At least two of the four posts required should be in the form of replies to fellow classmates in threads other than your own.
Each of your replies should be at least 200 words and informed by the required course material. As such, the replies must have citations and references in APA notation. Your list of references for each reply should include all of the course material that has informed your reply, in addition to any research that you have obtained on your own.
Your replies should focus on the specific examination presented by your fellow student and these should include an examination of whether or not the characteristics of the ethical theory and/or economic system were identified well, and whether or not their application and analysis were also carried out successfully. Providing such an examination is not an attack on your fellow student but an attempt to work together with your fellow student toward the better understanding of the ethical theories employed, as well as their application.
1st post “I buried my face in the loads of material we were assigned for our case study. With my strong suit being finance, I elected to choose the Lehman Brothers bankruptcy and the subsequent financial collapse in September 2008. There are multiple factors that contributed to what was known as the subprime mortgage collapse which involved the investment banks Bear Sterns, Lehman Brothers and Merrill Lynch as well as insurance firm AIG (Cochrane, 2009). Most notably was the engagement of the preceding firms engaging in packaging groups of subprime mortgages into securities that were then traded on the stock market. This is similar to swapping cash into chips at the casino – people lost focus on what they were actually buying and these mortgage backed securities took on a life of their own (Swedburg, 2010). Subprime mortgages, which are no longer permitted in the industry, allowed banks to distribute their riskiest assets into marketable securities which reduced their exposure.
My focus for the issue with the Lehman Bankruptcy, and the behavior of many large banking institutions during the 2008 financial crisis, is that these banks should not be permitted to pass debt amongst each other’s balance sheets. Since the United States is a capitalist society, corporations always seek to maximize profits with the least amount of risk for selfish reasons. The CEOs and executives are charged with maximizing return to shareholders while also protecting their jobs by managing downside risk (Friedman, 1970). Large banks are governed by the Fed so they are bound to the central bank’s rates and regulations while hedge funds answer to the SEC, which creates a financial grey area, and it allows banks to distribute credit and default swaps off their balance sheets and into hedge funds portfolios which ultimately end up traded on the stock exchange (Zingales, 2008).
Thesis: Restricting banks from trading debt with each other will reduce the risk of bank default and prevent broad losses among investors and markets.
Like most of my us, I will be choosing utilitarianism because it best aligns with what I perceive to a moral best case scenario. Due unto others what you wish would done to you and always seek the maximum happiness a least amount of pain for an ethical outcome. Virtue ethics rely too much on an individual’s teaching which can be subjective and based on culture or religion. Also Deontology is too rooted in the categorical imperative which essentially indicates there is always a right choice that everyone should be regulated by (Fieser, 2015).
Utilitarianism can be applied to my thesis in multiple ways, but most importantly limiting pain for investors is a moral good which should regulate banking ethics. By allowing banks to spread their own risky decisions and investments within the banking system they expose more people to the risky assets which could lead to bankruptcy and investment losses like those experienced in the financial crisis. Firms like Lehman Brothers were permitted to take on loans and risks that small investors, like myself, would be denied from engaging in. This gives the hedge funds an unfair advantage over me because they are now less exposed to default by securitizing subprime mortgages while simultaneously exposing me to more risk. This is fundamentally what happened in the financial crisis, regular investors where punished by the panic of the markets and the bankruptcy of Lehman which lost north of $600 billion for its share and bond holders (Swedburg, 2010). If the actors in the mortgage-backed security industry had considered the outcome potential for regular people then they would have realized the ethical conflicts surrounding these business practices.
Cochrane, J. H. (2009). Lessons from the financial crisis. Regulations, 32(4), 34-37. Retrieved from http://object.cato.org/sites/cato.org/files/serials/files/regulation/2009/11/v32n4-6.pdf
Fieser, J. (2015). Introduction to business ethics [Electronic version]. Retrieved from https://content.uagc.edu/
Friedman, M. (1970, September 13). The social responsibility of business is to increase its profits. New York Times Magazine. Retrieved from http://umich.edu/~thecore/doc/Friedman.pdf
Swedberg, R. (2010). The Structure of Confidence and the Collapse of Lehman Brothers. Research in the Sociology of Organizations, 30A, 71-114. Retrieved from http://www.jteall.com/Lehman%20Brothers%2002.pdf
Zingales, L. (2008, October 6). Causes and effects of the Lehman Brothers bankruptcy. Causes and effects of the Lehman Brothers bankruptcy[Testimony before the Committee on Oversight and Government Reform]. Retrieved from http://research.chicagobooth.edu/igm/docs/Zingales-Testimonies.pdf “
2nd Post “In the case Ledbetter v. Goodyear Tire & Rubber Co., Ledbetter, being the only female production supervisor at Goodyear filed a claim of discrimination with the Equal Employment Opportunity Commission (EEOC), alleging various forms of sex discrimination. Lilly Ledbetter claimed gender discrimination due to unequal pay. Ledbetters pay was up to 40% lower than the lowest-paid male supervisor. Ledbetters claim against Goodyear stated gender discrimination in violation of Title VII of The Civil Rights Act of 1964. A jury awarded Ledbetter $3.5 million, but the settlement was eventually reduced to $360,000 by the judge stating she waited too long to file her complaint in accordance with Title VIIs cap on damages.
The capitalist economic system is how I would classify Goodyear due to the fact that they act on what interests themselves and not the business as a whole. To clarify, the first point maintains that the engine that drives all business activity is the desire for personal gain Fieser, 2015 The laws that affect the operations of the business are the Equal Pay Act of 1963 and the Fair Labor Standards Act of 1938. These two acts prohibit wage discrimination between men and women in a working environment if they are performing the same tasks and are equally qualified and skilled for the position.
According to Immanuel Kant, deontology theory states I should do to others what I would want them to do to me. Fieser, 2015) With that being said I would have to say the ethical theory that would best suit the Ledbetter v. Goodyear claim would be the deontology theory. One characteristic of deontology designed by Kant is Treat people as an end, and never merely as a means to an end. (Fieser, 2015) Meaning we should treat people as beings that have value and not as just a pawn to be used and taken advantage of. The second characteristic of deontology is to treat all people as beings with intrinsic value and regard them as highly as we would our own happiness. (Fieser, 2015) In other words, treat people and their values as we would value our own happiness. When you apply deontology theory to this specific case you can see everyone should be treated equally and we all have the duty to treat them as such no matter their sex, race, or religion. Deontologists also believe people should be treated as an end, and never merely as a means to an end. Also, to always value people and not use anyone.
Fieser, J. (2015). Introduction to business ethics [Electronic version]. Retrieved from https://content.uagc.edu/ (Links to an external site.)
Bader. H. (2013). Misconceptions about Ledbetter v. Goodyear Tire & Rubber Co (Links to an external site.). (Links to an external site.) Engage, 13(3), 26-30. Retrieved from http://www.fed-soc.org/publications/detail/misconceptions-about-ledbetter-v-goodyear-tire-rubber-co (Links to an external site.)
Brake, D. L., & Grossman, J. L. (2007). Title VIIs protection against pay discrimination: The impact of Ledbetter v. Goodyear Tire & Rubber Co. (Links to an external site.)Regional Labor Review, 10(1), 28-36. Retrieved from http://www.hofstra.edu/pdf/academics/colleges/hclas/cld/cld_rlr_fall07_title7_grossman.pdf”
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