Ethical Conflicts that can arise within Companies

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The problem to be investigated is the conflict that can arise within companies between doing what is right (or moral) and doing what is often viewed as more important the attainment of corporate goals. This conflict is highlighted in the case study involving Fannie Mae (FM). (Jennings, 2009) In this case, corporate executives choose to focus on corporate goals and meeting the market expectations, ignoring any moral issued witch conflicted with the attainment of their goal. (Jennings, 2009) To understand the reasons for the executives actions and learn from their mistakes and misjudgments the following topics are reviewed: 1) ethics and social responsibility, 2) the importance of devolution, 3) the power and value of incentive plans, 4) the rational for legitimate income smoothing, and 5) the impact of pep talks.

FM is a federally chartered shareholder-owned corporation. The organization is charged with the goal of increasing affordable housing availability and to attract investment in the housing market. Coupling the federal charter and the goals of shareholders FM needs to walk a fine line between ethics and business practices. FM was named the most ethical company in the United States by Business Ethics magazine in 2004. (Jennings, 2009) Unfortunately, there was a darker side to the FM story. Corporate executives choose to focus on corporate goals and meeting the market expectations, ignoring any moral issued witch conflicted with the attainment of their goal. (Jennings, 2009) To understand the reasons the reader needs to be aware of several pieces to the FM situation including: 1) ethics and social responsibility, 2) the importance of devolution, 3) the power and value of incentive plans, 4) the rational for...

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...be it Enron or Nazi Germany, can be a result of individuals that do not question authority.

Conclusion

It is clear in reviewing the FM case that the corporate executive’s personal morals were overrun by their desire to attain personal incentives and bonuses. Lack of internal controls allowed the executives to control what was reported to ensure the goal was attained. (Jennings, 2009) Retaining control and limiting devolution kept those below the executive ranks largely in the dark. The executive team used the corporate goals to manage behaviors from the top down, ignoring and or eliminating those who questioned their processes. (Marken, 2004) Reviewing the impact of how goals and incentives are communicated and calculated is a valuable lesson in understanding the balance between personal morals and attaining corporate goals. (Schultz & Wehmeier, 2010)

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