UNETHICAL PRACTICES AT BARCLAYS BANK

Unethical Practices at Barclays Bank

         In this case study we have the United States of Justice conducting a criminal investigation into abuse of the LIBOR (London Interbank Offered Rate) interest rate regulated by the British Banker’s Administration. And resulting on a fine of more than $440 million by Unites States and English financial regulatory agencies for manipulating the LIBOR to its advantages, causing world-wide effects to business and individuals. 

Ethical Development Level

In the case of Barclays Bank and the manipulation of the LIBOR (London Interbank Offered Rate). It can easily be determined that the executives of this organization correspond to the Preconventional morality level. “Preconventional morality can be define as the most basic level, is childlike. It is calculating, self-centered, and even selfish, based on what will be immediately punished or rewarded” (Lamb, Hair, & McDaniel, 2014, p.34). The manipulation of the LIBOR interest rates by proposing artificially low bank-to-bank rates to make themselves more stable than they actually were showed that they did not care about anyone else but rewarding themselves.

Corporate Social Responsibility

 “Corporate Social Responsibility: Is the business’s concern for society’s welfare. This concern is demonstrated by managers who consider the best interest of the company and the society within which it operates” (Lamb, Hair, & McDaniel, 2014, p.37). The manipulation of the LIBOR rate Barclays Bank not only affected London banks and business executives, but also small business and individuals like students who have students’ loans, and homeowners, whom interest rates depend on the LIBOR rate since it is use all around the world as an interest rate and a financial instrument benchmark. If Barclay’s bank executives had had any kind of Corporate Social Responsibility they had never manipulated the rate to their best interest without thinking on the bad consequences for the rest of the society.   

Corporate Social Responsibility Response Actions

To take corporate Social Responsibility of their actions after the scandal broke up Barclays bank should of ask a public general apology and offered to compensated the most affected victims of their unethical practices, and compromise to do a clean up of all their unethical executives and make them responsible for their actions. Show society that people have to be responsible and accountable for their actions regardless of the position they held within the organization.

Postconventional Morality

But in the other hand if the executives at Barclays Bank would of stopped and think for a moment if  “Even though manipulating the LIBOR will increase company profits, is it the right thing to do in the long run?” they would of being in the Postconventional morality level. This is the last level of morality that represents the morality of and adult. “At this level, people are less concerned about how others might see them and more concerned about how they see and judge themselves over the long run”(Lamb, Hair, & McDaniel, 2014, p.34). Being at this level show that the organization and the people in it have an excellent ethical and moral integrity.

Ethics and Social Responsibility in Marketing

“Ethics is the moral principle that generally governs the conduct of an individual or a group” (Lamb, Hair, & McDaniel, 2014, p.32). Ethics are the base of a successful long lasting relationship between the organization and their customers since the businesspersons have the obligation to be honest with their customers, they are also responsible for preserving their customers environment and protecting their rights. By doing so they have insured a good long relationship with them and these actions would automatically put them on the philanthropic responsibilities level of the pyramid of Corporate Social Responsibility since they would not only be profitable, obey the law, be ethical, but a good corporate citizen, contributing to the community and improving the quality of life.   

References

Lamb, C. W., Hair, J. F., & McDaniel,

Understanding the Chinese Business Culture

Understanding the Chinese Business Culture

As president of Global Plastics Inc., I have been in strategy meetings with upper management and we have decided that in order to take our company to the next level we will need to expand our market. We have decided to to market and distribute our product’s, which consist of plastic toys and furniture, in China. We have an initial meeting with a Chinese company, CEKG, to see if they will take on your product, and not only distribute it, but help you market it in China as well.

The Chinese culture is very different from our culture and it is important that we understand their culture in order to have successful dealings in this endeavor. Confucianism is the primary philosophy behind the Chinese culture and it is necessary to understand what guides them.

With Confucian principles openly flourishing in China, the Chinese’s traditional philosophy applies a constructivism perspective, dealing with intricacy and ambiguity by way of a clear procedural guideline and roadmap for both scholars and practitioners (Ning, 2011).

