Regulatory Agencies

Despite the presence of regulatory agencies like the SEC, the simple reality is that there is no such thing as the “organization police”. One of the hardest realities that I had to adjust to as an administrator in a public organization was the fact that there are very few people actually watching what organizational leaders do. It is incumbent on these leaders to do the right thing for their organizations. After all, this is why they get the big paychecks! However, with this being stated and well-known, it is important to remember that executives are still only people. Objectivity can often be obscured by emotions of fear, anger, jealousy, or even greed. This is the first key in understanding how things can end up going the wrong way.

The goal of any business is to create profit. Executives within a company are tasked with creating strategies to ensure that companies are healthy and profitable. While many organizational concepts are abstract (like motivation, leadership, etc.), financial reporting should be very quantitative and straightforward. However, as mentioned in the first conversation this week, it is still possible to obscure the truth with irrelevant or missing information. An example of this scenario was seen with Enron, as financial managers “cooked the books” to ensure that stakeholders and the public had a more favorable view of the company than what was actually taking place (Epstein, 2014). Feeling the pressure of the expectation of success, it is entirely possible for business or financial managers to create these kinds of false reporting scenarios to mislead anybody who might be paying attention.

As we have seen many times throughout history, it is still entirely possible to mislead people despite the presence of regulatory agencies. As I mentioned above, this is where it is important for all leaders within an organization to hold ethical principles as one of their guiding forces. Accurate financial reporting is one area that should be very straightforward, but it is up to the person wielding the pen and calculator to do the right thing.

References:

Epstein, L. (2014). Financial Decision Making: An Introduction to Financial Reports. Zovio. Retrieved from: https://content.uagc.edu/