Enforced Ethics


1. Why does Mills make the argument that it is critical for society to have a sociological imagination?

He argues that the sociological imagination is crucial not only for individuals, but also for groups, to use when making decisions.  Throughout the article, he explains that if people act with this kind of consideration, they will be able to operate in a more understanding manner. By doing this, it not only makes society better, but it would create a cohesiveness of decision making for both one’s personal and business life. Mills continues that society needs the sociological imagination in order to think carefully – using the information to act in a way that is significant or sometimes insignificant to them.  Mills suggests that motives of one’s behavior wouldn’t be questioned since the thought process could by the society that used this method of thinking.

2. What did Standard and Poor and Moody do to contribute to the financial crisis of 2008?

Listed above are the two largest rating companies that helped contribute to the recession. Their purpose was to rate the riskiness of securities, and especially mortgages. Although the questions asks, “what did” they do, the question should be asked in terms of “what didn’t they do?”

The businesses continued rating mortgages on the highest possible levels, which in fact in some cases, have been disqualified. The problems were that the companies did not foresee a decline in the housing market, and therefore failed in their responsibilities. The system in which they were giving these ratings was thoroughly defective.  The companies were giving high ratings, not because the people deserved them, but in order to be hired by the agencies that were giving these ratings. This in turn ensured more happy customers, and therefore created a higher paycheck for Standard and Poor and Moody. By failing to give appropriate ratings, high-risk investments were made because of a falsely high rating.

3. Should large businesses leaders be obligated to make sure that their company is run in an ethical manner?

“Ethical” is a loose term, for the definition can vary depending on who is answering the question. If we reflect on the sociological imagination that Mills discusses, there is an explanation of ethical reasoning outlined that business leaders should use. By utilizing the imagination, there will always be a simplistic or creative solution that is likely to end with a positive outcome – not only for oneself, but also for the community involved. Although events cannot be changed, it is the reaction and adaptation to these occurrences that define the nature and ethical practices of a business.

The company Barclays was involved in a scandal in which they were being accused of rigging interest rates. After months of a quiet lull, Anthony Jenkins came out publically to publically uphold the five values most cherished by the company: respect, integrity, service, excellence and stewardship. He also states that he doesn’t “want to do it for public relations…it is simply how [he] will run Barclays. Yes, this announcement was made after a scandal, but it simply amplifies the point that leaders should make sure that the company is run in an ethical way. Not only will they have to out and apologize to the public, but will have to take the time to restructure the way the company runs; meaning time wasted. Leaders do have the obligation to enforce ethical practices, for it is the only way to ensure self-preservation from a shaming community.

http://online.wsj.com/article/SB10001424127887323468604578247461697635932.html?KEYWORDS=ethics

 

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6 thoughts on “Enforced Ethics

  1. In response to your discussion on the financial crisis, do you agree that we should tighten legislation on what companies are required to disclose to there stakeholders (and more importantly shareholders) about what they are doing with your money?

    • They should because it would help investors know what happens to their property (in this case, their money) and it just sounds like an ethical thing to do (I hate not knowing things and consider it unethical). They, however, should not disclose their future investment decisions because, had the information gone public, other firms might also see the opportunity. Hence, supply of money increases, and therefore returns decrease, which in turn will hurt shareholders’ interests.

  2. I undoubtedly agree with your third response that large business leaders should act as leaders for the industry. As leaders, naturally other companies are going to try to copy what they do. According to the Institutional Theory, that is why organizations are structured and run they way they do. They copy the successful organizations to succeed. Look at almost any grocery store, they are all extremely similar with rows of categorized foods, automatic sliding doors, grocery carts in the front, rows of check outs at the front, etc. Even if you do not believe the Institutional Theory, it is only natural to copy the person who is succeeding. In business, if an leading organization acts unethically, other businesses feel forced to act unethically to keep up. However, if they act ethically, they exemplify an ethical system that works and others will follow

  3. Great post! It brings up the age old question…Are they sorry because it happened? Or are they sorry because they got caught? …I think that many company executive know exactly what unethical practices are going on underneath their nose. They only apologize after someone finds out about it, and then proceed to fire as many people as deemed necessary by their legal departments to cover up the scandal. In the greedy world we live in today it is hard to imagine that business leaders will cease to care about profit, and start to care about their ethical practices. We can only hope..

  4. You’re comment about Standard and Poor and Moody’s involvement in the 2008 financial crisis is head on. The reason why these rating agencies gave outstanding ratings to products that they know they should not have, is because they know they won’t get hired again. Companies are trying to sell their products, so of course they would hire the agencies that would give better ratings than deserved.
    What is interesting is that the Dodd-Frank Act was created to tighten regulations in response to the crisis. And it does. But what it still needs to address is the root of the problem: that the agencies giving these ratings are hired by the companies that are selling the products.

    • In response to the first comment, are you suggesting that disclosing information on the balance sheet would help investors? On the whole, yes I do believe it is crucial to disclose future investments, etc., but in this case, it wasn’t an oversight made by investors. I believe that the problem was that these two industries would pat each other on the back in order to continue doing seemingly successful business. The faulty rating system was a discussion between the companies, and those relying on the ratings wouldn’t know the inner workings of the companies, meaning that notating it on the financial statement would do almost nothing.

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