“The framework of Western and Eastern work ethic studies is very different, the differences and similarities are resulted from the different origins and core components of both systems. The similarities are that both promote thrift, hard work, and sense of shame. Confucianism highlights humanity, righteousness, proprieties, wisdom, trust, harmony, loyalty, the family life and personality development; whereas the western principle underscores that the individual should take responsibility” (Ning, 2011, Year). In the traditional style of western management, scientific research methods like optimizing, algorithm, and operation research are applied to solve multifaceted problems, while cultural, behavior, and psychological aspects of human behavior are less measured. In contrast, Chinese Confucian philosophy, explores the fundamental power of human beings in order to deal with unexpected things and rising complexity.

Chinese business people behave differently from their European counterparts – the way they speak, the way they think, and the way they treat their clients. To successfully enter the Chinese market, you need to put aside your preconceived notions and embrace what is there. Acknowledge that things are different and try to understand why such differences are important to your business and your success in China and how you can deal with them in an efficient way. (EUSME Center, 2013)

Relationships are essential for effectively conducting business anywhere, this is especially true in China. “The Chinese concept of guanxi encompasses a network of personal connections, such as with family members, friends, classmates and relatives as well as with close business associates. It is based on deep mutual understanding, feeling, trust and respect. Understanding, building, using and maintaining such a network remains one of the biggest challenges for foreign business people in China.” (EUSME Center, 2013)

Negotiating in China is a slow process. The first few meetings usually involve unrelated conversations as participants share information about their personal lives, such as: families, home towns, and leisure activities These meetings are not unimportant, they begin the process of forming connections that are essential to Chinese business. The rule is “friendship first, business later”.

Conflicts and disputes are an a part of doing business in China. When negotiating, people test the boundaries of where their counterpart is willing to go in order to get the best deal. In a culture where people are used to bargaining, tense negotiations are normal. Yet, for an array of reasons, most conflicts do not end up in litigation.

The most important thing is keeping face, it is extremely important in China. Chinese people don’t like to expose their troubles to the outside world. They are guided by the belief of “turning big problems into smaller ones, and small problems into no problems at all” (da shi hua xiao, xiao shi hua liao). (EUSME Center, 2013)

Second, harmony is an preferred state to reach according to conventional Chinese philosophy. Therefore, Chinese business people are predisposed to avoid conflicts, make concessions and glossy things over so that they can stay on good terms.

In conclusion the Chinese culture is very complicated and the utmost care must be made in understanding the differences and similarities between our two cultures. I propose the negotiating team complete a class on Chinese cultural studies to strengthen the opportunity that the expansion into the Chinese market would create for  Global Plastics Inc.

 

References

Ning, H. (2011, June 29). Case study on the influence of Chinese traditional philosophy to the enterprise management [School of economics and management, xi’an institute]. Journal of Management and Strategy, volume 2(issue 3), 73,74,75.

EUSME Center. (2013). Negotiating and dealing with Chinese business partners. Retrieved from http://www.ccilc.pt/sites/default/files/eu_sme_centre_guideline_negotiating_and_dealing_with_business_partners_en.pdf

Corporate Social Responsibility and the Future

Corporate social responsibility (CSR) is also known as responsible business, corporate conscience, or corporate citizenship that embodies valuable strategies for the welfare of a society in relation to corporate responsibilities. CSR is the part of a business model that governs the procedure of the self-regulatory policy of a company, and an organization’s business ensures CSR’s compliance with legal, social, and ethical values. Companies have learned from the devastating consequences of corporate social irresponsibility that has made them rational enough to act sensibly not only in the interest of a company but for a society as well.

 The active implementation of CSR has significant effects on the prosperity of a company’s business that ultimately benefits its shareholders. Those organizations which prefer to do social welfare work are able to draw a great number of customers towards their products by establishing a good ethical impression that a society appreciates at large. According to McCoy (1989), ethics should be the central part of a business, and this recognition helps in enhancing the performance of a company. The effective CSR policy ensures the firm position of an organization in the market and has positive effects on the profitability of a business. 

