Abstract
The following chapter should give you an impression of current ethical problems in the economy. As we have seen unmoral aspiration for enrichment of managers was common in all crisis. People are influenced in their behavior by their view of the world. Ideas and attitudes, or moral values, must be shown by example and included in education. Bad examples can ruin common decency as much as it can be dangerous to continually preach thinking in models and maximizing benefit as the only reasonable, rational behavior. The consequence will be that people orient themselves on these behavioral maxims and repress their positive human characteristics such as sympathy, helpfulness, general willingness to sacrifice and selflessness. Management education in particular must ask itself if it did not indirectly create monster managers; business ethics receives too little attention.
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Notes
- 1.
Skillings was and is considered very intelligent, but arrogant as well. Just like Lay, he was charged with fraud, money laundering and conspiracy. The accusations proved difficult to prove however, since Skillings had given all instructions verbally. See Handelsblatt dated January 27/28/29 2006, p. 15.
- 2.
Mclean, Bethany (2001).
- 3.
See Der Spiegel 11/2009, pp. 43.
- 4.
This is another example to show that not all information is included in the market prices, otherwise long term there would be no short sellers, or speculators. The majority of market participants can be mistake, they are only human. The market can be outperformed through better information and analyses.
- 5.
- 6.
“Enron,” http://en.wikipedia.org/wiki/Kenneth_Lay dated October 8, 2006.
- 7.
See Schwarz, Gunter Christian/Holland, Björn (2002), p. 1662.
- 8.
See Handelsblatt dated July 11, 2005, p. 21.
- 9.
See “Arthur Andersen,” http://en.wikipedia.org/wiki/Arthur_Andersen, dated October 8, 2006.
- 10.
According to 3nd. Annual Board of Directors Study, Korn/Ferry International dated February 23, 2006, http://news.onvista.de/alle.html?ID_NEWS=20584380
- 11.
See Ledgerwood, Shaun/Taylor, Gary (2016).
- 12.
“… the Fannie Mae Corporation is easing the credit requirements on loans … The action … will encourage those banks to extend home mortgages to individuals whose credit is generally not good enough… Fannie Mae… has been under increasing pressure from the Clinton Administration to expand mortgage loans among low and moderate income people and felt pressure from stock holders to maintain its phenomenal growth in profits. In addition, banks, thrift institutions and mortgage companies have been pressing Fannie Mae to help them make more loans to so-called subprime borrowers whose incomes, credit ratings and savings are not good enough for conventional loans… Fannie Mae is taking on significantly more risk… the government subsidized corporation may run into trouble… prompting a government rescue… the move is intended in part to increase the number of… home owners who tend to have worse credit ratings…” September 30, 1999 New York Times.
- 13.
In 2000, warnings were issued as to the threat posed to the financial system due to the lack of regulation on Hedge Funds as counter-parties to derivative transactions. See Conrad, Christian/Stahl, Markus (2000).
- 14.
- 15.
This income was exceeded by Goldman Sachs CEO Henry Paulson, who earned a bonus of $18.7 million along with realizing proceeds from the sale of $480 million in stock by exercising options issued prior to his becoming US secretary of the treasury. See Der Spiegel No. 8 (2009), p. 62.
- 16.
- 17.
See Dahrendorf, Ralf, (2009).
- 18.
See the film “Inside Job” of 2010 by Charles Ferguson (Sony Pictures) and Conrad, Christian, A./ Stahl, Markus (2002).
- 19.
In 1998 this hedge fund named Long Term Capital Management (LTCM) then lost the investors around 90% of the $4 billion invested, which threatened to trigger a chain reaction on the international finance markets. The issue here is not just the credit taken by LTCM, but also the derivative positions of LTCM as contracting party, with which other finance market actors had protected themselves. Only when the then US central bank president Alan Greenspan intervened personally and pulled together an emergency package of billions from several large banks could the capital market crisis be averted. See Conrad, Christian A. (2005).
- 20.
“What we have found over the years in the marketplace is that derivatives have been an extraordinarily useful vehicle to transfer risk from those who shouldn’t be taking it to those who are willing to and are capable of doing so.” “We think that it would be a mistake” to more regulate the contracts. Greenspan in front of the Banking Committee in 2003. New York Times, 20.10.2008.
- 21.
The chief controller of the SEC later spoke at a conference when questioned about “the systematic elimination of personnel from the regulatory office,… so that became impossible for the office to perform any regulation whatsoever.” Der Spiegel, No. 47 (2008), p. 78.
