Financial Scandals and Management Financial Management Financial

Financial Scandals and Management Financial Management Management Financial Actions, Controls, and Decisions Financial Scandals and Management Following the rise of financial scandals in the recent past, external and internal audits are carried out to review the management's financial controls and actions, and keep tab of the outside and internal auditors. However, despite the best efforts, accounting scandals like the Cendant Corporation's $300 million bogus revenue indicate that external auditors and managers are not doing their job.

It is the perception of management and financial scholars that social and political forces interfere with the ability of auditors and managers to meet their obligation and uncover management misdeeds (Lublin and MacDonald, 1998). This is because an increase in the toughness of external audit committees only increases the chances of bad accounting and shareholder lawsuits. This forms the problem for this review of literature, as the research proposes that for effective financial and audit control, managers must adopt integrated financial and organizational management strategies.

To achieve this, this paper will explore the financial scandal of Enron and apply different management strategies as proposed by literature. Financial scandals are a topic of concern for this research since they greatly affect and reflect negatively on management. Reviewing literature and news stories reveals that any financial scandal has had a bigger effect on the management rather than the employees or other stakeholders.

This implies that in the current business world, the roles of management are no longer defined by Henri Fayol's management principles of coordinating, organizing, planning, or controlling (Mintzberg 1989). Financial and Management Strategies Enron is an illustration of the fundamental need for ethical standards in management, since ethics are required for trust for without trust the organization falls apart. This is because Enron puts into focus important and cherished business ethics of the last two decades into harsh reality (Millman 2002).

The first ethic is that traditional business management theory has required managers to think like shareholders. However, following the events in Enron, it is evident that there is a higher risk of a breach of the code of ethics with the management trying to align their financial interests along with those of the company's investors.

The second business notion has been that managers must think like entrepreneurs, as seen in the company, which adopted a slogan of everybody should ask "Why." The challenge of this ethics is that it led the management to ask "Why Not," consequently resulting in the management decisions that led to the scandal (Millman 2002). Given the dynamic business world firms are facing currently, complicated by the effects of the recession, it is necessary that managers following the basic management principles proposed by Linda Hill (2003).

To deal with the changing demands of management and avoid financial scandals like Enron, management should engage in three fundamental types of learning to cope with the changing business environment. Hill (2003) recommends that managers must learn something new, change their minds, and change themselves. This theory requires managers to learn something new, in this sense a manager should learn about effective financial management and accountability. Effective manager seeks learning in financial and conceptual competencies necessary to avoid the financial mistakes made by the management of Enron.

This manager must change their attitudes, values, and mind-sets to align them with their managerial roles, duties, and responsibilities above their personal interests (Hill, 2003). According to Hill (2003) managers must lead others instead than work themselves, to win the respect and trust, motivate, and create a balance between control and delegation. According to Hill (2003) managers must learn their duties and responsibilities and create an ethical identity which directs and motivates employees, to avoid the mistakes made in Enron.

His is because managers and employees learn through trial, error, interpretation, and observation to be effective managers. Therefore, the decision by Enron managers to invest and put personal interest in investments and finances of the company was unethical. The role of the manager is to perform all functions of the organization through others or through employees. Therefore, the manager is highly dependent on the competencies of others to meet the functions of the organization (Hill, 2003).

In this case, managers can make use of the financial and audit competencies of employees and external auditors to realize effective financial statements and practices. Moreover, the case drives the need to review management practices as proposed by Mintzberg (1989). From the case of Enron, it is clear that management must abandon the folklore that they must be systematic and reflective entrepreneurs and planners. Management in today's organizations must be about activities characterized by brevity, discontinuity, variety, and should be strongly oriented to action and dislike reflective activities (Mintzberg, 1989).

For full financial control and audit to prevent financial scandals, management must work. The work management is involved in performs several regular duties, which include ceremony, rituals, processing of information, negotiations, that link the organization to its internal and external environment (Mintzberg, 1989). Moreover, to prevent a case of misinformation of management decisions, it is vital that managers have strong communication lines. Mintzberg (1989) recommends that managers have a strong verbal media, meetings, and telephone calls over the use of documents in communicating.

In addition, the current business world requires managers to move beyond the traditional concept that management is a science and a profession. Rather, management is about the locking into individual behavior and cognition the schedule, processes, information, decisions, control, and practices. This implies that to avoid the financial scandals like Enron, management must move beyond traditional management route and rhetoric, to adopt management as a way of life and behavior. This increases commitment to management duties and responsibilities, increases accountability, and commitment to organizational goals.

This leads to the concept of morals in management as proposed by Robert Jackall (2010). Given the participation in investment, and alignment of personal interests by the management of Enron, it is evident that there is a need for moral ethos in management. The moral ethos for corporate management emerges not only from individual principles and convictions, but also from the social networks. In this the management acquires personal moral principles and convictions by adopt Mintzberg's (1989) last fact of personal commitment to managerial role.

The second ethos from social networks recognizes that management does not work alone, but is involved in an interactive environment with different employees and stakeholders. Therefore, their moral ethos is the product of the situations and relations they are in contact with (Jackall, 2010). This draws attention to Enron's management failure to meet their ethical duty to stakeholders and investors as they made use of company resources and finances for personal interests. The second ethical issue is the use and management of the company's property and resources.

It is a general knowledge that the company's property is supposed to be utilised in a most efficient manner, to increase corporate competitiveness and to provide the best possible service to its customers. The need for ethics in management is to give everyone guidelines on the procedure to follow on reporting and following up on violation charges. The expectation is that management must set an example to the staff, not to hesitate in reporting misconduct that is in violation of the law or the code of conduct.

