Masthead graphic based on a painting by Gudrun Thriemer.

Wednesday, September 24, 2008

Craig and Matten, "Ethics and financial crisis," September 18, 2008.

[In a later posting, Craig and Matten wonder, "Who would have thought that the government most committed to reinstall freedom of markets, low taxes and ‘small government’ is now intervening directly in the economy in an unprecedented way. We blogged about similar cases in the UK and France recently – but what the US government intends to do here eclipses all the others." Few have missed the irony. Fewer still have registered it as a structural market failure. -jlt]

  As with Enron, the fault lines for disaster run through the system of risk management, regulation, transparency, business interdependence, and reward systems, not simply rogue traders crossing the ethical boundaries.

With stock markets plummeting, financial institutions going belly-up, and governments on both sides of the Atlantic stepping in to bail out failing companies, the prospects for investors, the financial community, and even tax payers do not look good. And with the likely knock on effects for employment in other sectors almost certain to result in job losses, the fall-out from the current market turmoil is going to be widely felt.

For us business ethics professors, however, the picture is somewhat mixed. On the one hand, issues of social responsibility tend to be higher on the agenda when times are good. On the other, when greed and corruption contribute to downturns (such as in the post Enron wake of the early 2000s), significantly more attention can shift to issues of integrity and governance in business. Its no coincidence that the 2000s have witnessed perhaps the most sustained growth yet in the corporate responsibility 'industry' and in courses, books, conferences, and workshops on the subject.

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