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INTRODUCTION
Today’s business does not exist in isolation. They are surrounded by various stakeholders that are either directly or indirectly being affected by the conduct of the business. Governments of countries today expect more responsible approach from businesses as there are limitations for imposing laws and restrictions without affecting both the bottom line and top line performance of businesses.
Corporate Social Responsibility is one type of self-regulation which the businesses integrate to their business model in order to create a positive impact on society. Although it’s considered by many businesses to be a costly exercise, it is found out to be beneficial to businesses in terms of avoiding future costs in terms of wasted resources, legal issues & restrictions while contributing to building of a better brand image.
Increasingly today’s businesses use approaches which are based on principles of CSR such as triple bottom line accounting (People, Planet & Profit) which in addition to monitoring financial performance, accounts for their ecological and social performance. Indices such as Calvert Social, Dow Jones Sustainability, Ethibel Sustainability and FTSE4GOOD have been introduced to measure the performance of corporates on the front of sustainable & responsible behaviour.
The problem of poor ethical standards in the financial sector is largely attributable to the theory of rational-maximization where entities which are engaged in trading & investment of financial instruments such as bonds, derivatives, stock and money market instruments, aims to maximize their own interests which opens the doors to unethical practices such as insider trading (ex: Raj Rajaratnam and Galleon insider trading case), ponzi schemes (ex: Bernard Madoff and Charles Ponzi) & fraudulent financial reporting (ex: Enron scandal). The problems created by these scandals have led to recent amendments to codes of conduct established by various accounting bodies. The conduct of the financial sector was especially questioned as lack of risk assessment, financial forecasting and most of all, greed for fast profits gave way for the worst financial crisis since the great depression.
With practices such as CSR, the governments are aiming at contributing to better corporate citizenship from today’s businesses. But are businesses alone to blame for poor ethical standards in a country? How ethical is the behaviour of today’s politicians? As one authority of the country, how does the government ensure responsible behaviour from its politicians? The following discussion examines the above question while identifying ethical standards expected from politicians and the extent to which they are being followed.
ETHICAL STANDARDS
There are basic guidelines set by accepted public bodies which define the meaning of ethical behaviour for all public servants which include politicians.
Ø Committee on Standards in Public Life, Great Britain
This committee, which was established in 1994 by the then Prime-minister John Major is an advisory independent public body reporting to the UK government. It’s main focus is on advising the government on ethical standards across the whole of public life in UK. It has come up with ‘Seven principles of public life’. (www.public-standards.gov.uk)
a) Selflessness
The actions of public officers should focus on public interest and not on gaining financial or material benefits for themselves, their relatives or friends.
b) Integrity
The officers must not be impaired by any obligations to outside parties that might influence them in performing their duty to the public.
c) Objectivity
The public officers must be free from any bias or emotional involvement in carrying out their business especially in cases of awarding contracts, recommendations for rewards and benefits.
d) Accountability
The officers must be responsible to the public for the outcomes of their conduct and must be willing to subject in any investigations against their office.
e) Openness
The public officers must be open about their decisions and must be willing to provide justification wherever possible except in cases where imperil of wider public interest is of concern.
f) Honesty
The officers carry an obligation to state private interests linked to their public duties and take strides to resolve any conflicts arising from those to protect the public interest.
g) Leadership
The above principles must be promoted and supported by public officers through leadership and example.
When considering the foundations for seven guidelines, it can be identified that they are based on one or more of the three basic ethical theories which are considered below.
1) Consequentialism
Consequentialist ethic theories focus on actions. It is where the moral judgement about an action is based on the consequences the action brings about. Therefore the actions, whether right or wrong, can be justified by focusing on the good consequences it may generate.
Ø Related theories
a) Utilitarianism (Objectivity & Openness)
This theory justifies any action if that results in greatest good for the greatest number of people. Therefore it focuses on the idea that happiness of everyone is more important than the happiness of a particular person.
b) Ethical altruism (Selflessness & Accountability)
Ethical altruism, endorses working towards the benefit of others, even at the expense of self-interest. The difference of this theory with utilitarianism lies in the fact that altruism focuses on maximizing favourable consequences to all by potentially sacrificing own benefit.
2) Deontology (Openness, Honesty, Objectivity and Accountability)
These ethics focus on rules and duties, rather than on actions as consequentialism defines. Here the action’s adherence to rules and duties is considered as the basis for judging its morality. There is a larger contrast here with consequentialism as deontologists believe in good will as the factor which determines the morality of the action. And so, any action which is undertaken with a bad will is deemed immoral, even if the consequences are favourable. As per Divine Command theory the morality of actions depends on the agreement with commands of god. Immanuel Kant (1780) stated that it is the conformity to duty and respect for moral law which determines ethicality of actions.
3) Virtue ethics (Integrity, Honesty, Accountability, Openness & Leadership)
Virtues are the essence of human spirit, the content which define the human character. This approach focuses on the identity or character of the moral agent as the contributor of ethical thinking, and not the consequences or the rules of action. Founded by Plato and Aristotle, it focuses on three central concepts; virtue, the state of being morally sound, practical wisdom, the ability to understand the universal truths and to define actions to achieve a particular end and eudaimonia, living a virtuous life.
