Major Ethical Issues in Business

The financial industry plays a critical role in determining the economic performance of the world. The business environment is largely dependent upon finance and banking when it comes to framing public policies. While several professions thrive on a strong commitment to service, finance is one such industry that relies on the hunt for gain. It doesn’t take much for this gain to translate into greed. 

This report will discuss the unethical behavior of companies such as Lehman Brothers and Wells Fargo and its impact on employees. It was during the credit boom of 2003-2004 that Lehman Brothers got itself into risky real estate, with inadequate capital and toxic assets. This took a bad turn in 2008 when the company saw itself collapse, declaring bankruptcy. More than 25,000 employees lost their jobs with the downfall of the company and it didn’t end there. Several factors contributed to the economic turmoil faced globally back then. But the failure of Lehman Brothers was the triggering element that released the conduits of this widespread recession. More than six million jobs were lost and unemployment rose by 10%. In 2013, the Los Angeles Times accused major retail bank, Wells Fargo of conducting unethical practices in cross-selling. In the year 2016, it was reported that the company opened approximately two million deposit and credit card accounts for customers, without their knowledge. This led to customers being charged an unexpected fee. In order to improve sales performance, financial companies initiate intense competition amongst employees as a part of their corporate culture, humiliating employees and even threatening to terminate them. The report focuses on the problems faced by employees working at such companies during the scandals and the negligence of the companies when it came to employee protection. The study of ‘right’ and ‘wrong’ in business situations, activities, and decisions is called Business Ethics. Although ethical norms surrounding fairness and justice are embodied by economic and legal responsibilities, ethical responsibilities undertake activities and practices that are either expected or prohibited by society, although they are not determined by law. Corporate executives have been challenged with the issue of the firm’s responsibility towards society for years now. The constant debate about the legitimacy of ethical responsibilities poses as a challenge that businesses have to deal with. However, it is argued that business ethics should be comparable to a game of poker, in which, lying and deceiving are permissible, and it is critical to note that business is not subject to the same moral standards as a society. Suggests that a business cannot be expected to have social responsibilities. It is individuals who have to be socially responsible. Looking at it solely from an economic perspective, the sole responsibility of a business is to optimize resources and engage in activities that are structured to generate revenue and increase profits, as long as it is within the rules of the game and engages in an open and free competitive environment without any fraud.

A major aspect of CSR requires a firm to commit several resources in areas like environmental issues such as pollution and humanitarian issues such as racial discrimination, poverty, consumerism, etc. While argues that CSR should generate some gain for businesses, either economic or otherwise, it can be a source of opportunity, innovation, and competitive advantage. A lot of enterprises today, strive to present a good business image, by attempting to be socially responsible. In that aspect, corporate social responsibility results in positive outcomes for business as well as for society and the environment.

Establishes that the groundwork of corporate governance should identify stakeholder rights, either established through legal or mutual agreements. It also lays emphasis on generating revenue, employment, as well as sustainable financially sound enterprises. The stakeholder theory directs how managers operate. The two core questions posed by with respect to the stakeholder theory are first, what the objective of the firm is, encouraging managers to articulate the shared sense of value generated, and what contributes to bringing stakeholders together. The second question posed by is the responsibility management has towards stakeholders, emphasizing on the kind of relationships management wants and needs to generate with their stakeholders to deliver on their purpose. The eventual, long-term achievement of a business is due to teamwork and a contribution of a number of stakeholders including investors, employees, creditors, customers, suppliers, etc. To serve the long-term interests of businesses when it comes to wealth generation, corporations should identify the contributions of stakeholders in the establishment of profitable businesses. The framework of corporate governance should therefore bear in mind, the interests of various stakeholders involved.

In 2015, the Member States of the United Nations adopted ‘The 2030 Agenda for Sustainable Development. This provides for a shared model for the peace and prosperity of people and the Earth, in the present and in the future. The 17 Sustainable Development Goals are a dire call for action by all developed and developing nations, in a worldwide association. Identifying that poverty and deprivation are connected with strategies to improve wellbeing and education, reduce inequality and spike economic growth, all while dealing with climate change and attempting towards saving our oceans and forests.

Companies like Wells Fargo and Lehman Brothers, in their attempt to increase profits, defied Sustainable Development Goals such as ‘No poverty’, ‘Good health and wellbeing', and ‘decent work and economic growth’. They did not take into account the interests of stakeholders such as customers and employees and looked simply at company gain and personal incentives. The consequences of the actions of the companies made the economy take a massive hit, and it was companies of such nature that were responsible for the Great Recession that occurred worldwide in 2008. Even after the Great Recession, while the Lehman Brothers collapsed, Wells Fargo continued to indulge in committing customer fraud for company gains. Deceiving employees, pressurizing and threatening employees of termination, and finally due to the consequences of the companies’ actions, employees getting fired; all the actions committed by the companies did not take into account the underlying concept of either corporate governance or sustainable development. The collapse of Lehman Brothers provides for an example of the need to take into account the interest and well-being of stakeholders for the long-term achievement of profitability.