Character of a Business Soul Part Two:

The second half of the questions according to Jennings include the following:

5. How does the company treat its employees?

Based on the previous question mentioning how Barnes was wrongfully terminated for bringing the allegations into the light it is fair to say that Fannie Mae did not treat its employees well. Unless you were one of the managers who went along with the unethical accounting practices and receive large bonuses as a result of the unethical actions. Those employees were treated well because they did not defy what the organization was doing.

6. How does the company handle third-party ethics issues?

From what I personally feel in reading Jennings (2012) text is that the main issue with unethical behavior and actions was internal, and that any third party ethics would be handled as if they were an ethical organization. As that is the persona that they led everyone to see on the outside that they were highly ethical organization to the point of winning awards that they were highly ethical. However internal that obviously was not the case. So a third party ethics issue would be treated properly as to not let others know that they were conducting unethical practices. If they were to let third party ethics issues slide then this would tarnish their reputation for good ethics.

7. How charitable is the company?

The organization was charitable according to Jennings (2012) after their reinstatement they built relationships through their foundation the Fannie Mae Foundation, that was subsequently investigated by the IRS for violating the use of a charitable foundation for political purposes made donations to charities on this basis of the political contacts they were able to list on their applications for funding. So they are charitable  but they are still dishonest in using their charities for unethical practices.

8. How does the company react when faced with negative disclosures?

The organization I feel reacted very defensively when face with negative disclosures because they knew they were conducting unethical and illegal accounting practices. They reacted poorly first by wrongfully firing Barnes and then not being forthcoming with information and owning up to what they did. Waiting until they were investigated to come clean. In my opinion they should have come clean and apologize provided the information taken their punishment. This is the ethical thing to do when caught doing unethical acts to then change ways and be a socially responsible organization.

After all of these question have been answered there is just more to answer by the reader and the writer that is: Would the model mean that Fannie Mae could be labeled an "honest" company? Why or why not? Please place any thoughts or opinions below in the comments.

Personal thoughts:

I feel that it still can not be labeled an honest company as the unethical accounting practices did occur and subsequently the fallout was that the individuals who were in Fannie Mae mortgages were the victims of the unethical accounting practices and since the crash of the housing market in 2008 I personally do not feel that they have as a company gained back the propriety  respect of being labeled an honest company. This is just my opinion and my feelings on business ethics.






Jennings, M. (2012). Business ethics: Case studies and selected readings (7th ed.). Australia: South-Western, Cengage Learning. 

Character of a Businesses Soul Part One:

This next area of discussion regarding business ethics will be split into two separate posts half of the questions in each post.

According to Jennings (2012) there are eight questions that should be answered about a company to determine the character of its soul. The following questions will be answered in regards to the Fannie Mae corporation and their character/ethics.

Before going into answering these questions about Fannie Mae a little background on what type of organization they are is needed to understand where they fit in. There are different types of organizations that are held accountable by the government and those that are not. According to Andre' (2012) one type that is held accountable by the government is , government centric or GSO's and a hybrid of this is called government sponsored enterprises or GSE's. Fannie Mae is in this category of organizations. It is created differently than the government in an attempt to compensate for government weakness,  and benefit corporations. The main difference between the two is the that their system for accountability is that in the government centric the external regulator is appointed by the government, while the corporate centric GSO the regulator is independent of government. So Fannie Mae is held accountable by the government for their actions.
































1. Does the company comply with the law?

Fannie Mae does not comply with the law, according to Jennings (2012) Fannie Mae's policies on amortization an important aspect of accounting for an organization  buying and hold mortgage loans. was developed by the chief financial officers with no input form the organizations controller. Their amortization policies were not in compliance with generally accepted accounting principles. The amortization policies relied on computer model that would shorten the amortization of the life of a loan in order to peak earnings performance with higher yields.

However this act by the CFO and those who knew about the accounting practices did not comply with the law this doesn't mean that the company as a whole has always not complied with the law just in this large incident.


2. Does the company have a sense of propriety?

The answer to this question I feel is split because prior to the discovery of this unethical practice Fannie Mae according to Jennings (2012) was named the most ethical company in the United States several years in a row. This would make them very respectable and honest company, but after this is is speculation as to how society feels about the company if they still have a sense of propriety or not. Personally I feel that they do as the CFO who orchestrated the unethical accounting practices and is not longer associated with the organization. So I feel that the organization does still have a sense of propriety and their message and goals to assist low income families and individuals obtain affordable housing. That is what is important to me.


3. How honestly do product claims match with reality?

According to Jennings (2012) the OFHEO investigation on Fannie Mae's accounting practices paints an ugly picture of a company tottering under the weight of baleful misdeeds that have been marked the corporate scandals of the past three years dishonest accounting, lax internal controls, insufficient capital and managers who are selfish only caring about getting themselves high earnings to get large bonuses and stock options.

