Business Ethics for a Finance Manager

Financial managers must have the skills to handle large sums of other peoples' money, but skill alone isn't enough. The potential for financial managers to line their own pockets or ruin a client or company through bad judgment is immense. It's essential to have a code of ethics in finance and to live up to those principles every day.

Ethics in Finance

The role of ethics in financial management is to balance, protect and preserve stakeholders' interests. Eli Lilly and Company, for example, says its code of ethics in finance covers obligations to management, fellow employees, business partners, the public and shareholders.

Conflicts of Interest

Underlying the role of ethics in financial management is a fiduciary duty. Managers must act in the interests of their clients and employers, not their own. If there's a conflict of interest where you can enrich yourself while harming a client, you must side with the client.

Bernie Madoff, for example, served as both a broker for his clients and a custodian for their money. With both roles combined, there was no independent auditing of his operations, which made it easier to defraud his clients of millions.

That's why establishing internal controls is essential. When the risk of exposure is high, it's less tempting to steal.

Reputation and Ethics in Finance

Another role of ethics in financial management is to guard your and your employer's reputation. If you act ethically, you're in the clear. However, cross the lines, and you can destroy your company's good name as well as your own.

Some industry analysts say tighter regulation is necessary because ethics in finance can't withstand temptation.

Ethics in Finance vs. Rewards

One problem with living up to a code of ethics in finance is that the system sometimes rewards unethical behavior. If an organization rewards financial managers for making decisions that benefit the company, not the clients, some financial managers will stumble.