Introduction
In a financial context, the term ethics is assumed to be a subset of general ethics, which accounts for ethical quandaries within the subfield of finance. Unlike in other fields, there are two forms of ethics in finance. These include positive and normative ethics (Aragon, 2011). In the finance domain, ethics are very essential as they guide the financial conduct of involved parties. In this report, ethical Behaviors, the importance of ethics, and ethical issues in finance will be covered.
Ethical Behaviors
Koslowski (2011) reported that, to build and maintain a healthy association between financial partners, there are ten central ethical behavior elements that should be considered. The first two, which are said to be interrelated, are honesty and integrity. To account for these, in an event that a prospective customer is not informed about a particular charge, it is the utmost duty of financial personnel to ensure that he/she becomes aware about it, even if such a move would reverse the client’s decision.
The second element is seeking to avail information to every stakeholder. Where a client appears unaware of a particular item in the agreement, a financial manager should not take advantage. Rather, he/she should strive to help the customer develop awareness on all contractual items before proceeding.
A further ethical behavior element is complying with the confidentiality policy. A financial manager ought to ensure that he/she does not disclose information about their company, or customers to unauthorized parties.
The fourth element is promotion of information-sharing. A financial director should motivate the employees to embrace an information-sharing culture. McGee (2011) revealed that such a direction is fundamental since it assists an organization achieve its purpose without any perceived difficulties.
Fourthly, a financial leader is required to update his/her skills frequently. Each day, new financial technologies for improving work quality emerge. Therefore, a manager is required to develop new skills and knowledge necessary to ensure that he/she is able to incorporate the new technologies into the workplace, effectively and efficiently.
Another vital element is promoting ethical behavioral attributes among the workers. Such an aim could be met only through a ârole model statusâ exhibited by a financial manager. For instance, an unethical behavior such as corruption might be prevalent in the workplace. However, if a financial leader opts to remain transparent, the followers might cease the unethical behavior, and instead seek to follow the path of their superior.
Additionally, an ethically safe environment should be created. Boatright (2010) claims that laying the foundation for building such a work setting should be the financial managerâs responsibility. Some work environments influence the rise of unethical behaviors among employees. For instance, where a work setting involves large sums of money, an employee might be predisposed to become fraudulent. To prevent this, the financial manager should reinforce ethical codes, and introduce company-wide values.
Power ought to be used responsibly. A financial manager should not be inclined to abuse his/her position. For instance, in case of excessive availability of resources, a financial manager should not use them to serve own interests at the expense of the company.
The tenth element is reporting about any violation of the code of ethics. In the event that a given employee performs an action that is against the code, it is the role of the witness to make him/her aware that the misconduct has been noted. If such an action is repeated, the witness should report the culprit to the manager for disciplinary actions.
Importance of ethics in finance
As the name suggests, financial ethics is constituted by two fields; finance and ethics. In the light of this, ethical doctrines in finance comply with the laws governing financial work. Consequently, as revealed by Aragons (2011), reinforcing the black-and-whiteness is a central financial ethic attribute. Therefore, in the absence of ethical codes, coordination of business operations would be far-reaching. Aside from this, the concept of partnership would be non-existence, and if it did, trust between the partners would not prevail. As such, ethics in finance glues businesses together, and helps in maintaining ethical financial decisions.
Ethical issues in finance
There are several ethical norms and codes in finance. However, ethical issues, which differ depending on the business model adopted, still emerge. Researchers have always sought to provide the taxonomy under which different critical ethical issues fall. Among these include distributing incentives among staff with diverse skills and experience, attendance to own interest resulting to greed, equating morality with financial ethics, and stunted moral development of a business partner.
Other taxonomies comprise of stock market fraud, conflict between employee’s responsibility and clients’ demand, conflict between employee’s duty and the demands of the company, and making a choice between financial transparency and financial information security in an event of mistrust in an entity. Further taxonomies include choosing between a high-risk nature of the strategy, which can potentially help in obtaining an increase in revenues and less profitable but reliable strategies, and whistle blowing.
In 2013, it was reported that Westpac, an Australian major bank, was being involved in financing organizations that were allegedly pursuing immoral undertakings such as illegal logging. Such an incidence provides a good account of how financial organizations participate in unethical conducts.
Conclusion
In finance, one of the major issues is engaging in unethical financial behaviors. However, the existence of financial ethics helps in eliminating them since it promotes a culture of honesty. As such, financial ethics limit behaviors, and provide a safe environment for undertaking financial activities. Therefore, financial ethics plays a key role in the field of finance.
References
Aragon, G. A. (2011). Financial ethics: A positivist analysis. Oxford, UK: Oxford University Press.
Boatright, J. (2010). Finance ethics: Critical issues in theory and practice. Hoboken, NJ: Wiley & Sons.
Koslowski, P. (2011). The ethics of banking: Conclusions from the financial crisis. North Miami, FL: Springer.
McGee, R. W. (2011). The ethics of tax evasion: Perspectives in theory and practice. North Miami, FL: Springer.