Business Ethics Obligations and Sustainability

Question: Discuss about the Business Ethics Obligations and Sustainability. Answer: Introduction: The London Interbank Offered Rate (LIBOR) scandal has raised several crucial questions regarding the ethical obligations of the financial institutions. In this context, the major three ethical issues that have been identified are lack of honesty, illegal business operations as well as fiduciary issues. Lack of honesty: The LIBOR scandal critically identified that Barclay did not maintain their integrity towards their business approach. They were responsible for maintaining the financial well being of customers and helping them to make rational decision. In this context, they were obliged to disclose proper interest rate so that the customers can evaluate the financial condition while making their decision regarding the transaction activities. However, as the present scenario revealed, Barclay manipulated the interest rate in order to manage the customer investment aiming to attain personal wealth (Alessi and Sergie 2012). Therefore, it is evidently observed that the organization did not stand firm in their ethical obligation with respect to maintaining the honesty as well as integration. Moreover, as there have been a number of banks were related with the scam, it can be questioned whether entire financial system is as corrupted as Barclay. Illegal business operations: The legislative departments as well as various regulatory divisions have formed the guidance that stated that any financial institution could not directly influence any financial data. As this faulty enclosure will directly affect the customers along with overall economy of the country, the manipulation is one of the most severe illegal activities. Therefore, it can be easily observed that Barclay directly disregarded the legal obligations with respect to maintain the financial transparency regarding the transaction (Car 2016). In this context, it has been also identified that the legislative department has been unable to monitor the financial activities in a crucial manner and thus failed to maintain the financial security of the generic population. Fiduciary Issues: In the fiduciary aspect, Barclay was accountable for maintaining the trust and confidence by disclosing exact interest rate. This particular activity would have maintained their transparency as well as reliability with respect to fulfilling their business commitment. However, Barclay failed to maintain their proper stand and manipulated the interest rate data in the sole aim of acquisition of personal wealth (McConnell 2013). This scenario raises the questions that whether the financial institutions of London are capable of entrusting. Impact of the traders ability on the interest benchmark: The impact of the traders ability on the interest benchmark created a several conflict of interest with regards to the LIBOR scandal. The most crucial conflict of interest are described below: Structural conflict of interest: The financial institutions, which have participated in the LIBOR scandal, were noted to be most active derivative traders. They were renowned for accounting 80% of overall outstanding interest rate as well as 70% of basic interest rate across the world. In other words, the manipulative financial institutions were most involved in the LIBOR trading derivatives. Although this does not raise any conflict of interest, it will definitely discourage others to be involved in LIBOR derivative trading (Hou and Skeie 2014). It has been also disclosed by the incident that despite of oversight process of FXMM Committee of BBA LIBOR Ltd, the contributing financial corporations were self-supervising them. Therefore, it is evident that this less transparency in monitoring system as well as conflict of interest was has been represented by traders ability to influence the interest benchmark. Banks conflict of interest: As identified by the disclosure of LIBOR scandal, that most of contributors of LIBOR process were involved in the trading derivatives of LIBOR. This will evidently raise the possibility of influencing the submission of rate in the absence of corroborating transactions. There are a number of conflicts of interest, which are crucial for the business operation of numerous International Bank (Ashton and Christophers 2015). Although the organizations undertake the policy to separate the conflicting employees from the traders, in the current situation the traders became involved with the submitters, as they were required to be expert. It has been often observed that the traders partook in submitting process actively. Individuals conflict of interest: It is evident from the disclosure of the LIBOR scandal that any individual could benefit with the knowledge of future submission. The major reason for this speculation is lack of corroborating submission process as well as subjective LIBOR submission. It has been also revealed that although the rate cannot be manipulated in a precise manner, it definitely can be prodded towards a direction (Chorafas 2015). As any small change in LIBOR, submission rate has the ability to produce a huge amount of profit. Therefore, the traders were encouraged to manipulate the submission rate for their personal gain. This particular scenario created a major conflict of interest. Examination of the possible intent and behavior of traders: In the current context, it has been identified that traders of Barclays as well as other fifteen financial institutions has been contributed in manipulation of LIBOR submission rate. It has been observed that LIBOR is invested in settling contracts on the derivatives of money market. The 18 banks will be asked in daily fashion that in which rate they will be able to purchase fund by the British Bankers Association. The entire data collection process regarding the LIBOR submission is conducted through Thomson Reuters data collection service. From there, this particular service ignores the four-submission rate from top and bottom data range (Huan et al. 2015). After that, the average of entire data range defines the official LIBOR rate. Now the traders took bet on the movement of interest rate in certain period of time. This way Barclay achieved a great deal of profit from the manipulation of the interest rate. The evaluated investigation of the contributing parties of LIBOR fraud has identified couple of major reason for manipulating the LIBOR submission rate. It has been disclosed that majority of the traders has been found to enquire about state of