- 22.
Empirical studies show that the spot prices follow the future prices. See Deutsche Bundesbank (2006), pp. 59.
- 23.
For the discussion of the effects of food and commodity speculation see Conrad, Christian A. (2014).
- 24.
Governments find themselves internationally in a dilemma, since the best outcome for a single state is if all other sates regulate their financial market and it is therefore with its unregulated market the most attractive location for financial institutions (Free-rider position). The worst result for the individual state is if it regulates its financial market while the others do not. Since everyone is subject to this situation of insecurity, everyone decides to behave uncooperatively, which provides the worst results for everyone, national and international not regulated financial markets. Such a dilemma is called in the Public Choice Theory “prisoner’s dilemma”. For the expression “prisoner’s dilemma” see Brennan, G./ Buchanan, James (1985), p. 3.
- 25.
See Conrad, Christian A. (2014).
- 26.
See The Financial Times,November 25th 2008. https://www.ft.com/content/50007754-ca35-11dd-93e5-000077b07658
- 27.
- 28.
- 29.
See Mocan, Naci/Tekin, Erdal (2006) and Fedako, Jim (2007), Correlating nonsense, February 18, 2007, http://antipositivist.blogspot.com
- 30.
See Zorita, E. (2006).
- 31.
Handelsblatt dated 04/03/06, p. 11, translated into English.
- 32.
See Hermalin, Benjamin E./Weisbach, Michael p. (2007), pp. 1–26.
- 33.
Anyone who would like to see an example of this can take a look at the website http://timlambert.org/2003/09/0910/. Here the author of a statistical model proving that broad ownership of guns leads to less crime is accused of manipulation.
- 34.
“This paper uses an extended life-cycle model to analyse the impact of social security on the individual’s simultaneous decision about retirement and saving Economic evidence, using an estimated time series of “social security wealth,” indicates that social security depresses personal savings by 30–50%.” Feldstein, Martin (1974), p. 90.
- 35.
“We offer evidence that legalized abortion has contributed significantly to recent crime reductions” Donohue, John J./Levitt, Steven D. (2001), p. 379 see also Handelsblatt dated 04/30/07, p. 9.
- 36.
See Hayek, Friedrich August von (1974).
- 37.
“The method of calculation is based upon historic volatility and does not take into account irrational human behaviour, such as panic,….“Conrad, Christian A. (2005), p. 398.
- 38.
See Conrad, Christian (2005) and Welt-Kompakt dated 08/22/06, p. 15.
- 39.
- 40.
Quoted from Capital, 18/2005, p. 54.
- 41.
See Wirtschaftswoche dated September, 01, 2005, p. 52–58 and Capital, No. 18, 2005, p. 54–56.
- 42.
See Dahrendorf, Ralf, (2009).
- 43.
See Ergenzinger, Rudolf/Krulis-Randa, Jan S. (2004), p. 4.
- 44.
See Noll, Bernd (2002), p. 168.
- 45.
- 46.
See Noll, Bernd (2002), p. 168.
- 47.
See Löhr, A. (1997), p. 198.
- 48.
See Ulrich, Peter (1993), pp. 1172.
- 49.
See Rheinische Post, 04/18/08 and http://de.statista.com/statistik/daten/studie/292/umfrage
- 50.
Walter Jachmann, Manager of Personnel Consultants Kienbaum, quoted from Handelsblatt dated October 20/21/22 2006, p. 1.
- 51.
Stefan Tilk, Member of Management at the Bertelsmann subsidiary Arvato Direct Services, quoted from Handelsblatt dated October 20/21/22 2006, p. 1, translated into English.
- 52.
See Handelsblatt dated October 20/21/22 2006, p. 1.
- 53.
See Ergenzinger, Rudolf/Krulis-Randa, Jan p. (2004), p. 4.
- 54.
See Brown, M. E./Treviño, L. K. (2006), p. 608.
- 55.
See Rheinische Post, 04/18/08 and http://de.statista.com/statistik/daten/studie/292/umfrage (01/22/2010).
- 56.
See Volk, Hartmut (2000), p. 57.
- 57.
See Volk, Hartmut (2006).
- 58.
See Sucharow, Labaton (2013).
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Conrad, C.A. (2018). Ethical Problems of the Economy: Enron, Subprime & Co. – From Crisis to Crisis. In: Business Ethics - A Philosophical and Behavioral Approach. Springer, Cham. https://doi.org/10.1007/978-3-319-91575-3_4
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