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Ethics and decision making in financial institution - Essay Example

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Re-evaluating Milton Friedman’s Concept of Social Responsibility of Business Introduction “The primary and only responsibility of business is to use its resources and engage in activities designed to increase its profits so long as it stays within the rules of the game, which is to say, engages in open and free competition without deception and fraud” - Milton Friedman (1970) The above mentioned lines are not only a quotation by the most influential economist in the second half of twentieth century but also the crux of this essay…
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Ethics and decision making in financial institution
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Ethics and decision making in financial institution

In the second part the study will understand role of business ethics and ethical decision making in context to banking industry. Although the concept of business ethics, fair and free competition, abolishment of monopolistic competition are pretty much older in comparison neo classical concepts like trade protection, corporate governance codes but surprisingly very few researcher have tried find how these implications are relevant in context to banking industry. To understand the importance of open and free competition it is essential for the researcher to analyze these concepts by using theories of economics (Misra and Arrawatia, 2012). Nature of Competition in Banking Industry In recent times, various research scholars have tried to investigate nature of competition in global banking industry with help of different concepts of economics. Modern economists have stated that conjoint impact of internationalization, liberalization and harmonization has changed the dynamics of competition in global banking competitions. ...
their primary and only responsibility is to increase profit by using its resources whereas understanding the second strata such as doing business in open and free competition environment without engaging in deception and frauds (Cheng, 2011). There is no doubt the world has changed a lot from the time Milton Friedman defined the responsibility of managers. In twenty first century, the world has seen many of the major financial scams, financial frauds, unethical competitions hence it is necessary to analyze the viewpoint of Milton in context modern business world. Now the fact is that, research scholars have raised question over the assumption of Milton Friedman in context to banking industry. For example, competition in banking sector has been created due to multitude of factors such as financial markets deregulation, liberalization, consolidation, merger between various financial institutions etc hence it will not be justifiable to take a unilateral approach to analyze the level of competition in banking sector. The study will take help of research works of eminent research scholars such as Bresnahan (1982) to understand competition theories in context to banking sector. According to Bresnahan (1982), market power of a bank is should be analyzed with the help of mark-up of price instead of marginal cost of a particular bank. The proposed model was based on two equations such as supply equation and inverse demand equation in context to first order profit maximization (Misra and Arrawatia, 2012). Shaffer (1993) has found that North American banks were competitive during 1965 to 1990 when the market was consolidated in nature. In that period, few North American banks competed in partially monopolistic competition environment where they had created entry barrier for ... Read More
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