Business Ethics and Values for Social Responsibility

Question: Discuss about the Business Ethics and Values for Social Responsibility? Answer: Identification of Each Stakeholder and Impact of Economic Crisis to Stakeholder The different stakeholders of the bank are customers of the bank, shareholders of the bank and government. All these stakeholders were affected by the great depression of 2008 that are described below Customers of the bank Banks at that time were changing their strategy to increase their business and a lot of loan was approved that exceeded the guarantee amount. Most of the bank in USA and the UK were unable to recover that money. Due to this depression, the banks had become stricter and they were not providing any loan to the business organizations (Crane Matten 2010). The savings account holders were in a dilemma whether they will get the money or not. Thus, the confidence of the customers was draining and bank was losing their normal business because of high interest rate for loan and low security of their savings account. Shareholder of the bank Customers were losing confidence in the banking business and the share prices were well below the required level. The investment of the shareholders was under huge threat, and this was not encouraging any further investments by the investors. The onset of the credit crunch created problems for the shareholders as the banking sector was running out of cash to operate their business. The unethical business process of the bank was the main reason that developed the situation. Government The major reasons behind the financial crisis were the two major players namely USAs Lehman Brothers and UKs Northern Rock in the banking sector. Both the banks ran out of money and government had to take initiatives to minimize the rumour. Thus in such a situation, the government provided lots of funding to the bank and helped to regain the confidence of the customer. Huge capital investment by the government of UK was a bold tep that makes them economically unstable and several other developments was prohibited however; the government is still trying to recover the situation by controlling the banking activity strictly. Argument from the utilitarian perspective According to the utilitarian perspective of normative ethics, it is the moral and ethical action that maximize the utility of the resources. According to the defination, in this casestudy no action from the banking sector was nither ethical nor profitable. Thetrefore from the utilitarian perspective it was a avoidable damage that may be restricted with proper vission and ethical action. f we consider the government approach in the banking industry in the UK, then it becomes very difficult to get further borrowings from the financial sector because every investment should be backed up by proper and calculated bank guarantee. Therefore, from the utilitarian perspective, it can be said that the government of UK has taken the right step in tightening the banking regulation of the country. The customers were losing their confidence in the banking sector and that was a threat to the economic condition of the country because UKs economy was highly dependent on the banking sector. However, the government of the country provided the required funding of 70 billion to the countrys banking sector to regain the customers hope. In spite of huge funding by the government, it was not sure, that all the financial institutions would run their business ethically. Therefore, it is the right decision to implement strict regulation by the government to control the banking sector from any further crisis (Crane Matten 2010). However, some of experts are saying that the strict regulation of the banking sector will lose the business that will not help the organizations to overcome the losses they have suffered. On the other hand, if we consider the government funding, then it will be impossible for the government to provide such kinds of fund any more in such a short period. Therefore, to ensure the customer confidence and a stable economy of the country, the government has taken an appropriate action that will ensure ethical operations by the banking sector. The aggressiveness of the banking business therefore, will be low and this will ensure the repayment of their loan from the reliable sources. Explanation about UK Banks that acted ethically in their operations From the philosophical perspective of the maxim of duty, it can be considered that the banks in the UK have not acted ethically because of their several aggressive strategies, in order to increase their business. In the early 1980s most of the banks were conservative, since, they were more dependent on the customers who deposited money in their bank. Therefore, customers have a great influence in the operating procedure of the bank. However, from the late 1990s, the bank business started to grow when many business organizations started to borrow their fund to strengthen their cash flow. The unethical practices by the bank officials were introduced to survive the competition in the market and most of the investments were made on land guarantee. . People were borrowing money to make their home. However, payment of the loan was provided up to 125% due to the competition. Along with the banks, many customers also made the unethical practice by borrowing money from several banks with the same land. The banking business was aggressive at that time and the minimum government regulation was available to control the businesses that lead to the unauthorised funding, which in turn resulted in huge loss by the