The management of any organization has the fiducial duty of ensuring that it conducts its activities in a manner that yields maximum benefits to its shareholders and various stakeholders. In light of this, corporate governance, which deals with how the management maximizes the welfare of all stakeholders in a company, is an important aspect of a business. In particular, an organizations management sets the tone of the culture and ethical practices in their institutions.
The Ethical Leadership at Waste Management
The management at Waste Management Inc. was unethical, and they tolerated and encouraged manipulation of financial statements in order to portray a positive image of continued business success in the company. The leader- follower trend in most organizations enables the management to set the tone of the organization’s culture (Mihelic 33). In Waste Management Inc., the company’s top management encouraged for financial manipulation of documents through netting in order to portray the company as being profitable. In turn, this behavior led to less senior managers, such as those in charge of finance and accounts to doctor their financial reports. The company’s management was unprofessional and did not value prudent financial management, and honesty. When the management realized that the company’s profits were reducing, instead of taking prudent decisions such as cost management or diversifying their operations, they decided to exaggerate their profits by over valuing the company’s assets.
The management lacked focus on its set goals. Despite the CEO setting goals on target profits, he did not appreciate that at times the company may fail to achieve these goals. Instead, he put excess pressure on the management, which made them to falsify their financial records. Finally, the company’s management was greedy. It was motivated by the huge bonuses, financial rewards, and gifts. Consequently, they committed the frauds so that the shareholders could imagine that the company was profitable.
Failings of Andersen With Respect to Professional Judgement
An auditor acts as a public watchdog who reviews and approves that the matters in the financial statements illustrate a true and fair position of the company. Consequently, Andersen had the fiducial duty of following through the company’s financial statements and reporting if they indeed portrayed a true and fair position. Andersen failed on the type of reports he prepared about the company. To begin with, Anderson did not exercise professional skeptism on the materiality of the issues that the management had highlighted they will implement in the first report. Accordingly, as a professional accountant, Anderson would have know that these issues were material in nature.
Secondly, Anderson did not have sufficient level of independence with Waster Management