Business ethics Essay Example | Topics and Well Written Essays - 2250 words

Business ethics - Essay Example Application of ethics into businesses has expanded the role of businesses in the economy. According to the classical economic theory however, the firms are driven by the primary objective to maximize profits while consumers are driven by the primary objective to maximize the self satisfaction which is known as utility. Hence the producers and consumers in the economy are motivated by profits and losses as measured in terms of dollars and cents rather than any moral value. Moreover, such profit maximizing production procedures may not be the ethical approach when the social and environmental concerns are addressed. Therefore, a theoretical ambiguity appears in what is the ethical conduct in business. When a company rigidly adheres to a marketing policy which focuses only on short run benefits it can suffer severe economic losses in the long run (Ferrell et al., 2012). Example, marginal declining of value of housing assets in the USA market ended up resulting in bankruptcy of Lehman Br others in the USA and BNP Paribas in France. Laiki Bank in Cyprus also ended up in bankruptcy as a result of unethical business strategies. In other words attempting profit out of thin year caused the recent financial market failure. Moreover, negligence of duty can result in lives lost to the society as well as losses to the companies (Guerra, 2013). An ethical dilemma is created when an individual company, a community or consumers are not in control of all the factors that influence their choices example, when the government interventions in open market operations lead certain companies into bankruptcy. Government interventions in the markets are identified in terms of price subsidizing, taxing, and imposing trade barriers which are aimed at achieving specific developmental goals, national food security and self sufficiency, reducing poverty, reducing market power and protecting the public goods. However, there are noneconomic, political motivations for interfering in the markets by the government example, for financing a war. Moral Issues in Financial Market Failures Banking failure is defined as a situation in which banks are closed from operation because of the financial difficulties (Gunsel, 2007). There can be a number of bad monetary policies which may cause banking failure. A number of moral issues also arise relevant to bank failures. For example, banks operate according to the policies which are set by the government i.e. policies are defined in the bank’s external environment. Even though an individual firm may foresee its bankruptcy it can have little to no control over the tragic destiny lying ahead. Government intervening in markets is identified as a market failure in neo-classical economics theory because it can disrupt the optimal resource allocation and create deadweight loss to the social welfare. Free market structure is identified as the most efficient economy. The three case studies described in the following chapter bare evidence s as to how bad fiscal and monetary policies can result in bankruptcy of the firms. Not only the external policy environment but unethical firm level policies can also lead companies into bankruptcy. The recent Subprime Mortgage Crisis Friedman, 2009, describes the cause of global financial crisis which occurred during the past decade in terms of following government interv