Discuss the Importance of Ethics in Business in Light of the Recent Global Financial Crisis (GFC)
The 2008 global financial crisis has affected today’s economy severely based on the collapses on issues such as immoral practices, governance, regulations, enterprise ethics. Factors to consider with the collapse that lead to the financial crisis is the dangerous outcomes that financial companies were not foreseen in advanced of borrowing mortgages for the companies. The change of ethics through enterprises demonstrate how business approaches to ethics over the past years where ethics is seen in different perspectives.
Lessons are learnt from financial failures in the lack of awareness in ethical performances to businesses. The recent global financial crisis has recently existed with a lack of awareness on business ethics policies where unprofessional practices are performed on dangerous mortgage borrowers have occurred without having any awareness of the outcomes of financial collapses (Lewis 2010). Business ethics is defined as the significance of moral performances on business in workplaces.
Also Lewis (2010, p2) has mentioned that “lending practices” have become out of control and increasingly inexistence since the finance industry has given out mortgages to people that do not have the capacity to repay back their mortgages which worsens the situation into a financial deterioration. Greed is another issue to consider in the collapse of the financial crisis where financial institutions did not look at peoples abilities on whether the mortgages they have borrowed from the bank can be repaid without any debts arising like in this financial crisis.
In other words greed and unethical performances can lead to such situation as the global financial crisis, seeing the collapse of mortgages and corporations in business ethics. Governance is defined as policies or methods installed to administrate how businesses operate and Regulation is defined as a structured type of regulation managed in finance companies (Clarke 2010).
There are certain problems existing with the issues on governance and regulation with its attachment to the global financial crisis. Issues such as subprime mortgages and stock markets play a major role to the fall of the economy. The collapse of governance policies lead to the unsuccessful process of giving subprime mortgages to corporations that are incapable of managing their repayments on the mortgages which also leads to a downfall on house prices.
With a failure to regulation policies to the financial crisis the stock market began to collapse where when people were unaware of this situation and mortgages started to have trouble increasing their capital on the balance sheets. Borrowing mortgages in the United States can also be part of a culture where citizens want to own their own houses but are still not aware of the dangerous downfalls that have occurred to companies that cannot repay their mortgages.
Thus the situation for both regulation and governance collapses will only increase if no solution to the problem occurs such as being more aware of who borrows out the sub prime mortgages and what are the dangers with borrowing mortgages to the financial corporations. The economic crisis and financial disasters also play a role to the downfall of business ethics in the financial crisis where problems such as misunderstanding of communication in ethical behaviour arises (Jameson 2009).
Huge companies in the economy had bad predictions and insufficient evidence to prove that mortgage investments were safe to be mortgaged out, where clients are not alert of the future threats of not being able to repay back the mortgages companies have given to the stakeholders. Jameson (2009, p502) states that “Managers who had inside information about the problems failed to persuade others to take appropriate action” this meaning managers did not perform their duty to inform clients about the troubles these mortgages had in the future.
Speaking generally economics and financial disasters can exist from the insufficient communication of ethics to the stakeholders about the dangers of mortgage collapses. The shortage of attendance to business ethics has a big impact to the financial crisis where honesty in ethics plays a major role. Regulators are considered to have good purposes to financial organisations but contain destroying results which is the boom of debts where honestly cannot be found in ethical ways for businesses (Huw 2010).
The guidance of teaching more on ethical practices is being greatly regulated by the financial associations that will learn their honesty which will avoid such shortages of unawareness of honest ethical practices. In general ethical practices regulated to the finance industry need to be existing to avoid future problems of financial breakage. The changes of ethical conduct in sustainable enterprises shows how today’s society in business performs different points of views on ethics.
To expand ethical enterprises it is very important to be aware of what is morally and immorally correct in different cultures which has an impact on the changes of enterprises over the past thirty years (Potocan & Mulej 2007). The concept of culture in ethical approaches relates to circumstances like Enron and Royal Ahold where a one perspective approach to enterprises was applied. To improve the situation Enron and Ahold should be a lesson learnt for future expansion of ethical practices in relation to perspectives of enterprises.
Thus the change of sustainable enterprises can be seen through cases such as Enron and Ahold and how today’s society is moving forward with more awareness on enterprise performances. The importance of financial service industries on having more regulations installed to enforce the performances based on the principles of ethics where seen in past financial crises that has seen huge losses in capital and the motivation to put through transactions that could crash companies downfall on share markets (Cascio, WF & Cappelli, P 2009) .
The more time consumed on ethical regulations which will help improve financial companies in their ethical performances in avoiding the financial crisis in business ethics. As Cascio has mentioned financially colleagues in the workplace were jeopardising their chances in reducing themselves by hiding the losses the companies have accumulated business to the loans that were unrepayable.
The fixing of regulations in ethical practices in businesses helps make financial areas of the workplace avoid future financial crisis situations from reoccurring. Therefore financial association should aim to be more aware of ethical situation in relation to the 2008 global financial crisis. In conclusion there are plenty of factors contributing to the recent global financial crisis that affect the current existance of corporate governance, business ethics and regulations which will benefit a lot to finance companies.
The unawareness of subprime mortgages in the collapse of the financial crisis will only increase if no governance and regulations on ethical performances are installed to avoid future problems. The modification of enterprise ethics has learnt that different perspectives on morals will benefit organisations financially giving important advice about investments before risking companies to a downfall on mortgages, practices on borrowing loans and the management of stock markets.