ACC696 Week 4 Discussion Post 13

These are fun questions, especially when applied to my current position as an accounting

manager for a government component. I see the agency theory applied often. Our entity

conducts a variety of programs, but one is federal and state, when the federal and/or state give

us money and we select what programs to spend it on within the parameters we were given. I

should say we, it’s the program manager and executive director that decide.

The stakeholder theory took me a bit of time to figure out within the government, since it’s

generally applied to capitalism (Stakeholder Theory, n.d.). However, the stakeholders for my

company would be other government agencies and the citizens of our state. We operate some

programs with tax dollars. We try to use only instate vendors. We actually have a website

They also appear to have a good working relationship and have similar political interests. As

longs this duo is together, I don’t foresee many changes in our ethical climate. Our

organization is encouraged to have transparency and accountability. I’m curious to see if any

of my classmates are working in organizations that are utilizing environmental, social, and

corporate governance (ESG), which seems to be a hot topic in the news lately.

The definition of corporate governance is "the means by which the financiers of firms ensure

themselves of receiving a return on their investment" (Mintz, 2020). It may also be viewed as

a set of guidelines that specify how a business's management, board of directors, and

stakeholders interact and have an impact on how the firm operates. This corporate governance

system will make sure the agent manages the business in compliance with all employees

(Mintz, 2020).

A successful corporate governance system built on four pillars is necessary to foster an ethical

shareholders (Mintz, 2020). Fairness in defending the interests of shareholders Transparency

calls for the prompt, accurate, and disclosure of all relevant information (Mintz, 2020). the

state of the economy, performance, ownership, and corporate governance, for instance.

Independence will be the last pillar, with institutions and processes in place to reduce or fully

ensure ethical standards were in 100% implemented. Unfortunately, unethical behaviour

might be done by some of the employees to make more money based on incentive bonus or

money from the clients.

manage a company. The board of directors is the foremost force influencing corporate

governance. Corporate governance covers the areas of environmental awareness, ethical

behavior, corporate strategy, compensation, and risk management with the basic principles

being accountability, transparency, fairness, responsibility, and risk management. The

stakeholder theory of corporate governance focuses on the effect of corporate activity on all

stakeholders of the corporation. There is the expectation that corporations will make efforts to

reduce conflicts between stakeholders. Agency theory suggests that corporations act as agents

of its shareholders. That is, shareholders invest in corporate ownership and thereby entrust

their resources to the management of the directors and officers of the corporation.

benefit to the shareholders, even though it was highly exceeding the planned margin. There

were circumstances where a larger margin could be made, while staying within legal

guidelines, and only the current benefit to the shareholders was considered, not the long-term

relationship with the customers. Not looking long term, to see what these customers would do

different interests from the principal.” (The Investopedia Team) Some Credit Unions are

formed when a company decides to form a financial institution exclusively for their

employees, others are formed when a group of community people come to together to form a

financial institution exclusively for those that live, work or worship in a particular area (these

are thereafter called SEGs – Select Employee Groups). The credit union I worked for was

formed by a company for its employees. The board of directors are supposed to represent the

average membership base and direct/guide and hold accountable the employees of the credit

union. The board of directors at the credit union was mostly consisted of older male retired

employees who had held higher up positions at the SEG. The average credit union member

was an employee who worked in a warehouse and lived paycheck to paycheck. At times it

was difficult to get the board to understand why the management team would propose certain

programs to help the membership because in their world, they would never use the proposed

program.

like other companies, you have different departments and each one must work together to

make it successful. My credit union was made up of 4 departments, loans, member services,

collections, and accounting. Loans wants to lend out money, member services wants to help

members with all transactions, collections want to get back the money that was lent out, and

values guide decision making and that ethical standards are being followed.” (Mintz, 2020 p.

