Were Business School to Blame for the Financial Crisis? Essays

When turning away from a quality to a profit focus only created far more problems. “Toyota, once the world’s most profitable automaker, suffered its first losses in its past two fiscal years; the turning away from a quality to a profit focus only created far more problems.” (O’Brien, 2010)

More and more concern is displayed with managerial ethics and social responsibility. Some may regard them as cost which will

Many believe that business entities should have an ethical duty to be socially responsible, to work towards increasing its positive effects on society while decreasing its negative effects. Many organizations look for opportunities to be socially responsible while also creating shareholder wealth.

From an opposite viewpoint many companies find different ways to help survive and/or maintain their economic status by cutting back on hiring, layoffs, cut backs on advertising and marketing. In the article written by Thomas Cushman entitled The Moral Economy of the Great Recession, Cushman examines the Great Recession of 2008. During this economic catastrophe unemployment was on the rise, the housing market was dwindling at an alarming rate, both large and small business were affected. Countless Americans were misled into buying homes that they could not pay for. During this time moral order had to be reestablished and emphasis on ethical values. When an economy is thriving capitalism’s is limited and risks are covered by dissertation of wealth and an overall consecration of gaining and expenditure.

In addition, one must note that those who caused the financial crisis avoided punishment. They were the ones who lead the economy into failure and, now, promising that they are the only ones who can fix it. In Inside Job, it demonstrated the consequences of the crisis and financial innovation, through the educational system. It means that those who consulted with financial firms and companies were professors or on the board of directors of ivy league schools, who teach their economic ideologies onto the future generation.7 Ergo, this is creating a vicious economic cycle that needs to change.

The banking crisis of the late 2000s, often called the Great Recession, is labelled by many economists as the worst financial crisis since the Great Depression. Its effect on the markets around the world can still be felt. Many countries suffered a drop in GDP, small or even negative growth, bankrupting businesses and rise in unemployment. The welfare cost that society had to paid lead to an obvious question: ‘Who’s to blame?’ The fingers are pointed to the United States of America, as it is obvious that this is where the crisis began, but who exactly is responsible? Many people believe that the banks are the only ones that are guilty, but this is just not true. The crisis was really a systematic failure, in which many problems in the

On September 15, 2008, Lehman Brothers filed for bankruptcy. With $639 billion in assets and $619 billion in debt, Lehman 's bankruptcy filing was the largest in history, as its assets far surpassed those of previous bankrupt giants such as WorldCom and Enron. Lehman was the fourth-largest U.S. investment bank at the time of its collapse, with 25,000 employees worldwide. The consequences for the world economy were extreme. Lehman’s ' fall contributed to a loss of confidence in other banks, a worldwide financial crisis and a deep recession in many countries. Lehman 's collapse roiled global financial markets for weeks, given the size of the company and its status as a major player in the U.S. and internationally. Many questioned the U.S. government 's decision to let Lehman fail, as compared to its tacit support for Bear Stearns, which was acquired by JPMorgan Chase & Co. (JPM) in March 2008. Lehman 's bankruptcy led to more than $46 billion of its market value being wiped out. Its collapse also served as the catalyst for the purchase of Merrill Lynch by Bank of America in an emergency deal that was also announced on September 15.

The 2008 financial crisis can be traced back to two factor, sub-prime mortgages and debt. Traditionally, it was considered difficult to get a mortgage if you had bad credit or did not have a steady form of income. Lenders did not want to take the risk that you might default on the loan. In the 2000s, investors in the U.S. and abroad looking for a low risk, high return investment started putting their money at the U.S. housing market. The thinking behind this was they could get a better return from the interest rates home owners paid on mortgages, than they could by investing in things like treasury bonds, which were paying extremely low interest. The global investors did not want to buy just individual mortgages. Instead, they bought

After a critical analysis of the essay, I stand in agreement with the major points. In addition, I feel that it is the moral education in society which is the founding stone of economic prosperity of nations, since, moral education will lead to developing the ethical factors which are essential for boosting the economic prosperity.

Just after ten years of Asian financial crisis, another major financial crisis now concern for all developed and some developing countries is “Global Financial Crisis 2008.” It is beginning with the bankruptcy of Lehman Brothers on Sunday, September 14, 2008 and spread like a flood. At first U.S banking sector fall in a great liquidity crisis and simultaneously around the world stock markets have fallen, large financial institutions have collapsed or been bought out, and governments in even the wealthiest nations have had to come up with rescue packages to bail out their financial systems. (Global issue)

Milton Friedman wrote in his famous 1970’s article in The New York Times Magazine, that “the one and only social responsibility of business, is to increase profits for shareholders.” Milton Friedman's view on business responsibility accentuates the importance of maximizing firm's value. He pointed that the “there is one and only one social responsibility of business –to use its resources and engage in activities designed to increase its profits so long as it stays within the rules of the game, which is to say, engaged in open and free completion without deception or fraud’’ and by taking on the burden of social cost, the business becomes less efficient (Milton Friedman, 1962).

Milton Friedman was an American economist, statistician and writer, who had a massive impact on the research agenda of the economics profession. His famous words “the only responsibility of business is to increase its profits” (Friedman, Milton. 1970) led to many controversial debates on whether businesses should have ethics or if profit should be their main goal. Corporate social responsibility has many definitions, as its interpretation is quite loose, so I have chosen one that relates the most to this essay, given by the World Business Council for Sustainable Development, in 2000: “Corporate social

Straight on, business has a predicament either to maximise profits for shareholders or to have a moral

Some business leaders are taking good moral decisions and the reason behind that idea is that the core part of their business strategy is to create mutual benefit for both wider society and business as well. The growing desire of top management is to find out ways to create mutual benefit for both the organizations and the stake holders but the public still believes that companies are greedy entities which make decisions only in their self-interest, even at the cost of greater public welfare. It is the utmost obligation of the companies to discern the social issues while making the decisions (Yashiro, Yoshida and Suzuki, no date; Godwin, 2006; Schwab, 1996; Godwin, 2008; Werhane, 1998; Werhane, 2002; Heath, 2008; Mehalik and Gorman, 2006).

Companies with extensive responsibilities even argue about the system in pursuing social responsibility of business. According to Ulrich Steger, the company should prioritize the shareholders’ incessant interest but they should also be concerned of their social responsibilities, morals and environmental goals that the public expects them to be. Without a doubt, companies’ primary goal is to earn a profit. Emphasizing on profitability affects the fundamental values in the company, its morality. Companies ignore the ethics just to earn a mountainous income. This often causes extensive repercussions in the companies.