In the wake of the Madoff Ponzi schemes, the SEC has stepped up investment regulation and fraud detection measures. Additionally, the Sarbanes-Oxley Act of 2002 (SOX) was passed as direct result of the Enron and WorldCom ethic violations. SOX has been characterized as "the most far reaching reforms of American business practices since the time of Franklin Delano Roosevelt” mandated a number of changes to improve financial disclosures from corporations and prevent accounting fraud. SOX also created the Public Company Accounting Oversight Board (PCAOB) to oversee the activities of the auditing profession. Had the PCAOB been in place perhaps Arthur Anderson would not have been so quick to turn a blind eye to Enron’s accounting irregulars.
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One of the major costs in business is employee turnover. Employee retention and recruitment can be hurt by the ethical issues. Ethical conduct in the workplace encourages a culture of making decisions based on ethics within the organization. The loss of valuable experience and development of new hires is a cost that can be controlled by instilling values that recognize and encourage participation and growth. The most successful organizations are ones that employees work with managers and supervisors in making decisions based on the company's values.
Employees who are treated with dignity and respect, who take pride in their organization and its ethics, tend to respect the assets of that organization and perform better at their jobs. These employees take greater pride in their work areas, and are careful with ensuring charges/expenses are correctly reflected. Employee theft is greatly reduced as well within an organization that leads by example.
Executives and Ethics
Corporate executives and business owners need to realize that there can be no compromise when it comes to ethics and that there are no easy shortcuts to success. Their companies need ethics to grow and succeed.
It is important for organizations to implement, communicate business values as well as lead by example. Of equal importance is ensuring management is all on the same