Many people deduce that the future of CSR is quite uncertain as it cannot be implemented effectively in contrast to the interest of shareholders who are not concerned with the non-profitable activities of a company. It is an unreasonable presumption as the policy of CSR is not only constantly penetrating into companies but also assuming a more sound and practical form than ever before due to its importance in today’s world. With the increasing implication of CSR, it can be safely concluded that its prospective growth will not be hampered in any way.

References

McCoy, C. S. (1989). Management of values: The ethical difference in corporate policy and performance. New York: Harper & Row.

Corporate Social Responsibility in Ethics

I think in general society will move in the direction of higher expectations for CSR. However, I also think it will happen unevenly, because society is not homogeneous. Certain states, like California, will put much higher pressure on companies than others. Such parts of the country have moved (and are still moving) toward greater accountability, authenticity, charity, and more company-customer interaction. Other parts of the country might not care so much about CSR as long as the company doesn't outright commit crimes or defraud customers.

The traditional company mindset, which Pearce & Robinson (2013) indicate was single-mindedly focused on stockholders in the past, might stay strongest in more traditional states. Given how polarized the country has become, this difference might only get stronger over time, making local companies more able to get away with questionable practices while national and international companies are held to higher corporate citizenship standards, both by progressive states here and by progressive nations around the world.

References

Pearce, J. A., & Robinson, R. B. (2013). Strategic management: Planning for domestic & global competition. (13th ed.). New York, NY: McGraw-Hill.

Managerial Ethics in Finance

Managerial Ethics in Finance

Management and leadership can have a direct effect on market performance of their company. This can be in the form of good and bad decisions of management. Obvious choices would be those that surround the products or services that are offered. If management pushes for a good product, markets will most likely react positively. Leadership can also have an effect based on their ethical decision. Investors react to the companies’ earnings disclosures and these reactions can be influenced by the type of disclosures companies do. Managers are responsible for choosing which information to disclose and sometimes they do not promote transparency. Managers bend the information according to the needs of the company and investors can usually detect this kind of behavior (Dinis & Soukiazis, pg. 29, 2016). When this is detected, it acts as a deterrent for investment as one would question why the company is attempting to hide certain aspects.

There are numerous regulations that exist to prevent the unlawful or unethical behavior by publicly traded companies. The Sarbanes-Oxley Act is one of these and lay out specific things that corporations must do in addition to conducting business ethically. Rather than prevent, these regulations are more apt to deter, as many companies still choose to bend the rules. Ethics are not cut and dry as the ideals differ for each individual and business. What one company may consider unethical, another may consider it common practice. For companies to stay competitive in a global economy the temptation is there to bend rules in order to stay at the top. Additionally, unethical and unlawful are two different things. It can be difficult to prosecute companies for unethical behavior. Because of the rarity of repercussions, many companies do not feel an overwhelming need to conduct 100% of their business in a completely ethical manner.

There are steps that can be taken to change an unethical culture into one that is an example of good business ethics. In a survey of managers on how to improve ethics within the organization, there were four common responses on what steps should be taken. Those responses were: ethics should be taught in school, there should be organizational codes of ethical conduct, improve monitoring and reporting, and hire people with integrity as a driving quality (Cordeiro, pg. 270, 2003). Teaching ethics in school is a good start. People should be aware of what ethics are, understand the importance, and be prepared to follow ethical guidelines. It should go beyond this and ethics training should be a regular occurrence within an organization. Leadership should set the example for everyone to follow. It is far less likely to have unethical behavior when management acts ethical and expects the same from employees by creating an atmosphere of shared values. Routine internal audits are another way that companies can curb unethical behavior. Having oversight and acting upon findings shows a company's commitment. The last recommendation regarding hiring honest employees can be difficult. It is hard to know with certainty that someone is honest. It can be conveyed to potential employees, however, that integrity and ethical behavior is a pillar within the organization. There are numerous ways in which a company can lessen unethical behavior and each solution requires commitment from the organization as a whole.

