Ethics in Finance: Leaders and Business Executives (Research Paper Sample)

Ethic in Finance
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Ethics in Finance
Introduction
Ethics in finance transcends beyond financial knowledge to actions that relate to particular activities. There is a call for leaders and business executives to exhibit a thorough understanding of rational and institutional strains to align their firms and organizations to ethical aspects.
Question 1
Ethics is the discipline concerned with both positive and negative aspects informed by moral principles and responsibilities. The laid down set of ethical, organizational, and legal rules play a central role when applying ethics to the society. Moral, institutional, and legal guidelines determine how various communities use values.
Apparently, it has become obvious that various financial institutions are involved into certain unethical issues. A good example is a financial manipulation that was conducted in London Interbank Offered Rate otherwise known as the LIBOR scandal (Youle, 2014).
Increased competition and the pressure to make high returns to the shareholders have seen numerous financial institutions overlook ethical issues that concern the financial sector. Another example of ethics in finance is where a particular company decides to manipulate the accounting process by providing inaccurate information in their financial statements in a bid to facilitate tax evasion or avoidance. When a business creates an environment of deceit and illegal actions aiming at gaining certain financial advantages, it can be viewed that it is violating the rules of financial ethics. For example, selling goods and services to the consumer in the wrong quantities and qualities to manipulate the results is a totally unacceptable unethical issue.
The financial meltdown in 2008 was highly contributed by massive unethical behavior that financial intuitions, such as JP Morgan, allowed under their watch. Greed became a critical factor that led to unethical practices within the mortgage sector. The fact is whether it was the lack of knowledge and understanding of the ethical financial standard, or it was greed. Consequently, the financial system changed in terms of reinforcing ethical practices in the finance industry (Thompson, 2015).
Question 2
Ethics in finance is important since the industry is the epicenter of a healthy functioning economy. Numerous companies and businesses adhere to the financial vehicle in their countries aiming at receiving the required credit to advance their growth strategies. The financial sector facilitates the flow of capital between companies establishing the interest rates that lenders and investors use for monetary exchange. Therefore, it makes ethics in finance rather critical since a problem that is ethically connected can send the entire economy into a crisis. A good example of an ethical issue is the lack of transparency in matters of complex financial systems that substantially contributed to the 2008/2009 financial crisis.
The financial sector is the center of the economy. It facilitates the movement of capital between the people who save and the borrowing entities. Additionally, it establishes the interest rates at which investors and financial institutions conduct their exchange. Ethical problems within the financial industry may lead to devastating consequences across the entire economy. For example, a lack of openness concerning complex financial apparatus played a significant role in triggering the financial disaster between 2008 and 2009 (Ferrell, 2009).
The second reason why ethics in finance is important lies in the fact that finance is the most powerful tool through which financial transactions change prices in the commodity markets. There is a price volatility in the markets which holds pension funds. Due to its immense power there must be a responsibility in financial transactions hence the need for ethics within financial markets.
Question 3
The financial industry has evolved over time, and so has the level of scandals and unethical practices increased and advanced. Therefore, most of the unethical practices have led to investors losing their capital through defrauding, which is mostly perpetuated by financial professionals. Consequently, financial professionals are required to adhere to a certain level of ethical standards. Particular standards are not disclosing vital classified information that may result in an anticipated loss. A good example is about professionals who deal with securities. Certain cases may arise where the professionals come into contact with non-public information. Such information is described as anything that has the potential to affect the prevailing security prices and has not yet been made available to the public.
Another standard for the financial professionals is accountability and transparency. Financial professionals are required to make sure that they point out unethical practices perpetuated by their counterparts no matter the price to pay. The latter is informed by the fact that even if a professional possesses the knowledge of any colleague practicing unethical behaviors, the same penalty is faced by both of them.
Question 4
It is obvious that ethical financial issues in a business affect all segments of economy. The financial sector is faced with a series of ethical issues, and therefore, financial institutions are mandated to act according to the law together with reinforcing ethical standards in their operations. Compliance is one of the ethical issues faced by financial institutions. The players in the financial markets must employ professionals who have a deep knowledge about financial markets as per the law's requirements.
Integrity represents another ethical issue relating to financial institutions. Integrity is critical when it comes to protecting the reputation of the financial sector. Manipulation of the securities markets may lead to the creation of the wrong impression of a high return which is not only illegal but immoral. If such ethical issue is discovered in the financial sector, the reputation can be damaged even to the extent of creating a larger bubble in the securities markets resulting in a crisis.
Conflicts of interest represent another ethical issue in financial institutions. Such conflicts may happen if the same financial service provider acts both as a brokerage firm and an investment banker.<...