the rates in order to attain personal gain. Due to this particular reason, LIBOR rate has been influenced in a significant fashion (Kuo et al. 2012). In addition to that, it has been also stated that after financial crisis Barclay single mindedly focused on the manipulation of LIBOR rate in order to maintain their market position in the banking industry. As the lower rate of interest will attract a higher amount of investment, Barclay was inclined to influence the LIBOR submission rate in a downward fashion. In order to do that, Barclay filled artificial lower rate so that they can disguise their financial stress from the customers. Application of several theories to the LIBOR scandal: LIBOR scandal has been immensely successful to point out the rotten state of financial institutions. The current case can be evaluated by several ethical theories in order to identify the major conflict. These applications of these theories regarding LIBOR case are described below. Utilitarianism: This particular theory states that a financial institution must focus on the happiness of the customers regarding all ends of any transaction. In this case, the people that invest, transfer as well as deposit a portion of the fund in any bank in England are considered as the consumers. As the case study indicates that, the modified rate of interest had directly affected those people. In addition to that, the Stock Exchange as well as other associated trading system would be distressed by this manipulation of interest rate (Kohn 2013). As the economical principles state, the people will be inclined to be invest their money while the rate is lower and vice-versa. It has been identified by the investigation that Barclay focused on their profit rather than financial wellbeing of the consumers. Deontology: The deontology states that the company must stay honest to their responsibility taking rational along with legal decisions. In this aspect, the companies are also responsible for helping the consumers to take proper, rational and informed decision. In addition to that, the corporation is also bound to maintain the fulfillment of individual requirements, diversity, autonomy as well as respect. In this case, Barclay did not maintain their duty by acting rationally and with good will to help the customers to take proper decision (Youle 2014). The outrageous rate of interest disclosed by Barclay inevitably thwarted consumers ability to make rational decision. In addition to that, Barclay also failed to maintain their legal obligation to maintain a transparent and honest practice. Virtue Ethics: The virtue ethics work on a string of morals as well as values, which guide the organizations to act ethically. These values are justice, honesty, courage as well as temperance. Although, Barclay displayed the courage attributes it was not done with good purpose (Coulter and Shapiro 2015). Moreover, Barclay also interfered with the justice value by disputing the legal considerations with respect to the financial transactions. Furthermore, Barclay did not act with self-control as well as integrity in order to gain personal wealth. Therefore, it can be concluded that Libor system did not act as per the virtue theory, which makes it unethical. Accountability of the banks: The proper investigation of the LIBOR scandal has successfully indicated that Barclay is one of the major culprits of the manipulation of interest rate. Although, Barclays had primarily attempted to shun the scandal as the desolate activities of traders, it has been proven that the organization had an active participation in the LIBOR submission rate manipulation (Braml 2016). Although, if traders individually manipulated the LIBOR rate without the influence of Barclay, the company would have been accounted as responsible as they are the employees of that organization. In this context, the organization bore full responsibility being the sole supervisor of those traders. It has been identified that Barclay has shadowed the LIBOR rate before the financial crisis. After the collapse of the Lehman Brothers, it has been a great deal for Barclay to maintain their market position. It is also observed that with the rise of anxiety regarding the strength of Barclay, the interest rate of Barclay became quite higher than the LIBOR rate (Abrantes-Metz and Sokol 2012). The major reason for this higher rate of Barclay was lack of reliability on the organization. In this context, in order to survive in this most competitive market the management of Barclay directly commanded the employees to lower their submission rate so that the LIBOR rate can be influenced. The relatively lower rate successfully impressed the investors, which helped the organization to survive in the market. The process for regaining trust by the financial institutions: In order to regain the trust of the consumers Barclay need to initiate several crucial steps, which will be influential to indicate their transparency and good intention in the following days. In this context, the most significant step for Barclay will be performing major public relations campaign. The public relation campaign has to be focused on attracting new business by developing goodwill with clients and increasing trust and confidence (Williams and Conley 2015). They need to enforce the statement among the consumer perception that they are most profitable bank for investing, transferring as well as depositing the consumers money. The organization also need to exhibits that they would not conduct any unethical activities in future. In order to that, the company has to new set of executives as well as management, which will indicate that they are inclined to start their business approach afresh. In addition to that, the organization needs to elevate their brand image by emphasizing on the corporate social responsibility. The best way to uplift their image is partaking in several charity events in a regular fashion. They can also express their good intentions by executing several goodwill projects that will solely focus on consumers happiness (Chorafas 2015). It will indicate that the organization is ready to ensure the consumers happiness disregarding the cost. In general, Barclay needs to depict the image that they would make them an impressive company in the near future. Reference List: Abrantes-Metz, R.M. and Sokol, D.D., 2012. The lessons from libor for detection and deterrence of cartel wrongdoing.Harvard Business Law Review Online,3, pp.10-16. Alessi, C. and Sergie, M.A., 2012. 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