DISCUSSION
The European political environment, in the last few years was flooded with news of scandals and corruption which revolves around certain factors such as accepting bribes, lobbying of policy decisions, biased nominations for state honours and violation of common law. Following are some of the selected news items which portray ethical violations on part of politicians.
a) An investigation is being carried out by the Speaker of House of Commons into Tony Blair’s involvement in securing an exemption for tobacco advertising in Formula 1. It is accused that Mr. Blair deliberately misled the parliament. The meeting Mr. Blair had with Formula 1 supremo Bernie Ecclestone just hours before was questioned as to have influenced the supporting of the exemption especially since Mr. Ecclestone was a major party donor. (The Telegraph, 14th October 2008)
When considering the conduct of Mr. Blair in misleading the parliament to grant an exemption for tobacco advertising in formula one, it can be identified that he has violated principles such as selflessness and accountability, as his action was aimed at supporting a type of advertising which is considered to be unethical around the world and would create negative results for the society. He has violated honesty by misleading a supreme authority which makes decisions on behalf of the citizens for their benefit. The fact that Mr. Ecclestone is a party supporter leads to questions relating to the integrity and objectivity of the PM as his conduct was focuses on satisfying the party supporter to cement his loyalty to the party. All of the above arguments are directed towards questions about his leadership.
b) Bertie Ahern, the Irish prime-minister has announced his resignation following allegations of accepting bribes while working as Ireland’s Finance Minister in 1990s. The PM was investigated for over 10 years by the Mahon Tribunal which uncovered cash lodgements exceeding £ 85,000 which Mr. Ahern claimed to be goodwill loans from friends. He was also accused of releasing a planning approval to a developer in return for IR £ 80,000. In order to avert the threat to the coalition government as a result of the bad publicity and damage to his credibility, the PM has decided to resign. (Daily Telegraph, 3rd April 2008)
The conduct of Bertie Ahern in releasing a planning approval can be argued as immoral and questions his objectivity and accountability to other parties who were applying for the approval, as his decision was biased. His honesty, integrity and openness can be questioned in case of accepting bribes while serving as a public servant. But, at the same time, his decision to resign from his position can be identified to be through accountability and selflessness, because he was not convicted of the crimes but saw a threat to the coalition government which has been successful in bringing economic prosperity and political stability to the country.
c) Cash for Honours was a political scandal which dominated headlines in UK in 2006-07. The scandal involved the alleged awarding of life peerages to lenders who provided secret loans to the labour party before the 2005 general election. The investigation ran for 16 months which involved interviewing 136 people including the former PM Tony Blair and four arrests. Although no one was charged in the case, the investigation was considered to have weakened Tony Blair’s position and was said to have hastened his resignation. (BBC, 20th July 2007)
The above accusation, when taken in relation to standards of public life, can be directly identified as a violation of objectivity as the awarding of peerages was biased towards party supporters and also questions the integrity of politicians as they carried an obligation to parties other than the public. But as a consequence of the inquiry reforms were made to funding laws which ensures non re-occurrences of such allegations.
d) The Italian prime-minister Silvio Berlusconi is being charged on tax fraud linked to his family company, Mediaset. He was also charged on the alleged bribing of a British tax lawyer earlier but the court proceedings was suspended by a law which grants immunity to politicians from prosecution while in office. With the immunity being lifted by the Italian Constitutional Court in October 2009, the prosecutions are allowed to be resumed. The opponents of the PM accuse him of tampering with the legal system for his benefit especially after a new bill is being processed through the parliament which limits time given to court cases. (BBC, 16th November 2009)
Tax fraud, which the Italian prime-minister is being charged against, can be identified as an issue of openness and accountability in a deontological perspective as it is illegal. It can also be argued that it’s immoral as tax evasion opposes ethical altruism, which portraits selflessness. The bias he has shown towards his family company as the leading public figure of the country can be questioned in terms of objectivity, integrity and honesty. At the same time, tampering with the country’s legal system for his own benefit disputes his leadership.
CONCLUSION
In closing, we can conclude that promotion of CSR in the financial sector is an imperative task as news of irresponsible and unethical behaviour from corporates is increasingly being reported. There is a need for greater transparency and proper legal guidelines accounting for best practices for businesses. That, coupled with more detailed professional codes of conduct can pave the path to less financial scandals which can repair the already dented public trust in the financial sector.
But there is much more urgent need to develop awareness & responsible behaviour among politicians with adherence to standards expected from them as public servants. The irresponsible behaviour on part of politicians as depicted above could result in biases in favour of external parties in decision making which causes severe damages to public interests in terms of obstructions to performance of public duty, social injustice, unsound policy formulations and results in low credibility in public eye, which could damage their survival in the political arena.
As a measure to overcome such lapses on part of politicians, more power should be allocated to departments such as Committee on Standards in Public Life which can investigate into ethics violations by politicians and advice the government on measures to overcome them. Political immunities must be removed and reasonable legal action must be employed in order to ensure politicians’ adherence to standards. The governments must remember that public trust and confidence plays an important role in their survival and must act in an exemplary & socially responsible manner before demanding the same from the corporate citizens of the country.
BIBLIOGRAPHY
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