Ethical Dilemmas in the Banking Industry The Sarbanes Oxley Act

The Sarbanes Oxley Act - Ethical Dilemmas in the Banking Industry

The Sarbanes Oxley Act poses various dilemmas in its execution in the financial industry. Particularly in its implementation in the spheres of corporate governance. The first involves nonprofit organizations where its effectiveness is dependent on the ethical values of executive leadership. While the Act requires constant reporting and monitoring of the financial operations, it relies on the integrity of the leaders who serve the oversight roles in those organizations (Hess, 2007). The fiscal integrity attached to the Act's objectives is only valid if relevant structures are implemented at every level. That is, there must be ethical considerations in the culture and norms of the organizations for both informal and formal settings. The Act assumes that the organization correctly does auditing to help protect investors and other shareholders from fraudulent reporting (Hess, 2007). The organization's declaration to abide by the Sarbanes Oxley Act is different from the legal obligation of the leadership, which is central in inculcating ethical culture in the organization. Leaders encourage the behavior, and it is through their actions that the Act's success is assessed. It assumes that ethical role models are instrumental in shaping the financial responsibilities of an organization. This lacks empirical evidence implying that the Sarbanes Oxley Act in itself raises ethical questions on its reliability and applicability in the fiscal environment (Heminway, 2008). First, for the Sarbanes Oxley Act to work, the executive leaders must be humble, ethical, and act ethically. The ethical question of these attributes then arises on the power of legal platforms to compel a humble and ethical person to behave in a manner that makes them ethical role models.

The second ethical dilemma is closely linked with the relationship between the code of ethics and governmental rules. It is noteworthy that the organization sets the code of ethics, and the law does not compel the organization to follow a specific standard in creating the code. This means that the Sarbanes Oxley Act, its success and as a government law, does not produce the desired effects without relying on organizations' code of ethics (Hess, 2007). It can be deployed, and all the features are addressed but still raise multiple questions on ethics. It is possible to argue that the Act is irrelevant in controlling the financial environment from fraud unless there is the will from the organizations to follow the rules. It is impractical to legislate ethics, implying that the Sarbanes Oxley Act does not make executive leaders or organizations ethical (Heminway, 2008). However, the legislation serves as a platform to encourage ethical behavior hence promoting behavior development. The principal feature of the Act is to provide an environment that welcomes positive behavior. It acts as a behavioral constraint. Again, this assumes that the people and organization under the legislation respond positively to what the Act offers. This is not measurable, and different people or organizations are likely to embrace the Sarbanes Oxley Act differently (Hess, 2007). A more reliable approach to promoting ethical behavior is anchored on the inherent desire of people to consistently execute their mandate ethically without being compelled by the laws. Thus, the Sarbanes Oxley Act as a tool of reinforcing responsible fiscal management does not ethically hold in all environments. Where then should the Act apply, and to what degree? While it supports the legal expectation of financial organizations to provide honest audits to investors and other shareholders, it leaves a wide gap in encouraging those responsible for reinforcing the values to deploy legal methods to compel other players to behave ethically (Heminway, 2008). It does not define what is legal or illegal regarding the code of ethics of specific organizations. Again, the nature of activities in the different public organizations necessitates developing varying codes of ethics.