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Ethical failures certainly played a role. While it remains to be seen whether and how many people blatantly broke the law, there are abundant signs of various forms of potentially unethical behavior. These include greed, unreasonable amounts of leverage, subtle forms of corruption (such as ratings agencies that appear to have had a conflict of interest), complex financial instruments that no one really understood, and herd behavior where people just followed along and failed to exercise independent judgment. ustomer’s interests above all else, because only through profit comes the freedom to contribute to society (Vasella). Business leaders must use their personal moral compasses to make ethical decisions. As for the business’s compass, it should be oriented toward satisfying customers above all stakeholders. That is the orientation that allows for the greatest competitive success and profitability. In Mr. Vasella’s view, only by making a profit does a company earn the right to pursue social goals; that is why pursuing profit is ethically legitimate.
A company’s primary responsibility is to produce perpetually improved products/services. Secondarily, it has a duty to contribute to solving social issues. The key ground rule in the pursuit of profit is transparency. per Mr. Vasella, “We should not do anything which we cannot put on the table and show. ” It is difficult or impossible to regulate against greed and against many of the other ethical shortcomings that have been seen. What can be done is to force greater transparency and accountability, a process which began with Sarbanes-Oxley and is expected to continue with new regulations of the financial system. l feel that we have a right to spend that money [on social issues], but we only get that right if we are successful. The condition to have that freedom … s that we make a profit…. I strongly believe this is legitimate. ” Context Drawing upon learnings from their work and experiences, the panelists and moderator exchanged views with the audience on the ethics and legitimacy of business and capitalism in general, and the financial crisis in particular. Daniel L. Vasella Key Takeaways A goal of policymakers is to make information more transparent to the investing public (Oxley).
From 1981 to 2001, the number of Americans owning equities grew from 34% to 54%, due to 401 (k)s, IRAs, day trading, and more. Because of this, the Enron and WorldCom candals and the current financial crisis are not abstract; they are real-world crises that affect most Americans. The financial crisis may shift societal views on the legitimacy of business. Each panelist offered a different perspective on the issue of ethics and legitimacy in business: The financial crisis has the potential to damage the In the wake of Enron, it became necessary to change the system to create greater transparency for investors.
If a system is transparent, much wrongdoing can be prevented. The strength of Sarbanes-Oxley (SOX) is not as much its punishment side as its transparency aspects. SOX’s two pillars are transparency and accountability, which go hand in hand. It was Congress’s hope to craft legislation that created an atmosphere of openness and transparency inhospitable to massive frauds taking root. Pulling off fraud is now much more difficult as a result.
While in some respects this can be seen as closing the barn door after the horses have left, it is a legitimate attempt by policymakers to create an open and transparent system. (Fortunately, many other governments around the world have followed the United States’s lead and have strengthened their own standards. ) egitimacy of capitalism (Di Tella). Richer nations tend to be more right-wing in their views and have more capitalistic economic systems. The United States is exceptionally right-leaning, even among developed nations.
These attributes are heavily influenced by beliefs regarding the reasons why people are prosperous or poor. Americans tend to see prosperity as a product of effort more than luck; left-leaning nations believe the opposite. Affecting these beliefs: the number and severity ofthe shocks a society has weathered; and perceptions regarding the legitimacy of business”i. e. , the perceived egree of corruption. America generally perceives that corrupt businesspeople are the exception, and punishes deviants severely.