Current Issues in Business Ethics - Essay Example

Introduction Business Ethics are considered as form of applied ethics which attempt to understand and explore the issues related with the businessesand ethics. The study of business ethics therefore outlines as to how the actions and conduct of the businesses can be actually explored and understood from the perspective of the existing theories of the ethics. Business ethics are considered as important because businesses tend to have a greater impact on the overall lives of the individuals. The central issue this paper is going to discuss and explore from the perspective of the business ethics is to whether the practice of supporting the failing financial institutions through the tax money is morally correct given the fact that financial institutions failed to perform their duties. After the financial crisis of 2008, US and other governments from the developed nations bailed-out their financial institutions by pouring in the public money. This issue created significant moral debate regarding the role of the financial institutions and the government in having allowed the bailing out of the financial institutions. Most of the arguments were based upon the notion that public money should not be spent on those who behaved irresponsibly and are the very cause of the crisis itself. The role of the financial managers in managing the money and engaging into business practices which were risky and speculative was also being deplored. This business ethics issue will therefore be explored from the perspective of the utilitarianism as well as deontology. Both these philosophical theories will be discussed first and applied to this issue in greater details. Deontology Deontological ethics are based upon the moral evaluation of the actions based upon whether the actions actually followed or adhered to any rules or not. It is also because of this reason that the deontology is often considered as rule based ethics as it stresses upon the adherence to the rules if any action is to be considered as ethical or not. There are however, different theories of deontology which outline as to how to actually treat an issue from certain perspectives. Kantian ethics of deontology suggests that the morally right way of doing things is as to whether the individuals actually performed from the perspective of the duty or not. Kant also suggests that the morality of actions shall be based upon the motives of the individuals rather than the overall consequences of taking such actions. (Shaw) Utilitarianism Utilitarianism however, is an alternative philosophical theory which suggests that the morality of the actions shall be based upon whether such actions result into greater utility or happiness and satisfaction for the greater number of people. Utilitarianism considers happiness as an end itself and its importance for humans is of greatest value. From this perspective, it becomes important that the actions shall be viewed from the perspective of whether these actions actually result into greater welfare for the greater number of people or not. If actions are not resulting into the greater satisfaction then these actions may not be justified morally and ethically. (Trevino and Nelson) Deontology and Financial Crisis Considering the overall issue of financial crisis and how government responded to the situation from the perspective of the deontology would suggest that the government supported those who actually failed to perform their duty. Over the period of time, financial institutions shifted their focus from creating larger welfare for their deposit holders and focused more on achieving short term profitability. Apart from this, executive compensation was linked with the performance of the executives thus actually making it more lucrative for the bank/finance officials to actually take decisions which were against their primary duty or the law. From the deontological perspectives, regulations and the laws for the banks and financial institutions is mostly driven through the central banks, the government and the self-regulatory mechanism existing within these institutions. However, considering the overall financial crisis and the impact of these crises on the economy and the ordinary lives of the masses suggests that deontology failed to actually act as a moral guidance for the financial institutions. Over the period of time, the business model of financial institutions changed drastically and thus more focus was on earning short term higher earnings. As a result of this, financial institutions ignored the rules and the laws and engaged into business practices which were actually speculative in nature. Banking and financial institutions started to lend to those borrowers who were otherwise not eligible to get the loans. Such type of practices however, allowed banks and financial institutions to improve their earnings because lending to the high risk customers generated higher rates of returns. (Santoro and Strauss) As such, it can be easily suggested that from the perspective of the deontology, the conduct of the financial managers and the government was not ethically as rules were ignored and the actions taken were not based upon the moral duty of the financial managers but were based upon their seeking individual personal benefits. Utilitarianism and Financial Crisis Utilitarianism suggests that actions should be based upon whether such actions actually result into the greater level of happiness for greatest number of people or not. Utilitarian ethics therefore suggest that actions should be evaluated based upon their consequences but rather on the basis of whether these actions are resulting into greater happiness for the greatest number of people or not. One of key impacts of the financial crisis was the mass scale unemployment due to negative growth of the economy. Financial crisis created an environment wherein almost whole of the economy was affected and people working in other industries were affected too. Many people lost their jobs whereas lack of economic progress resulted into strong austerity measures also. Various governments across EU took measures which resulted into the drastic reductions in the government benefits to the masses and as such the overall standards of life declined as a result of such measures. (Flynn) Considering such impacts of the actions of the banks and financial institutions from the utilitarian perspectives therefore suggests that these actions may not be moral and ethics. The business practices adapted by the financial institutions were favoring very few and were potentially detrimental to the overall interests of others. Utilitarian ethics therefore would suggests that such actions and conduct of the businesses may be entirely unethical as the resulting financial crisis generated into events which were entirely against the overall welfare and the happiness of the masses who lost their jobs and endured low standards of life. Conclusion The above discussion clearly outlines that from the deontological as well as utilitarianism perspectives, financial institutions as well as the governments and other related regulatory bodies actually failed to prevent such crisis. Regulations were relaxed in order to allow the financial institutions to adapt the practices which were risky and detrimental to the overall health of the financial services sector as well as to the economy. The focus on the short term profitability and speculative nature of the conduct of the banks clearly outlined as to how ethical norms were not followed. This was against the fact that financial services sector is one of the intensively regulated sector in any economy. Despite such nature of the regulations and the industry itself, banks and financial institutions actually engaged into business practices which were not ethical in any manner. What is also important to note that governments supported such firms at the time of the crisis with the public money. This was even considered as unethical as government was not doing its job of protecting the welfare of masses. Works Cited Flynn, Eileen P. Ethical Lessons of the Financial Crisis. London: Routledge, 2012. Santoro, Michael A. and Ronald J. Strauss. Wall Street Values: Business Ethics and the Global Financial Crisis. Cambridge: Cambridge University Press, 2012. Shaw, William. Business Ethics. London: Cengage Learning, 2007. Trevino, Linda K. and Katherine A Nelson. Managing Business Ethics. New York: John Wiley & Sons, 2010. Read More