Socially Responsible Commerce Paper

Undertaking this subject, I was able to develop my understanding of the role of morality in business and how differing ethical theories impact upon stakeholders. Acting to benefit the interests of a majority is at the core of the consequentiality theory of utilitarianism, a philosophy carefully examined throughout the semester. Its merits and faults can be analyses through scrutinizing the actions of Bernard Maddox, whose firm operated a scam claimed to be the largest financial fraud in the history of the United States.

His deception provides insight into the implications of enacting a purely egoist business model and the repercussions of an absence of utilitarian principles on vulnerable stakeholders. Contrasting initial views with current knowledge allows one to reflect upon how their outlook has transformed over time. The Week 2 writing task to convey a preliminary understanding of the need to engage in responsible business highlighted how superficial my stance was towards this important issue. Supporting an economic perspective, I criticizes firms and individuals’ who undertake corrupt behavior and ‘gain an unfair advantage’ over principled businesses.

This viewpoint was libertarian in nature, as it did not include concern for total social wellbeing but supported prevention of negative interference which restricted the liberty of others (Shaw et al, 2009). This limited perspective focused on fair profit mastication, whilst not apportioning accountability on firms to concern the interests of all stakeholders. My initial position was devoid of utilitarian principle, though after engaging in this subject, I now understand the importance of external parties such as the public, the families of employees and the government and how the ethical decisions of genuineness impact upon these groups.

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The study of Enron’s collapse strengthened an earlier view of the significance of responsible actions by workers Within a firm’, albeit they may be facing ‘pressure from above’ to behave in this manner. I believed these confliction could be compounded if their behavior was not ‘unlawful’ but still ‘immoral’. In an interview with Forbes magazine, Stephen Jordan, founder and executive director of the Business Civic Leadership Centre, an affiliate of the U. S. Chamber of Commerce, acknowledges the role of corporations in helping to solve humanitarian, community and societal problems’.

He recognizes a trend in modern business whereby firms are becoming more ‘proactive’ in reacting to ‘social pressures’ and addressing their ‘external environment’ (Forbes 2012). Cordon’s views coincide with my informed interpretation of the bearing socially responsible commerce has on external stakeholders. Undertaking this subject expanded my outlook from an emphasis on results-based support of fair competition to an enhanced understanding of the role of employees and firms in engaging in responsible business. The moral theory of utilitarianism forms part of the core of the modern ethical bases of businesses.

However, several criticisms arise from its application, leading to questions as to whether this philosophy is truly beneficial. Although the major proponent of utilitarianism was Jeremy Beneath. His 1789 seminal work ‘The Principles of Morals and Legislation’ portrayed a moral decision as one which preferences ‘pleasure’ over ‘pain’ and, furthermore, one which increases total pleasure for a majority. Beneath did not differentiate between types of pleasure, such as physical, mental or spiritual, a view challenged by the theory next foremost advocate, John Stuart Mill.

His work, ‘Utilitarianism’, published in 1861, qualitatively separated pleasures based on stimulation of one’s intellect. Mill held that once rational people were exposed higher sensory gratification such as enjoying fine art, they would no longer seek simple-minded forms of pleasure. Moreover, the extent of sophistication will lead to a greater amount of happiness for that individual and, collectively, for society (Driver, 2009). Therefore, a moral choice would be one which maximizes happiness for a majority of people. This is known as Bantam’s greatest happiness principle.

Before socially responsible commerce was emphasized in business, utilitarianism was manifest in the form of the cost-benefit analysis, whereby Bantam’s pleasure and pain were assigned monetary values and the decision was only moral if benefits outweighed costs. However, Dry. Steven Kalmia outlines criticisms associated with the use of the cost-benefit analysis including instances where a decision may be moral ‘even though its benefits do not outweigh its costs’ and that there may be ‘good reasons to oppose’ quantifying non-marketed benefits and costs such as human lives (Kalmia 1981, p. 3). Consequently, his maintains using resources to complete a cost-benefit analysis when these factors occur is wasteful. Salesman’s arguments concur with Shaw criticisms of utilitarianism, such as the difficulties involved in predicting consequences whereby pain and pleasure are derived. He also suggests the moral theory may be too demanding due to the subjectivity associated with quantifying happiness and that acting simply to increase total happiness may not take into account how this pleasure is distributed (Shaw et al, 2009).

Whilst utilitarianism presents a seemingly convincing method of oral decision-making, problems arising from its application due to the complexity of reality may limit the theory efficacy. The central tenets of utilitarianism were not addressed in my initial writing, identifying the depth of learning acquired throughout the subject. Part of my views resonated largely with Kantian ethics, where I suggested firms and individuals should act responsibly because they want to’, not simply acting in self-interest to ‘better their reputation’.

Whilst still agreeing with the Kantian sense of duty, I now understand this requires immense demand on the part of individuals and firms to uphold this ideal and that utilitarianism may provide a simpler moral basis. However, constantly acting to benefit all parties may reduce the efficiency of business, indirectly burdening a large number of people and contradicting Bantam’s greatest happiness principle. S. Parka’s Seth contends that businesses consistently attempt to ‘create imperfect markets’ to earn extra profit.

He believes ‘corporate social responsibility or accountability is assessed by the attempts of the business to Justify their actions to external stakeholders. Seth states that foundations such as overspent and property rights are becoming less effective in enforcing a ‘social decision makers are often separated from the meaner of production (Seth, 2005, p. 112). As such, consumers depend on the ethics of businesses to act on this contract. A careful study of normative theories exposed the role egoism plays in commerce.

Driver states that often acting in one’s self interest can simultaneously increase the happiness of other parties. In a business environment, egoism could be manifest through the pursuit of profit as a rationale for investment and innovation. In my initial writing, I acknowledged that ‘self-interest can be a major factor in the decisions of workers, managers and firms as a whole’. I still subscribe to this view, though recognize the importance of acting to benefit all stakeholders, an outlook reinforced through the reading of Wastepaper’s sustainability Journey.

Throughout the subject, the principles of utilitarianism challenged my thinking and while realizing the importance of Bantam’s greatest happiness principle, I maintain that self-interest also plays a critical role in business decisions and that a Kantian sense of duty is an supranational standard employees and managers can work towards. A close examination of the actions of Maddox highlights the effects of relentless self- interest and the impacts of an absence of utilitarianism on exposed stakeholders, particularly his investors and family.

The case also emphasis the role of the U. S. Securities and Exchange Commission (SEC) and their ineptitude in controlling hedge fund fraud. