Business people have been brought under scrutiny in recent years for mismanagement. Recently FTX’s Sam Bankman-Fried, Terra Luna’s Do Kwon, and Silicon Valley Bank, among others, made the news. Do Kwon is wanted for over $40 billion Terra Luna crypto crash. Likewise, Sam Bankman-Fried was arrested in the Bahamas after his cryptocurrency exchange collapsed.
When it comes to financial literacy, skills are not enough. Managers have a high potential to line their pockets or ruin the company through bad judgment. This is why there are unending stories and ethics essay examples of manipulations. As a result, experts are advocating incorporating ethics into the curriculum. Let us explore why the subject is important for companies and business management.
Introducing Ethics into The Financial Curriculum
Ethics plays an important role in our daily interactions. It is a discipline of dealing with good and bad with commitment and moral duties. In business, ethics are the standards for right and wrong conduct. Although most people confuse law and ethics, they are different. The law is objective and assertive. In contrast, ethics is flexible and subjective. The latter controls how individuals in a profession behave.
Ethics in finance balances, protects, and preserves shareholders’ interests. Scandals and misdeeds erode public confidence in corporate responsibility. It damages investor trust and affects the sustainability of the global markets.
Over time, regulators and governments have tried to combat misconduct through regulatory reforms. But laws and compliance alone are not enough to eradicate fraud. In the end, firms and individuals develop a culture of integrity. This culture must permeate all levels of operation. It promotes the virtuous rules of managing assets in the client’s best interest.
Teaching Ethics in Schools
The school is one of the foremost educational institutes for learning. Indoctrinating students in a planning program that teaches ethical regulations inspire trust. Lecturers educate on social responsibilities and assign research essays for an independent investigation. For wider research coverage, explore samples for papers on ethics for in-depth analysis and essay examples of different industries. An ethics paper example allows students to understand ethics in the modern business world and various applicable theories. It also provides knowledge most traditional business programs don't teach.
There are guidelines in the Certified Financial Planner Board of Standards, Inc. Code of Ethics. These are most important that firms should teach include:
- Loyalty: A manager must place the client’s interest above everything else. They should avoid conflicts of interest, request informed consent, and manage conflicts. Managers must also act with due care, skill, prudence, and diligence.
- Integrity: A professional must act with integrity, which demands honesty and candor. It allows for innocent errors and legitimate differences in opinion. But, it cannot co-exist with the subordination of principle and deceit.
- Conflict of interest: Managers must always act in the interest of their clients. Side with the client if there is a conflict of interest.
- Confidentiality: A professional must keep confidential. He may not disclose any nonpublic personal information about clients. Also, he must not also use such information for his benefit, whether it causes harm or not.
- Professionalism: All managers must treat clients and the corporate profession with dignity and respect.
Why Ethics Should Be at The Core of Financial Education?
Teaching ethics grow intellectual dimensions to identify issues and address them. Not only this, but it also aids the development of critical thinking skills. Students that internalize purposes reflect on the effects of their actions. Ethics is an essential branch of philosophy. It plays a huge role in decision-making. But most people don’t understand what it is. As a result, they cannot distinguish between morals and ethics.
Teaching ethics in the school promotes a more deliberate learning experience. It expands a student’s ethical awareness. It also helps them understand or motivates them to act appropriately. Laws and regulations can guide ethical behaviors. But an individual's judgment is a critical ingredient in making principled choices.
Individuals with well-developed principles make sound judgments. They leverage ethical frameworks for an internal thought process before acting. Most people make decisions from a profit or loss outlook. Instead, they use a framework. A framework for decision helps you examine your conduct. It analyzes the particular circumstances of each decision. It also determines the best course of action to fulfill responsibilities.
Ethics Improves Profitability
The goal of every business is to make a profit. Many professionals are eager to bend the rules and overlook ethical implications. Overlooking unethical concepts has short-term benefits. But it will hurt the brand in the long run. An average person supports ethical decisions. He also views them as socially acceptable. Examples include offering a good work environment for employees or selling high-quality products.
Focusing on your ethics requires putting your customers first. It also means keeping your employees comfortable and minimizing potential dangers. Sticking to these principles will provide longevity for a business. It builds customer understanding, improves employee behavior, and maintains pristine brand recognition.
Business Ethics is an Essential Skill
The world is changing, so business ethics should be at the core of education. Unlike before, it is easy to identify and publicize ethical missteps. A single tweet or Facebook post could bring the walls crashing down on a business. It can also attract various negative implications. Hence, management is devoting more resources and hiring the right talents. The goal is to drive honesty and integrity.
Ethics Drive Employee Behavior
Most employees conform to standard workplace practices. People that work in an environment with strong cultures handle issues well. Their environment reinforces their ideologies. It also motivates them to dispense their roles with integrity.
A complete ethics program covers all parts of business functions. This includes marketing, human resources, and operations. The best way to maximize the impact is to make ethical processes part of the employee workflow. They include:
- Establishing policies and procedures.
- Overseeing allegations of misconduct.
- Defining program mandate.
- Providing instructions and communications, etc.
Educational institutions play an important role in producing ethical leaders. It is a platform where students can face some of the world’s most significant problems in simulation. Then, they solve them with reasoning. Aspiring professionals learn the behavioral expectations of an ethical workplace. They use it to investigate social and legal factors of decision-making.
The Ethical Issues in Financial System
What behaviors are acceptable as right or wrong based on conventional morality? Ethics attempts to resolve the conflict between our material needs and our conscience. It also relates between selfishness and selflessness.
In economic systems, the line can become blurry quickly. For example, Bernie Madoff served as a broker for his clients and a custodian of their money. With both roles, there was no independent auditing process. As a result, it was easy to defraud clients of millions. This conflict of interest is one of the many ethical issues in the system. Other problems are:
- Security and information: This relates to how firms handle and secure information. A security breach at the Equifax credit bureau affected the confidential credit and personal data of over 143 million Americans.
- Insider trading: This is one of the most publicized unethical behaviors. It means taking advantage of information about a company unavailable to the public to generate an extraordinary gain. Coinbase’s ex-manager, Ishan Wahi, was convicted of insider trading. Not only Ishan but many more people have threaded the path.
- Toxic workplace culture: firms with unscrupulous leadership have a toxic workplace culture. The leaders accept bribes, manipulate sales figures, and pressure employees for favors. They also don’t pay attention to reports of bullying and harassment. This type of environment does not respect all types of people. They set unrealistic and conflicting goals and misuse company technology.
- Fraud and tax evasion: This is an illegal activity where a person avoids paying a true tax liability. It involves false claims to deductions, deliberate under-reporting or non-reporting receipts, etc.
The commercial system is filled with examples of violations of trust in dealings. They include fraudulent dealings, unauthorized transactions, and more. Regulatory agencies and self-regulating bodies establish codes. The aim is to promote responsible behaviors among their operatives. It also holds them accountable for their actions.
Ethics is important in the leadership culture of a firm. It helps managers develop an awareness of morals and ethical guidelines. The code of ethics for most professionals is almost the same in different places. As a result, seasoned workers know it regardless of where they work. But organizations should not assume everyone does. Firms have to develop compliance training and create learning models to educate employees on their codes of ethics.