Organizational Ethics Essay

Introduction

Since the beginning of the 21st century, different accounting scandals and financial irregularities in the corporations has highlighted the significance of organizational ethics. Different accounting companies have collapsed because the financial organizations were unable to control the irregularities for example Enron. The Enron is considered to be a good example for the think tanks where the implementation of the ethical code of conduct was considered to be the barrier to success for the company. The company that will be discussed in this paper is Goldman Sachs. Goldman Sachs established in 1869 and is considered to be the global investment management of securities and banking sector that provides a wide array of services to different financial institutions (Mallen, 2012).

What role do external social pressure have in influencing organizational ethics?

External social pressures now play the main role in the organizational ethics. This is especially significant for the financial sectors because they are more vulnerable to different external pressures that play an integral role in business decision-making. It is important that the companies play a strong role in determining the community involvement, ethical means of financial reporting and environmental responsibility tasks to meet the customer expectations. The information age and the rapid use of social networks have made it easier to spread the work against or in the favor of the company and a lot can be done in this regard that can affect the reputation of the company (Davis, 2006).
Goldman Sachs has been through different financial and legal turmoil mainly due to the intense social pressures it had to face in the industry it operates in – not only were the pressures faced by the local stakeholders but also the international stakeholders. The main external pressures, that the company has to face, is from the investors, shareholders, government regulatory bodies, community services and increased government pressure in different financial transactions. The main external pressure on Goldman Sach has been from the investment community and government regulations and various financial policies. For example, in order to profit its investors and maintain their trust, there are different decisions taken that compromise the ethics policy and regulations of the company (Mallen, 2012). In 2008, the company created Goldman Sach’s Commodity Index that was implicated to create the world food price crisis. It was argued that with the creation of this Index, Goldman Sach helped its investors such as mutual funds and pension funds to enter the food commodity market through other commodity funds as well as their own fund while following the Sach’s lead (Mallen, 2012). This intervention of the other funds disturbed the regular demand and supply that resulted in price volatility. This was the practice that was of the organizational, financial and ethical decision-making and instead of stabilizing the prices it destabilized the commodity prices (Mallen, 2012).
There are various impacts of these social pressures. These can result in boycotts and lower level of investment by the investment community. It is important to note that the services and the offerings that have been boycotted by the consumers have been short-lived but the ones the organizations that are found indulged in bribery, corruption or fraudulent acts do not retrieve their reputation back. Apart from this the media coverage, social media news feeds and the overall public pressure tends to blow over the news (Davis, 2006).

How might these issues be relevant to organizational and personal decisions?

It is important to note that especially in financial companies like Goldman Sachs the personal and organizational decisions are deeply impacted by the issues and the external social pressure. The financial professionals might have to undergo undue pressure from the top management that can influence the various financial decisions because they tend to make investment decisions that merely focus on the shareholders and the investment community (Davis, 2006). The decisions that can be undertaken in this regard might turn out to be inappropriate, corrupt, unethical or fraudulent, but in the short-term they might benefit the organization and the personal endeavors as the team can receive incentive for profit making or signing an investment deal. There is a possibility that the senior management influences the finance department to mention financial inappropriately and forge the reports that they look attractive and results in increased investments for the institution (Davis, 2006).

What is the relationship between legal and ethical issues?

There is a strong relationship between legal and ethical issues in a company like Goldman Sach and many other financial companies like it. It can be said that what is legal it can be considered ethical too, in this case. The ethical obligations of the financial institutions tend to exceed the legal duties because of the amount of investment and money involve of the various shareholders and the obligation and responsibility the company holds to take care of the investments. The law embodies the ethical principles so that the financial corruption and frauds can be prevented (Lee, 2012).

Conclusion

Different accounting companies have collapsed because the financial organizations were unable to control the irregularities. External social pressures now play the main role in the organizational ethics. This is especially significant for the financial sectors because they are more vulnerable to different external pressures that play an integral role in business decision-making. It is important that legal and ethical issues should be considered the same in investment companies like Goldman Sachs due to the level of investment involved.

References

Davis, S., DeZoort, F.T. Kopp, L.S. (2006) The effect of obedience pressure and perceived responsibility for management accountant’s creation of budgetary slack. Behavioural Research in Accounting, Vol. 18, p.19.
Lee, K., and M. C. Ashton. (2012) Getting mad and getting even: Agreeableness and Honesty Humility as predictors of revenge intentions, Personality and Individual Differences, 52 (5): p. 596.
Mallen B. (2012) Goldman Sachs: Morally Bankrupt or Great Place to Work http://www.ethicalcorp.com/governance-regulation/goldman-sachs-morally-bankrupt-or-great-place-work