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External Pressure & Questionable Ethics

What external pressures encourage executives to misrepresent financial performance and how can companies prevent this?

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Executives may feel pressured to misrepresent financial performance due to the need to display ongoing positive results to outside investors. Reasons cited for misrepresentation in financial performance include the moral decay in society, executive incentives for performing well (such as stock option benefits), stock market expectations (which again provide rewards for short term behavior), ...

Solution Summary

This solution describes external pressures that might encourage executives to misrepresent financial performance. It gives ideas for how companies can prevent this behavior from occurring. APA reference is included.