Importance of Ethical Compliance in Corporate Governance

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Governance and
Fraud

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Table of Contents
Part 1...........................................................................................................2
Part 2...........................................................................................................7
References................................................................................................11

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Part 1
In today’s competitive business world, the importance of ethical principles
has grown substantially as the number of cases involving illegal or
immoral practices by companies’ increases. The number of corporations
that comply with corporate governance principles has increases, which
allow them to self-regulate their actions in order to fulfil their social
responsibilities towards a wide range of stakeholders (Wintoki, Linck and
Netter, 2012). Along with these provisions, many states have also
implemented mandatory legal compliances relating to corporate
governance in order to impose obligations on the management of
organisations to make sure that they effectively comply with their legal as
well as moral obligations (Nica, 2013). Although legal compliances are
necessary for achieving corporate governance goals; however, ethical
corporate governance compliances have a greater impact on the
fulfilment of corporate responsibilities of companies (Mason and Simmons,
2014). Without the availability of ethical compliances, it becomes easier
for organisations to violate or avoid compliance with legal provisions of
corporate governance. The objective of this essay is to support the
argument that ethical compliance has a greater impact on corporate
responsibilities by using examples of companies and applying ethical
theories. This essay will also evaluate the arguments given in support of
the statement that legal compliance has a greater impact on the
corporate responsibility and further rebuttal will be made in order to
support the argument that ethical compliances are more relevant.
Ethical principles concern with an individual’s moral judgements regarding
what is right and wrong. The decisions which are taken within an
organisation are made by individuals or groups; however, their decisions
are influenced by the culture, and their decisions also affect a wide range
of stakeholders (Wintoki, Linck and Netter, 2012). Therefore, it is
important that they behave ethically and make moral judgements which
allow them to take the right course of action and it also allow them to
ensure that they comply with the legal provisions which are imposed on