So not they did not do what they claimed as they essentially provided low income individuals mortgages that came with a false sense of security which is not providing what their claim is. Which according to Jennings (2012) was created to provide affordable housing availability and to make sure that there was a stable market with consistent availability of mortgage funds for consumers to purchase homes. Well if they are essentially cooking the books so to speak and earning large bonuses when they shouldn't be in my opinion they are not matching with reality of what they should be.

4. How forthcoming is the company with information?

They were not forthcoming with information as it took according to Jennings (2012) the work of employee Barnes to investigate the allegations, but even he was not provided the necessary information to fully conduct a proper investigation. Barnes made other officers aware of the intentional acts related to financial reporting  but no one ever followed up on the issue. He was later proven innocent by the OFHEO report made a year after he was wrongfully terminated. So not until the final OFHEO report in 2003 did the CEO Daniel Mudd raise his concerns about the organizations accounting policies was anything mentioned. So to answer the question the answer is no Fannie Maw was not forthcoming at all with information about their unethical accounting practices.
















Resources


André, R. (2012). Assessing the Accountability of the Benefit Corporation: Will This New Gray Sector Organization Enhance Corporate Social Responsibility?. Journal Of Business Ethics, 110(1), 133-150. doi:10.1007/s10551-012-1254-1http://eds.b.ebscohost.com.proxy1.ncu.edu/eds/detail/detail?vid=1&sid=2552a6da-cb81-44d8-8121-1a6ab0b21500%40sessionmgr113&hid=117&bdata=JnNpdGU9ZWRzLWxpdmU%3d#db=bth&AN=80030284


Jennings, M. (2012). Business ethics: Case studies and selected readings (7th ed.). Australia: South-Western, Cengage Learning. 

Corporate Social Responsibility

Corporate  social responsibility is one of the most important aspects when discussing business ethics. There are different ideas and thoughts as to what businesses are held responsible for. This blog series is going to include three entries that will discuss this topic in detail.

What is a Corporation responsibility? According to Bansal (2009) the legal accountability of corporations is to profit their shareholders. With profit comes power and powerful corporations can use their power to gain more power, creating even more profits. This can cause ethical problems because the more power a corporation the harder it becomes to eject.

Different Views:

According to Jennings (2012) Edward Freeman's thoughts is that corporations have ceased to be merely legal devices through which the private business transactions of individuals may be carried on. Corporations have become both a method of property tenure and a means of organizing economic life. Freeman's overall standpoint is that the idea of the managerial capitalism can be replaced by fiduciary duty to stakeholders. The main point of his argument is that in order to reanalyze corporations the following question should be answered: For whose benefit and at whose expense should the corporation be managed.

Freeman's viewpoint is very much through the stakeholder's eyes, wanting to include all aspects of stakeholders, "suppliers,customers,employees,stockholders, local community" (Jennings, 2012) in their roles as an agent for their groups. He argues that the legal, economic, political and moral challenges to the currently received theory of an organization  as a connection to the owners of the factors of production and customers, require us to revise the concept.

I agree with this standpoint as corporations need to ask themselves whose benefit and at what and whose expense should the corporation be managed. This is a question that Fannie Mae discussed in the other posts did not take into account and should have. It would have led to better ethical decisions.


According to Friedman (1970) his viewpoint is that social responsibilities of businesses in a free enterprise system is that they are standing up for free enterprise when they denounce that business is not concerned with merely profit but also with promoting desirable social ends that business has a social conscience. They take responsibility for providing employment, eliminating discrimination, avoiding pollution.

Overall Friedman's viewpoint is that one's own ethics do go hand in hand with what they feel social responsibilities should be. This does make it hard , as  Friedman (1970) points out the difficulty of exercising social responsibility illustrates the great virtue of private competitive enterprise it forces individuals to be responsible for their own actions and makes it difficult for them to exploit other individuals for selfish and unethical act.s They can only do good but at their own expense.

I really agree with Friedman's viewpoint of social responsibility as I feel that an organization can only be as good as the individuals who work in it. If an organization has individuals who have high ethical standards the company is more likely to not get into unethical trouble at the cost of employee actions. However if an organization has individuals who have a low standard of ethics then it is more likely to not be socially responsible.























Bansal, P. (2009). Corporate Social Responsibility: The Good, the Bad, and the Ugly. Administrative Science Quarterly, 54(1), 182-184.

Jennings, M. (2012). Business ethics: Case studies and selected readings (7th ed.). Australia: South-Western, Cengage Learning. 

 Friedman, M. (1970). The social responsibility of businesses is to increase its profits. The New York Times. http://www.colorado.edu/studentgroups/libertarians/issues/friedman-soc-resp-business.html