Why is the appearance of impropriety sometimes more damaging than the legal penalties for actual impropriety? Provide an example. (Accounting Ethic class)

 

Appearance to impropriety indicates the occurrence of an unethical behavior or action due to casual behavior, negligence, comfort, etc. There is no strong motive behind it to take undue advantage or commit a fraud. For example, a stockbroker receives payments from his clients directly to his personal bank account although he deposits the amount to the trader within the due date. This is to reduce the bank settlement time which takes more in case of a trader account or to ease the work of the broker as he doesn't have to run to the bank to clear the check. There is no significant or monetary gain for taking such risk. This is a non-compliance issue and may cause several damage to the goodwill of the stock exchange. When such unethical behavior is exposed to the clients, it may raise suspicious questions on the trading of securities by stock exchanges. Although there is no significant benefit of carrying such unethical behavior, the repercussion for it is equally damaging than actual impropriety. Actual impropriety is done with a fraudulent intention. So it is non-recurring in nature. But appearance of impropriety takes place due to easiness or personal comfort. It becomes an inherent and continuous practice. Such unethical behavior continued over a long period of time, when disclosed, reveals a fraud of a huge amount attracting a big legal penalty. Thus, appearance to impropriety sometimes becomes more damaging than the legal penalties for actual impropriety.