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Ethics in Finance

A good example of this is when the U.S. government uation of the organization’s progress toward implementing
ordered the breakup of the Bell Telephone System several socially responsible programs. This is not a precise science
years ago. It was felt that the system had grown too large and depends on interpretations of what is socially respon-
and that fair competition was not possible. When compa- sive behavior. Again, these decisions must be made by
nies become monopolies, they can set prices and control individuals within the business. Social audits do illustrate
supplies of goods and services in ways that might not be that a business is at least concerned about the social
fair to consumers. A government can intervene to assure impact it has.
fair trade practices. Many laws have been written to influ-
ence fair economic trade. SUMMARY
Ethics is not easy for any business, and there will always
SETTING BUSINESS ETHICAL be individuals and/or groups who question the behaviors
STANDARDS of institutions in our economic system. Our discussion
Businesses make decisions that influence consumers, has focused on businesses in the economic system, but
employees, and society in general. It is people who make other systems such as churches, schools, and governmen-
up the businesses, and it is people who must set the stan- tal agencies are also subjected to critical ethical scrutiny.
dards for ethical conduct. The process for setting stan- Ethics and social responsibility are the concern of every-
dards needs to be a top-down approach—management one, and it is up to individuals to establish ethical codes
must develop and support an ethical code. Employees and to follow them.
must understand what is expected of them in order to fol- SEE ALSO Economics
low the codes. Managers and employees must be trained
to interpret and consider alternatives relative to estab-
lished ethical codes. In larger businesses, compliance BIBLIOGRAPHY
offices are often established to assure that ethical codes are Baylis, Charles A. (1958). Ethics: The Principles of Wise Choice.
New York: Holt.
followed.
Boulding, Kenneth E. (1968). Beyond Economics: Essays on Soci-
People outside the business must also know what eth- ety, Religion, and Ethics. Ann Arbor: University of Michigan
ical standards are being followed, and they must know Press.
that individuals within the company who do not follow Bowne, Borden P. (1979). The Principles of Ethics. New York:
the prescribed ethical codes will be dealt with in a manner AMS Press.
appropriate to the violation. This illustrates the need to Brandt, Richard B. (1998). A Theory of the Good and the Right.
enforce the ethical codes. If a business establishes an ethi- Amherst, NY: Prometheus Books.
cal code but does not enforce it, the code will not be fol- Facione, Peter A., Scherer, Donald, and Attig, Thomas. (1991).
lowed. Ethics and Society. Englewood Cliffs, NJ: Prentice Hall.
Velasquez, Manuel G. (2002). Business Ethics: Concepts and Cases.
Upper Saddle River, NJ: Prentice Hall.
SOCIAL RESPONSIBILITY
Closely related to ethical codes are responsibilities that
economic enterprises have to society. This is known as Roger L. Luft
social responsibility. This is a difficult element of business
operations because it normally means additional costs to
the business. Social responsibility could mean making
contributions to charitable organizations. An example ETHICS IN FINANCE
might be a corporation donating land it is not using to a Ethics in general is concerned with human behavior that
conservation group for the development of a nature pre- is acceptable or “right” and that is not acceptable or
serve. “wrong” based on conventional morality. General ethical
Social responsibility also includes internal considera- norms encompass truthfulness, honesty, integrity, respect
tions, such as hiring minorities, establishing on-site child- for others, fairness, and justice. They relate to all aspects
care facilities, controlling pollution, ensuring safe working of life, including business and finance. Financial ethics is,
conditions, providing substance-abuse programs for therefore, a subset of general ethics.
employees, and manufacturing safe products. These are all Ethical norms are essential for maintaining stability
economic decisions that have social effects both within and harmony in social life, where people interact with one
and outside the business. another. Recognition of others’ needs and aspirations,
Businesses that are concerned about social responsi- fairness, and cooperative efforts to deal with common
bility will conduct social audits. This is a systematic eval- issues are, for example, aspects of social behavior that con-

266 ENCYCLOPEDIA OF BUSINESS AND FINANCE, SECOND EDITION