Corporate Frauds and Absence of Ethical Demeanor Essay

Corporate Frauds and Absence of Ethical Demeanor - Essay Example As per Trevino and Weaver (2003), ethical culture is one which rouses ethical demeanor. Ethical leadership involves proper demeanor through interpersonal relationships and personal actions and the advocating such demeanors to subordinates, mainly through two-way communication, decision-making and reinforcement As per Martin and Cullen (2006), ethical climate in an organization refers to normative systems of organizational work climate mirroring the organization’s policies, procedures, and practices with moral outcomes. As per Victor and Cullen (1988), ethical work climate refers to the organizational procedures and practices that direct the decision-making of organization and the systematic outcomes to ethical dilemmas. The ethical climate is one of the main ingredients of the culture of an organization. Ethical climate plays a dominant role when fraud is observed in an organization. As per Shin (2012), CEOs’ ethical demeanor is directly associated with employeesâ€℠¢ overall view of the ethical atmosphere of the organization (Soltani, 2014, p.254). Enron on October 16, 2001, published figures that exposed conspicuous accounting malpractices. One of the questionable accounting practices followed by the Enron was that is improper accounting of a note receivable from Enron’s equity partners in different limited partnerships. WorldCom also indulged in one of the largest corporate accounting scandals in the US which were projected at $14 billion as of March 2004. SEC alleged that WorldCom purportedly exaggerated its† revenue before interest, taxes, depreciation, and amortization (EBITDA)† in 2001 and in 2002 (SEC Annual Report 2002). HealthSouth Corporation of USA ordered the accounting personnel’ of the company to inflate the revenue to match the Wall Street analyst’ projections (Soltani, 2014, p.262).