Ethical Concerns in business Financial management is defined as planning, directing, monitoring, organizing, and controlling of the monetary resources of an organization.
Financial management has to do with the process of managing the financial resources, including accounting and financial reporting, budgeting, collecting accounts receivable, risk management, and insurance for a business.[business dictionary]
How ethics impacts the financial decision-making process
The ethical concerns impact financial decision making in many different ways. The investors concerns are that the firms which they are going to invest in are truly depicted in audit reports. They are also interested that profit prospects of these firms in future will be as certain as their claims are. They are also hopeful that they are not cheated while profits are distributed among the investors. The banks will have expectations that loans are returned in full without default. The owners of the firm will expect that some black money is not being invested in their firm. they expect of the employees that their output or productivity matches their emoluments. They may have concerns as to there should not be wastage of resources and maximum production is being ensured at minimum cost. The consumers expect that they are charged reasonable prices for goods and services and firms are not seeking exorbitant profits. Moreover, consumers’ interests are not infringed by firms’ cartels or by price discrimination. General public will expect from firms that their operations are not detrimental for their health or not generating environmental pollution. The environmentalists concerns are that firms operations are not leading to ozone-layer depletion or loss of biodiversity. Government expectations are that corporate laws are not violated and firms pay taxes without evasion. The employees concerns are that they are paid fully for the services they render and there is no discrimination in salaries and promotions on the basis of sex differences or on any other ground. When so many different things from different quarters enter into the scene the financial decision will naturally be affected.
Ethics considerations involved in the financial decision-making
The article which is selected for analysis is about health services organization financial management.
In the business organization referred to in the article under consideration ethical concerns are categorized on the basis of the various publics with which the financial manager has to deal. these publics include the board of directors, the medical staff, vendors, regulatory agencies, employees, and consumers.
A board of directors’ member interests may be in conflict with that of the organization due to his multiple roles. the board member may also represent an organization that is in competition with the institution for certain goods or services. Ethical concerns may also come up as a result of a board members service with other not-for-profit, religious, civic, or charitable organizations whose goals, objectives, or philosophies may be in conflict with those of the financial managers organization.
Medical staff ability to influence a patients selection of healthcare institutions, some physicians may be tempted to use this power to gain personal or professional advantage from the organization and in this situation financial manager may be in dilemma either to effectively compete in the market or to maintain good relationships with the medical staff .
Medical institutions restrictive policies of limiting the amount of charity can pose a moral dilemma for the financial manager who must balance responsibility for ensuring the long-term financial survival of the institution with the responsibility to care for wretched segments of society.
“Often the responsibility to comply with existing regulations and standards may conflict with the responsibility to act in the best interest of the organization. While some legal requirements are explicit, many others are ambiguous and subject to interpretations. Resolving potential conflicts between the intent of a particular regulation and the best interest of the organization can pose serious ethical dilemmas”.
The vendors may offer to financial manager open bribes or gifts for favors. this situation may put financial managers in serious ethical dilemmas.
Identifying the financial management objectives of the organization and their influence on the financial reporting decisions
Some of the derived objectives of financial management of the organization in the article being analyzed are to:
i. Ensure maximum revenue in a competitive environment
ii. Minimize costs of the firms
iii. ensure the long-term financial survival of the institution
iv. ensure compliance to regulation and standards laid down by the authorities
In the article at least two cases can be mentioned when the financial manager will have to keep in mind management objectives of the organization while doing financial reporting .one is the case when the financial manager will report that pressure on management for new equipment or services by physician can not be cost effective and can not ensure maximum revenues for the organization in an era of limited resources. The second case is that when the financial manager will report in favor of restrictive policies of limiting the amount of charity and other forms of uncompensated care. this is being influenced by second objective i.e., to ensure the long-term financial survival of the institution.[ Gould ,G R. and Younkins, E. W, 1989] Sources
Business dictionary.april12, 2008. http://www.businessdictionary.com/definition/financial-management.html
Gould ,G R., Younkins, E. W. [1989 ] Healthcare Financial Management. April12, 2008