135) A credit union has to adhere to regulations set forth by NCUA (National Credit Union

Association), the federal government, and policy’s set forth by their board of directors. These

are managed by using internal controls along with policies and procedures to monitor the

credit unions activities. Credit Unions are examined/audited by not only CPAs but also by

regulators, NCUA. My credit union was audited by outside CPA examiners once a year,

monthly by a supervisory committee who would audit different aspects of the credit union

each month, and every 12 to 18 months NCUA would do an extensive audit of the credit

union to make sure we were following regulations and internal policies.

very sensitive/private financial information that you are supposed to always protect. We had

in place policies to help prevent unethical behaviour, for example, all employees had to take 5

business days in a row of vacation at least once a year. The theory was in those 5 days,

someone else had to do your job and it would be possible to detect any wrongdoing by the

employee on vacation. Sometimes in other credit unions this policy has been effective and has

caught employees committing fraud.

However, one thing our company is committed to is safety. Every meeting between managers

regards to safety measures as a way to cut costs or increase production. We are also

constantly reminded that not only do we have the ability to speak up as employees (even the

For any company's ethical culture to be an asset, it has to begin with the upper management.

Individuals making the rules have to be willing to set the example for the rules to have any

positive effect. If the standard operating procedure is regarded as "red tape that slows down

production," then it becomes very clear where the company's priorities lie. Secondly, these

policies have to be communicated to everyone in the company and there has to be

consequences within the company for not adhering to these policies. If the workers do not

know the right way to do things as part of the company's desired culture, then the ethical

culture is going to be poor. If there is nothing in place to keep people from deviating from the

correct behavior, then it will not yield a good ethical culture either. Even our governing body,

the Mine Safety and Health Administration (MSHA) will tell miners that issues within the

company should be taken to their internal supervisor and/or the Safety Department before

involving MSHA, as they are much more effective at keeping safe by setting a strong ethical

culture of safety than MSHA can do by merely writing citations. Obviously, serious

main purpose of corporate governance is to add value to the company (Garzón, 2021).

governance is accountability. Accountability refers to the act of taking responsibility for a

certain action and owning the decisions (Corporate governance | diligent insights. Corporate

governance, 2021). It involves providing explanations about the different decisions and

activities taken by people in the company to the important stakeholders. The effect that

accountability has on the ethical climate of the organization is that it helps in avoiding the risk

of false blames. It creates a culture of transparency within the company and helps in

preventing potential misunderstandings.

Fairness is another essential component of good governance in a company. It ensures that all

the stakeholders, vendors, employees, as well as the community as a whole are treated equally

by the board of directors of the company. Fairness also has a significant impact on the ethical

climate of the organization. It ensures optimum satisfaction of all the stakeholders and

eliminates the chances of partiality or special treatment for any of the stakeholders.

business operations to important stakeholders. Transparency also positively affects the ethical

climate of the organization. It allows the company to continue operating in an ethical manner.

As all the important information about the company is clearly disclosed, it minimizes the risk

of unethical practices by any stakeholders in the organization.

Corporate governance creates the practices and rules that provide guidance as to the manner

Stakeholders, Economic and Agency Theory:

The stakeholder theory states that businesses exist to create value for all parties directly

involved, like employees, customers, suppliers, investors, and communities. Managers are

responsible to all who have a stake in the success or failure of the business. Freeman’s version

of this theory is one of the most recognized. It recognizes that every business decision affects

all stakeholders, benefiting some and imposing costs on others. The managers must recognize

their ethical duty to shareholders but also acknowledge that other ethical responsibilities to

other stakeholders have equal value (Mintz & Morris, 2020).

The economic theory believes that companies must do the financial functions designed to

This theory recognizes that any decision that doesn’t involve fraud or deception is ethical, and

the other stakeholders must work with the primary purpose of fulfilling the owner’s interest

(Mintz & Morris, 2020).

the future. One of the problems with this theory in corporate governance is the possible

resulting behavior of CEOs. CEOs seek to increase their utility at the expense of an

organization by withholding effort or improving their compensation through self-dealing or

honest incompetence. The CEO could conceal selfish actions at the organization’s cost (Bosse

stakeholders. I am lucky to share that I have mostly worked for companies that follow the

management’s primary focus has been to increase profit but always taking into consideration

employees by evaluating the amount of work that is expected from each employee in a fair

Only on one occasion in my career as an accountant, I experienced the economic/agency

theory, where all the focus was on creating profit for the shareholders at the employees' costs.