References

Dinis, D. S., & Soukiazis, E. (2016). The links between the companies’ market price quality and that of its management and business quality: A system panel data approach. International Journal of Financial Management, 6(1), 28-38. Retrieved fromhttp://lib.kaplan.edu/login?url=http://search.proquest.com/docview/1772607071?accountid=34544

Cordeiro, W. P. (2003). The only solution to the decline in business ethics: Ethical managers. Teaching Business Ethics, 7(3), 265. Retrieved from http://lib.kaplan.edu/login?url=http://search.proquest.com/docview/211840858?accountid=34544

Improving Ethical Behavior

           Ethics in Business

           Leaders and managers can under report expenses and/or over report sales figures. Either of these would have the effect of making the company appear to be in a healthier financial position than they are actually in. These same people can also suppress information on anticipated litigation where the company has significant risk of being levied with financial penalties or being barred from certain markets due to regulatory non-compliance. Any of these actions can drive higher stock prices until they are exposed.

            One of the key reasons why unethical behavior occurs in financial management is that it tends to be rewarded in one form or another. Employees, managers, and leadership at many companies have a portion of their compensation tied to financial results. Even if compensation isn’t tied to financial results, continued employment often is. Given these pressures it isn’t hard to understand how some people may give in to the temptation to realize personal gain at the expense of the long term financial health of the organization. In some cases unethical behavior is a symptom of widespread cultural dysfunction, while in other cases it can be limited to isolated individuals or departments.

            There are several things that companies can do to improve ethical behavior. The first is to clearly communicate what the behavioral expectations in terms of code of conduct, anti-corruption and ethics training that goes beyond the 15 minute annual training that hasn’t changed since 2000 that so many companies offer. When companies take that approach to ethics training it is often motivated by the desire to claim plausible deniability when employees acting unethically are caught by authorities or exposed in the media. The second thing is to lead by example from the top down. Leadership and management must be seen to be acting ethically even when it is not in the companies or their personal best interest. This will help to build a culture of ethical behavior. The third thing is to stop rewarding unethical behavior. Compensation and promotions need to be based on a system that is fair, transparent and auditable. Finally, companies can hold individuals responsible for their behavior. If unethical behavior is consistently punished with demotion, termination, or handing the offender to authorities, employees will quickly realize that developing a strong ethical compass is in their best interest.

Management Report on Governance and Regulation

Management Report on Governance and Regulation

            Law, government, and economics has an effect on the value creation of all businesses. The law provides organizations with many business entities to enter into, such as a sole proprietorship, partnership, corporation, or a limited liability corporation (Bagley, C.E., 2008). These business structures are selected by the organization in order to suit their business strategy. Government regulates business activities in very different ways according their industry specific needs.  The IRS, Department of Revenue, Department of Transportation, Department of Health, FDA, EPA, and the FCC are regulatory bodies that create standards for business operations.  The market and the economy also have substantial influences on businesses and their value creation.

The Law’s Influence on Value Creation

            Creating a viable business entity is one of the most important activities an organization takes in the first steps of starting a company.  The organization must decide whether they should become a corporation, a limited liability corporation, a partnership, or even to be a sole proprietor. The ramifications of taxation and liability are different for each entity and the variety of business entities created must align with the goals, mission and vision of business (Bagley, C.E., 2008).  Laws are not just meant to bind organizations they also help to create business opportunities (Bagley, C.E., 2006).  The enforcement of contracts and laws such as antitrust laws, intellectual property rights, information technology, environmental regulations, product safety standards, and legal recourse all help to create independent business practices (Bagley, C.E., 2006).  The enforcement of contract law promotes interdependence and cooperation among businesses (Bagley, C.E., 2006).  These laws help to not only protect the business entity from undue fines or litigation, but also helps to create financial and economic opportunities.  The opportunities arise from the competitive advantages created from holding intellectual property rights, licensing, and contracts.

