ABSTRACT
The Mutual Fund Scandal of 2003 has raised issues in business ethics as well as compliance with law and securities regulations. Evidence presented in this study suggests that mutual fund management companies accused of unethical and illegal behaviors have poorer performance in terms of return on investment to the funds shareholders. Conflict of interest behavior patterns have been used by regulators in their charges against certain mutual fund management companies. Agency theory has been used as a basis for legal solutions that manage conflict of interest. However, the authors suggest that the ethical ramifications of the problem have not been adequately addressed. Drawing on research into the causes and effects of the 2001 corporate scandal at Enron Corporation, the authors suggest changes in corporate culture and leadership are necessary to effect longer term behavior changes.