A failure to report a violation or aiding and encouraging another to break the law or revenging against a report of violation shall be liable for disciplinary action. However, it is apparent that management today find it difficult achieving the level of management set forth by the society and political elite. This is because the ethics standards required for management in handling financial statements is under the influence of the Securities and Exchange Commission and elite business leaders (Lublin and MacDonald, 1998).

These influence the external audit committees, as they are forced to go along with the set rules of the SEC. often, while management and the external audit may have the financial experience and independence to oversee the management and accountability, social and political forces interfere. Therefore, this calls for the management to have a firm personal ethics principles and morals ethos.

The need for ethics is seen in the case of Enron corrupt dealings with CitiGroup, they agreed to settle at $120 million, this was to cover Dynegy who they had also helped to commit fraud Citigroup. At the same time they were alleged to have tricked borrowers into buying high credit insurance. Furthermore, they had in some instances, included fees in monthly payments and added thousands of dollars to the total cost. When complaints were received from consumers, the employees discouraged the customer form withdrawing the insurance.

In the process the FTC made CitiGroup to pay the largest customer settlement of $215 million. This is in terms of ethical principles and theories that give viewpoints and guidance in making ethical decisions. By considering the ethical principles, this research finds that management must follow the first principle is the 'Least Harm' this requires one to do the least harm possible. Management must also follow the principle of respect for autonomy, which requires one to be self-reliant and controlling.

The justice principle requires the theories to present actions that are fair in management decision-making. The beneficence principle expects one to do good. The theory of deontology requires one to adhere to their obligations and responsibilities. In this theory, Enron executives are obliged to serve their stakeholders with dignity. They were responsible for the employees, debtors and customers. However, it is not easy to apply the managerial ethics and management principles as suggested by Jackall (2010) and Mintzberg (1989).

This is because managers in today's business world have a different managerial behavior as compared to the behavior of the classical theorists Henri Fayol and Henry Mintzberg. This is because managers are faced with larger workloads, and an organizational structure that has a pattern that is oriented towards subordinates. This is seen in Enron as the goal of management was the meeting of the interests of the stakeholders as required by the society and political frameworks.

The need to meet the expectations of the investors and prove themselves as entrepreneurial managers, led the management of Enron to fail to resolve financial issues that arose. Therefore, the need for managers to control many functions of the organization increases their workload calling for managers to find integrative approaches to deal with the workload. Therefore, Tenglad (2006) recommends that managers dealing with the large workload in today's organizations to adopt a management pattern that is oriented towards working with subordinates within the group setup.

This calls for management to create teamwork and groups that they can easily manage, assign projects, and decisions. This is necessary in management of financial issues since employees have the skills and knowledge to assist the management in creating risk management strategies. This is needed in today's firms given the recent recession and financial scandals that reveal the need for risk management strategies. Tengbald (2006) also believes that management has the responsibility of giving enough information and carrying out less administrative duties in the organization.

Management has the responsibility of more than giving their administrative commands to employees, but they also need to inform them on all aspects of the firm. This also includes sharing information on financial decisions with key and expertise employees, planning, and the implementation of financial decisions. Tengblad (2006) finds that like previous studies, new management skills require that managers also apply time fragmentation.

The goal of adopting the strategies proposed by Tengblad (2006) is the realization that a manager in the current business world is facing different financial challenges, which require a proactive approach. These managers are required to adopt a management discourse that embraces leadership and corporate culture, develops aspects like organizational structure and organizing geographically dispersed teams. This management approach is also in agreement with the management approach proposed by Hales (1986).

Hales identifies that managers face challenges in their leadership from the organizational, and national economic performance presumption that management makes the exclusive contribution to the identifiable, and tangible performance of the organization. This means that often-financial scandals arise from the performance burden placed on management that drives them to think unconventionally. There is a need for managers to move beyond the traditional managerial thought that management is an authority that rests upon power and defacto status.

This perception is associated with the rise of the financial scandal that rocked Enron, from the executive managers' selfish financial decisions. Hales (1986) identifies that management should be the implicit duty of managing where authority is a vital resource. For management to avoid falling into the temptation of getting financial gains like the executives of Enron, it is necessary they adopt effective management as proposed by Hales (1986). Effective management here in implies that the management match what they do with what they are supposed to do, leading to situational leadership.

This situational leadership must lead the manager to adopt change management strategy to develop decisions, and plans that meet the different situations, and financial decisions they need to make each day. In this strategy management, develop leadership and organizational skills required to achieve the objectives of its business strategy. Training and development is to realize organizational and individual learning, with interpersonal skill development used to overcome the challenges of the highly structured organizational hierarchy.

Interpersonal skills are identified as a necessary strategic approach to developing the teamwork environment required in management especially financial management. Therefore, this research finds that a manager that needs to avoid the management and financial mistakes done by Enron needs to create teamwork, increase communication, adopt effective and strategic leadership and interpersonal skills. Personal skills are improved through and increase team participation through effective communication. This also involves listening skills, where listener gets into the context, text and language used, predicting, summarizing, drawing inference and listening for the main concept.

These skills are on offer through interpersonal training programs for conflict resolution, problem solving, interpersonal relations development, and teamwork workshops. Tools like training and development of management and staff. The design of training and development is to increase the skill and knowledge of the employees through workshops and conference resources. The strategy also uses management and leadership development to train management. The strategy uses organize facilitators, sponsors, facilitators, training and development staff, couches, training and development facilities, IT and computer support, and project managers and management to begin.

Moreover, it is necessary for management to develop teamwork and interpersonal communication with external audit firms. External audit firms can assist managers of organizations to create and adopt risk management and internal control. Risk management is an important area in the financial sector, as it protects firms from internal and external risks. These risks as seen with Enron have proven to have adverse effects on businesses, especially in the areas of internal audit and regulation, and governance.

In addition, risk management has become an important management practice following the financial scandals that rocked the banking and financial sector during the economic.