Forsyth defines ethics as the guidelines for wrong or right in a society whereas moral principles are the specific principles in use by people to decide on right and wrong (Forsyth, 1992). These guidelines determine the ability of an individual to make moral decisions when faced…
Moral hazard occurs when a party to a contract understanding that the consequences of their actions will be borne by a different party puts themselves under more risks. This paper aims at analyzing the characteristics that make the 2008 financial crisis an ethics and specifically moral hazard situation and the measures taken for effectively eradicating the recession.
Reasons for the 2008 financial crisis include massive nationwide residential housing bubble, financial sector overleveraging, unregulated subprime lending growth at a large rate, and lack of transparency in new, complex, and more popular mortgage based funds. The other reasons for the global financial crisis in 2008 was resultant inability to measure risk, screening of borrowers and bank lending of precarious loans and lack of concern on ability to pay with main aim being origination of loans (Dowd, 143). These factors that resulted in the financial crisis shows the blatant disregard by the financial institutions of the needs of the stakeholders through taking on precarious loans depicting an example of the lack of ethics or moral hazard situation. Securitization and subprime mortgage origination rose until 2006 when household debt was 100% of US GDP, causing rising interest rates making refinancing difficult and drop of housing prices and 1.3 million housing projects were on foreclosure in 2007, the crash had began. The proceeding days would be so tough for banks and other financial institutions owing to bank runs and collapse including certain governments that depended so much on foreign market loans.
The crisis could have been prevented through a reduction in the bailouts or the expectation of bailouts by firms since set precedence for firms to invest in risky activities. This is because when these activities are successful; the investors benefit, but in case of failure, there are bailout by the government. Having a law holding each person responsible for the risky actions that led to the ...
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The banks used new instruments which were not only risky, but were unethical also. These instruments were created to double the debt level in the US economy which was already indebted heavily. This created a bubble and when the debt levels went out of control, the bubble busted resulting in dire economic problems.
It provided the researcher with enough evidence on ethical lapses present within an organization particularly in the pharmaceutical sector. The report has been divided into two tasks. Task 1 is based on the case study, “GlaxoSmithKline experiences high cost of product quality issues” which identifies the ethical lapses that may have affected the product quality at GSK.
It produces a number of pharmaceutical products ranging from biologics, vaccines and drugs targeting neglected diseases in the sub-Saharan Africa. The multinational was formed following merger with other pharmaceutical and related companies like smith Kline Bicham, Glaxo welcome plc in the United Kingdom and smith Beckman Corporation all based in the United Kingdom.
The growing of this kind of soybean is greatly facilitated by the rainforest climate of Amazon. Hence the production of soybean has boomed in this region and extensive savanna like ecosystem (known as Cerrado) is being converted into industrial soybeans farms, which is highly detrimental to the environment.
The core business of any commercial organisation is to maximize the value for its shareholders. The auditing process in its comprehensive consideration facilitates the attainment of this purpose by deterring or detecting any fraudulent activities. Fraudulent activities
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