Business Ethics

Business ethics is the application of standards of moral behavior to business

situations. The subject can be approached from a descriptive perspective
(documenting what is happening) or a normative perspective (more interested in
what should be happening). In either case, business ethics should not be a separate
set of standards from general ethics. Ethical behavior, should be the same both
inside and outside a business situation.
"Business Ethics" can be defined as the critical, structured examination of how
people & institutions should behave in the world of commerce. In particular, it
involves examining appropriate constraints on how company generate self-
interest, or (for firms) profits, when the actions of individuals or firms affects
others. The definition of business ethics is the set of moral rules that govern how
businesses operate, how business decisions are made and how people are treated.
In business, there are many different people you have to answer to: customers,
shareholders and clients. Determining what to do when an ethical dilemma arises
among these different interests can be extremely tricky, and as such business
ethics are complex and multi-faceted.
Example of Business Ethics: Google regularly makes good on its slogan: Dont
be evil. Through its Google Green Program, the company has donated over $1 billion to
renewable energy projects, and has decreased its own footprint by using energy efficient
buildings and public transportation . Google is also an open supporter of gay rights.
Google employees have access to free health care and treatment from on-site doctors, free
legal advice with discounted legal services, a fully stock snack pantry and onsite cafeteria
(staffed by world-class chefs, no less), and a free on-site nursery. With such record of
social awareness and positive employee relations, Google is easily the best example of
ethics in the corporate world today.

Example(s) of unethical behavior by an
accountant
In 1998, the telecommunications industry began to slow down and WorldCom's
stock was declining. CEO Bernard Ebbers came under increasing pressure from
banks to cover margin calls on his WorldCom stock that was used to finance his
other businesses endeavors (timber, yachting, etc.). The company's profitability
took another hit when it was forced to abandon its proposed merger with Sprint in
late 2000. During 2001, Ebbers persuaded WorldCom's board of directors to
provide him corporate loans and guarantees totaling more than $400 million.
Ebbers wanted to cover the margin calls, but this strategy ultimately failed and
Ebbers was ousted as CEO in April 2002.
Beginning in 1999 and continuing through May 2002, WorldCom (under the
direction of Scott Sullivan (CFO), David Myers (Controller) and Buford Yates
(Director of General Accounting)) used shady accounting methods to mask its
declining financial condition by falsely professing financial growth and
profitability to increase the price of WorldCom's stock.
HOW THIS FRAUD WAS ACCOMPLISHED?
The fraud was accomplished in two main ways. First, WorldCom's accounting
department underreported 'line costs' (interconnection expenses with other
telecommunication companies) by capitalizing these costs on the balance sheet
rather than properly expensing them. Second, the company inflated revenues with
bogus accounting entries from 'corporate unallocated revenue accounts'.

The first discovery of possible illegal activity was by WorldCom's own internal
audit department who uncovered approximately $3.8 billion of the fraud in June
2002. The company's audit committee and board of directors were notified of the
fraud and acted swiftly: Sullivan was fired, Myers resigned, and the Securities and
Exchange Commission (SEC) launched an investigation. By the end of 2003, it
was estimated that the company's total assets had been inflated by around $11
billion (WorldCom, 2005).

On July 21, 2002, WorldCom filed for Chapter 11 bankruptcy protection, the
largest such filing in United States history. The company emerged from Chapter
11 bankruptcy in 2004 with about $5.7 billion in debt. At last count, WorldCom
has yet to pay its creditors, many of whom have waited years for the money owed.
CONSEQUENCES:

On March 15, 2005 Bernard Ebbers was found guilty of all charges and convicted
on fraud, conspiracy and filing false documents with regulators. He was sentenced
to 25 years in prison. Other former WorldCom officials charged with criminal
penalties in relation to the company's financial misstatements include former CFO
Scott Sullivan (entered a guilty plea on March 2, 2004 to one count each of
securities fraud, conspiracy to commit securities fraud, and filing false
statements), former controller David Myers (pleaded guilty to securities fraud,
conspiracy to commit securities fraud, and filing false statements on September
27, 2002), former accounting director Buford Yates (pleaded guilty to conspiracy
and fraud charges on October 7, 2002), and former accounting managers Betty
Vinson and Troy Normand (both pleading guilty to conspiracy and securities fraud
on October 10, 2002) (MCI, 2006). Ebbers reported to prison on September 26,
2006 to begin serving his sentence.
four key items in a code of ethics
It can capture what the organization understands ethical behavior to
meanyour values statement: A code of conduct is intended to be a
central guide and reference for users in support of day-to-day decision
making. It is meant to clarify an organization's mission, values and
principles
It can establish a detailed guide to acceptable behavior: Historically,
there has been a transition away from regulatory codes designed to punish
unethical behavior, towards codes which help someone determine a course of
action through moral judgement.
It can state policies for behavior in specific situations: A strong ethics
code ought to address both general values for which the company
stands, and particular principles specific to the daily operations of that
particular enterprise. The key is to generate a code that is tailored to the
activities and goals of a particular organization, while simultaneously
upholding universal ethical principles.

It can document punishments for violations of those policies: a code of ethics
should not only contain award policies but it should have punishment to guarantee
unethical behavior will be punished