CORPORATION ETHICS AND RECESSION 2008

PHL 216

Presented by : Sheikha latifa , Omais , Arsalan , Farhan, ali

CONTENT :• What is recession• Was the 2008 financial crisis caused by a lack of

corporate ethics? • Four important views of ethics and issues about

business ethics• The Global Recession and its effect on Work Ethics :• First survey conducted by Cyber Ark Software• Second survey on Fraud And Misconduct

conducted by coporative executive board• Bibliography

What is recession?

• The contraction phase of the business cycle• National Bureau of economic Research

(NBER) is the official agency in charger of declaring that the economy is in the state of recession.

• significant decline in economic activity lasting more than a few months, which is normally visible in real GDP, real income, unemployment, industrial production, and wholesale-retail sales”.

Was the 2008 financial crisis caused by a lack of corporate ethics?

• During the second half of 2008, the United States financial markets, and eventually all major world markets, were devastated by the aftermath of unethical lending practices by major lending institutions.

• These bad loans were made at the height of a real estate bubble in the United States. Aggressive lenders engaged in loans called “sub-prime mortgages.” These mortgages were extremely high risk and most of them violated traditional underwriting standards for the industry.

• Prudence and ethics were pushed aside as greed overcame good judgment among mortgage lenders nationwide. The problem was exacerbated by the packaging, and leveraging, of these loans by Wall Street financial companies.

• Who is to blame for the current financial crisis that has led to a mortgage and stock market meltdown

• whereby President Elect Obama has called “the greatest crisis since the great depression”?

• Many feel that the financial services industry is to blame because it has consistently tried to defy gravity by using debt, securitization and proprietary trading to boost fee income and profits. Investors, hungry for yield have willingly gone along with the financial services industry.

• U.S.A – Consumption based Economy.• 2/3rd economic activity i.e. GDP –

comes from consumers.• Credit - free flowing for U.S consumers

Credit card loans for personal consumption

Auto loans for purchase of cars

Home loans for purchase of houses

• The first part discusses the events leading up to the mortgage and stock market meltdown.

• The second part discusses the main causes of the bank failures and subsequent bailouts.

• The third part discusses the now congressionally approved auto company bailouts.

• The fourth part discusses possible suggested remedies. Finally, the conclusion presents a summary of the paper and answers the hypothesis of whether the 2008 financial crisis was indeed caused by a lack of corporate ethics.

•

Four important views of ethics and issues about business ethics

The term ethics refers to rules and principles thatdefine right and wrong conduct.

Four vital ethics points

ISSUES IN BUSINESS ETHICSThis part of business ethics overlaps with the philosophy of business, one of the aims of which is to determine the fundamental purposes of a company. If a company's main purpose is to maximize the returns to its shareholders, then it could be seen as unethical for a company to consider the interests and rights of anyone else.

This survey was conducted by Cyber-Ark Software - a leading provider of Privileged Identity Management (PIM) solutions for securing privileged user accounts and managing sensitive information across the enterprise to find out if the current economic market is having an effect on work ethics and data leakage.

The Global Recession and its effect on Work Ethics

The second survey was on Fraud And Misconduct conducted by coporative executive board which result in a major :

Global Recession Has Resulted in Major Organizational Changes such as Layoffs and Restructuring

This turmoil has generated serious implications for the ethics and compliance function

A 20% increase in observations of

misconduct from the first to the second half of 2008

A 20% increase in observations of

misconduct from the first to the second half of 2008

A 5% decline in frontline employee perceptions of

senior management's commitment to integrity

A 5% decline in frontline employee perceptions of

senior management's commitment to integrity

A 10% increase in the number of disengaged

employees, from one in ten to one in five, causing

declines in companywide productivity of up to 5%

A 10% increase in the number of disengaged

employees, from one in ten to one in five, causing

declines in companywide productivity of up to 5%

Based on a survey of more than 125,000 employees in 75 countries over the past five quarters, the Corporate Executive Board found:

Bibliography

• http://www.businessweek.com/managing/content/jun2009/ca20090612_156983.htm

• http://www.complianceethicsinstitute.org/handouts/2009/conference/supplimental/201Supp1.pdf

• http://www.corporateeye.com/blog/2008/12/financial-crisis-and-leadership-or-lack-of/

• http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1633638