non-payment of the loans (Mallin 2004). Customers was losing hope because banks were unable to return the depositors money that was guaranteed to them. All the factors acted as the unethical practice of the UKs banking sector. It was clear that the UK banks have not acted ethically in their business operations because they was providing the loan to most of the borrowers without verifying the degree of guarantee and at some instances banks were providing loan that was in excess of the bank guarantee. All these practices were unethical because in the early 1990s the source of the fund was depositors money that the bank used to provide loan with interest. Therefore, the money of the public was under the risk due to the aggressive activity of the bank that was ideally unethical. The practice of the banking sector was unethical because those customers who were highly dependent on the borrowing and made a proper repayment within time, but were unable to take loan to operate their business activity. Involvement of Clashes of Rights with the mentioned situation (Judgement of relative importance) The clashes of rights that are involved in this situation are the business right of the bank and the operating activity that was involved with the customers confidence. The relative importance of the right is associated with the customers and shareholders that are possible to judge. With this situation of the banking sector, the most affected persons are the shareholders who have invested a lot of money to make profit. The customers are also affected in this situation because they have provided the funds to the bank and in this situation; they do not know how they will get the return. Both the rights matter here because the bank was committed to both stakeholders. It was important for the bank to provide the information and take proper attention of their investment. The violation of the action by the bank officials was unethical. However, there was no such regulation of the government that would restrict the borrowing (Fisher Lovell 2009). Therefore, without any hindrance the busine ss of providing loan become popular, that involves many unethical practices form different industries, and among them, the real estate was the main. According to rights theory, as long as the distribution of wealth in society is achieved through fair acquisition and exchange, the distribution is a just one, regardless of any degree of inequalities that may ensue. Therefore, for both the stakeholders, right to information is the most relevant in this context. None of the stakeholders was aware about the fact that the bank is providing loan to their customers without any proper document just to compete in the market. If the customers had the information of the banks negligence then they might not depend on the bank, which is same in case of shareholders as well. If the shareholders knew it then they might not invest so much. Right to information is inalienable in this case because the bank has unethically provided loan to their customers only to make more profit. Application of normative theories Virtue Ethics The current situation of the banking sector can be explained with the two normative theories namely virtue ethics and egoisms. According to the virtue ethics, it is the action of the individual, which is more important to identify the codes of conduct to take an action. From the organizational perspective, the decision authority of the bank has decided to become aggressive which was unethical without the return guarantee. However, banks were more interested to provide more loans without thinking of the return. For example, managers of the bank decided to make aggressive business. Banks that were more involved with the activity of aggressive business faced the biggest problem in the industry and the government had to take the initiative to help them to gain the customers confidence (Mallin 2004). According to the virtue ethics, the officials in the banking sector were part of the race and change was introduced in the late 1990s with the onset of globalization. Therefore, several inter national banks like American Home Mortgage, ABN AMRO, Lehman Brothers etc. were also involved with the actions of unethical practices that are most relevant to the normative theory of virtue ethics. Egoisms The situation can also be explained with the theory of egoisms that explain an action is morally right or wrong. In the late 1990s, most of the banks became liberal and provided loans to their customers for several reasons. The main purpose was to invest in the land or in the real estate sector. All the investment of the bank was done to increase the business and to survive the increasing competition. In this case, the bank had taken these actions to bring more benefits to their customers and shareholders by providing more interest and profit. Therefore, the intention of the action was good, but the result of the action was on the negative side. The importance of the egoisms was more relevant because of the sustainability factor that will increase the intensity of the action without implementing the fact of return (Mallin 2004). Therefore most of the banks had done the same thing and provided a lot of money to their customers without thinking or verifying the process of repayment tha t lead to the disaster in the banking sector as well as generated the financial crisis. Reference List Crane,A Matten,D (2010) Business Ethics. (Third Edition). Oxford University Press. Fisher,C A.Lovell (2009) Business Ethics and Values. Prentice Hall. Mallin,C (2004) Corporate Governance. Oxford University Press.