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.
No comments:
Post a Comment