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Management Planning and Ethics

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Management Planning and Ethics
Student __________
Axia College of University of Phoenix
MGT 330 Management Theory, Practice and Application
Instructor ________
Date _________

Management Planning and Ethics

Only during the last few decades has planning become a widespread function of management. In the mid-1900s formal planning was only adopted by a few large corporations. Nowadays, aggressive and opportunistic entrepreneurs who run small firms also engage in formal planning (Bateman & Snell, 2009). Planning is directed to set up goals and to decide in advance what actions should be taken in order to achieve the established organizational goals. Planning includes activities directed to analyze the current situation, anticipate the future, as well to determine objectives and resources that will be used to achieve them. Planning is not considered as an informal response to a crisis. Planning is a purposeful effort geared towards providing “individuals and work units with a clear map to follow in their future activities; at the same time this map may be flexible enough to allow for individual circumstances and changing conditions” (Bateman & Snell, 2009, p. 132). The purpose of this paper is to evaluate Arthur Andersen’s, LLP, planning function of and how legal issues, ethics, and corporate social responsibilities impacted Arthur Andersen’s management planning.

Arthur Andersen, LLP In 1913, Arthur Andersen and Clarence De Lany, accounting professors at Northwestern University, formed Andersen, DeLany & Co. A few years later, DeLany left the company; therefore the company’s name changed to Arthur Andersen. During Andersen’s control, the company’s mission statement focused on building a solid corporate culture among all Andersen employees. In 1947, after Arthur Andersen’s death, the company almost closed; if it was not for the intervention of Leonard Spacek, a follower of Arthur Andersen, who convinced the company's investors to stay together despite the financial difficulties. Spacek continued to run the company under the name of Arthur Andersen because of its renowned reputation it had built in past years (CFO, 2002). The company continues to provide the same consulting, tax, and auditing services to large corporations as they did in the past. Ernst & Young, Deloitte, KPMG, and PriceWaterhouseCoopers are known as “the Big 4 accounting firms. Arthur Andersen made the Big 5 list but was disbanded by the government in 2002 for Obstruction of Justice following the Enron scandal” (The New York Job Source, n.d., ¶ 1).
Evaluation of Arthur Andersen’s Planning Function

The management’s function in strategic planning identifies and pursues “the organization’s mission by aligning the organization’s internal capabilities with external demands of its environment” (University of Phoenix, 2004, ¶ 1). The first step of the management’s function in strategic planning is direct to create a unique vision, mission, and values (VMV) statement. Vision statements are a specific and concrete destination. A mission statement is a declaration regarding the basic purpose of an organization. Values refer to the beliefs of an organization. The VMV of Arthur Andersen focused on among others, exceeding client expectations. Upper management repeated the mission statements at the beginning of meetings. “It worked until the firm was overcome with greed" (Goliath, 2008, ¶ 1). Indeed, the Arthur Andersen commitment to build the reputation of the firm, promote an equal distribution of profits among the firm’s partners, and maintain its faithfulness to accounting standards failed when the firm gained more profit than it truly should have and senior executives shredded relevant documents related to its audit of Enron. The lawyer for Enron Corporation sued Arthur Andersen and the company lost its reputation and its business collapsed. Thus, the planning of Arthur Andersen failed.

Legal Issues, Ethics, and Social Responsibility Legal issues, ethics, and social responsibilities are three factors that impact management planning. Every company has a legal responsibility to obey local, federal, state, and international laws. Further, every company has an ethical responsibility which means meeting social expectations that are not translated in laws. Finally, every company has a corporate social responsibility which is “the obligation toward society assumed by business. The socially responsible business maximizes its positive effects on society and minimize its negative effects” (Bateman & Snell, 2009, p. 181). Arthur Andersen did not fulfill the necessary legal, ethical, and corporate social responsibility standards. Management planning was negatively affected by these three factors. For instance, legal issues (i.e. Enron) did not allow the company to function properly which led to the company being disbanded by the government. The firm was following wrong and illegal accounting practices, which initially led the company into legal troubles. Arthur Andersen did not have any business ethics, which “comprises the moral principles and standards that guide in the world business” (Bateman & Snell, 2009, p. 181). Faulty presentation made in order to attract earnings from the public and focusing mainly on achieving company’s profits by neglecting the use of correct accounting practices are a couple ethical issues that affected negative way the management planning functioned. Finally, Arthur Andersen did not consider its customers, the stakeholders, employees, and its community when senior executive prepared the management plan. The main goal was to maximize profits by bending accounting and standard procedures. The Arthur Andersen management plan did not take into account of protecting the confidence of its customers or protecting the interest of its stakeholders and employees. Indeed, 85,000 employees lost their jobs when the firm was disbanded in 2002. Not to mention, the wrong message the Arthur Andersen sent to the community by breaking every legal, ethical, and corporate social responsibility in order to maximize profits.
Conclusion
Planning is directed to set up goals and to decide in advance what actions should be taken in order to achieve the established organizational goals. Nowadays, planning is used not only by large corporation but also aggressive and opportunistic entrepreneurs who run small firms also engage in formal planning. Arthur Andersen, LLP was one of the Big 5 accounting firms that provided consulting, tax, and auditing services to large corporations. The Arthur Andersen mission statement was direct to exceed client expectations among others. Upper management repeated the mission statements at the beginning of meetings. However, in the past decade Arthur Andersen lost its main purpose and management planning was negatively affected by that. Arthur Andersen’s management planning did not fulfill the necessary legal, ethical, and corporate social responsibility standards. Indeed, the firm was following wrong and illegal accounting practices, which led the company into legal troubles. Furthermore, faulty presentations were made to attract earnings from the public and did not consider its customers, the stakeholders, employees, and the community. As a result of its poor management planning, Arthur Andersen was disbanded by the government in 2002.

References
Bateman, T.S. and Snell S. (2009). Management: leading and collaborating in the competitive world (8th ed.). New York, NY: McGraw-Hill/Irwin
CFO (2002, August). So who was Arthur Andersen, anyway? Retrieved on February 21, 2009 from http://www.cfo.com/article.cfm/3006246

Goliath (2008). On a mission is your firm’s mission statement a living management tool integrated into daily use, or wallpaper for website? Retrieved on February 21, 2009 from http://goliath.ecnext.com/coms2/gi_0199-976915/On-a-mission-is-your.html
The New York Job Source (n.d.). Nation's largest accounting firms. Retrieved on February 21, 2009 from http://nyjobsource.com/accountingfirms.html

University of Phoenix (2004). Planning strategically. Retrieved on February 20, 2009 from C:\Documents and Settings\Massimo\Desktop\UNI-PHOENIX2\management_application\planning_strategically\…...

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