            Economic Value Creation

            The laws help to create a level playing field for businesses within the market and within industries.  The market is in effect created by organizations, buyers, sellers, and customers are held contractually through agreements (Bagley, C.E., 2006).  When businesses are subject to the same regulations they are forced to create the means for their own competitive advantages in order to be profitable.  The economy has a major impact on business activities.  When the economy is low businesses tend to tighten up and go to lean production methods to control costs and reduce waste.  When economies are bustling businesses strive to keep up with demand.  Corporate strategies must take these economic times into consideration when formulating their practices in order to remain profitable. 

            The global economy is no different.  The global market has made financial integration among other countries reality (Walter, A., & Sen, G., 2009).  It is these economic results that create political connotations that change opinions and power (Walter, A., & Sen, G., 2009).  One political connotation is that economic policies create change in the distribution of wealth (Walter, A., & Sen, G., 2009).  The economic value of trade policies and exchange rates are what, economists claim, maximizes national and global welfare through trade agreements (Walter, A., & Sen, G., 2009).  Organizations and stakeholders must consider the global ramifications of their actions along with their personal and organizational goals.

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Governmental Factors of Value Creation

            The government has a large role that affects the business environment (Bagley, C.E., 2006).  The lobbying activities made by corporations, interest groups, and organizations such as; the National Restaurant Association, the Tavern League, the National Rifle Association, and AARP advocate what legislation helps their interests.  Each industry group aims to get legislators to hear their troubles and through financial support the lobbyists go up against governmental legislation and regulatory bodies to make laws that create efficient markets and economic prosperity (Bagley, C.E., 2006).

Economics and Value Creation

            AARP’s mission statement is reported by Hastley as being “dedicated to enhancing quality of life for all as we age, leading positive social change, and delivering value to members through information, advocacy, and service” (2011, para. 16).  It is special interest groups such as these that lead to policy change.  Walter, A., and Sen, G. state that “economic policies are almost invariably politicized because different choices have different effects on the distribution of wealth” (2009, pg. 2).  These changes result in economic and political connotations that change opinions and lead to creating power (Walter, A., & Sen, G., 2009).  Economics affects trade policies and exchange rates.  The global market has made financial integration among countries possible (Walter, A., & Sen, G., 2009).  Economists claim that using the comparative advantage theory is what maximizes national and global welfare through free trade agreements (Walter, A., & Sen, G., 2009). 

            Value creation sometimes comes at a cost.  For example, agribusiness lobbyists have supported bills that help to regulate food labeling objectives (Hastley, G., 2011).  At a cost to manufacturers regulations like this have been created to be a check and balance for maintaining truth in advertising and informing the public of the contents of their product.  These legislative initiatives have created a level playing field for organizations in their industry to differentiate themselves from others in the industry.  Some industries, like the oil industry, lobby for less regulations and governmental intervention in order to create value for themselves within their industry at a cost to the environment.  It is political strategies like this example that creates competitive advantages for industry giants like big oil.  In cases like this one can see how laws liberate organizations (Bagley, C.E., 2006).

Ethical Ramifications

            Keith, Pettijohn, and Burnett believe that ethics is not just based “societal implications” but also is “based on their economic and business implications” (2008, pg. 83). Unethical activities not only creates a less profitable business but it also creates a negative image (Keith, N.K., Pettijohn, C.E., & Burnett, M.S., 2008).  Together this also hampers employee relations, job performance, and job satisfaction of the employees (Keith, N.K., et. al., 2008).  The perception of a company is what influences behaviors, so in order to change the perception of an organization an organization can advertise.  Advertising serves many purposes.  It displays companies in a positive light to sell their goods or services (Murphy, P.E., 1998).  Advertising also serves the agencies creating the ads. Their creative differentiation attracts new customers and retains current customers (Murphy, P.E., 1998).  Advertising also serves the media through the payment for ad placements this supports their business of entertainment and educating society (Murphy, P.E., 1998).

            It is this web of connectedness that builds customer trust (Snyder, W.S., 2008).  Advertising needs to have truth, fairness, taste and decency (Snyder, W.S., 2008). The advertising industry is a $200 billion industry that is estimated to support 21 million jobs nationwide (Snyder, W.S., 2008).  Ethics is vital to an industry of this size.  Advertising is what helps to shape attitudes, behaviors, and priorities of society (Srivastava, V., & Nandant, T., 2010).  Snyder defines ethics as “the moral standards and principles, against which behavior is judged” (2008, pg. 62).

Conclusion

            The findings conclude the intricacies of how governance, regulations, laws, transparency, and ethical standards work together to shape the economic potential for industry and the entire marketplace.  Organizations drive the forces that determine standard practices and regulations in order to improve their economic livelihood. In doing so they help to form and shape social standards, attitudes, and perceptions.  The costs involved change both the economic and physical market environments.  The ramifications are seen in societal measures of what is considered ethical and just, and also in what determines the shape and extent of a global marketplace.

References

Bagley, C.E. (2006). What’s law go to do with it: A systems approach to management. Harvard Business School. Retrieved from: https://www.hbs.edu/faculty/Publication%20Files/06-038.pdf.

Bagley, C. E. (2008). Winning Legally: The Value of Legal Astuteness. Academy Of Management Review, 33(2), 378-390. Retrieved from: http://eds.b.ebscohost.com.lib.kaplan.edu/eds/pdfviewer/pdfviewer?sid=01485bb3-9114-4d60-9dc5-7c8c28d0ad2d%40sessionmgr106&vid=3&hid=119

Hastley, G. (2011). 10 of the biggest lobbies in washington. Business Pundit. Retrieved from: http://www.businesspundit.com/10-of-the-biggest-lobbies-in-washington/

Keith, N. K., Pettijohn, C. E., & Burnett, M. S. (2008). Ethics in advertising: Differences in industry values and student perceptions. Academy Of Marketing Studies Journal, 12(2), 81-96. Retrieved from: http://eds.a.ebscohost.com.lib.kaplan.edu/eds/pdfviewer/pdfviewer?sid=27da467b-7fe5-49ce-92bf-b14d7ebca51a%40sessionmgr4004&vid=2&hid=4210

Murphy, P. E. (1998). Ethics in Advertising: Review, Analysis, and Suggestions. Journal Of Public Policy & Marketing, 17(2), 316-319. Retrieved from: http://eds.a.ebscohost.com.lib.kaplan.edu/eds/detail/detail?vid=5&sid=27da467b-7fe5-49ce-92bf-b14d7ebca51a%40sessionmgr4004&hid=4210&bdata=JnNpdGU9ZWRzLWxpdmU%3d#AN=1376193&db=bth

Snyder, W. S. (2008, March). The Ethical Consequences of Your Advertisement Matter. Journal of Advertising Research. pp. 8-9. Retrieved from: http://eds.a.ebscohost.com.lib.kaplan.edu/eds/pdfviewer/pdfviewer?sid=27da467b-7fe5-49ce-92bf-b14d7ebca51a%40sessionmgr4004&vid=12&hid=4210

Srivastava, V., & Nandan, T. (2010). A Study of Perceptions in Society Regarding Unethical Practices in Advertising. South Asian Journal Of Management, 17(1), 61-69. Retrieved from: http://eds.a.ebscohost.com.lib.kaplan.edu/eds/pdfviewer/pdfviewer?sid=27da467b-7fe5-49ce-92bf-b14d7ebca51a%40sessionmgr4004&vid=14&hid=4210

Walter, A., & Sen, G. (2009). Analyzing the Global Political Economy. Princeton, N.J.: Princeton University Press. Retrieved from: http://eds.a.ebscohost.com.lib.kaplan.edu/eds/ebookviewer/ebook/ZTAwMHhuYV9fMzU1MDUwX19BTg2?sid=b3e04d35-0057-448b-9ce2-1b0791a86cee@sessionmgr4001&vid=10&format=EB&rid=91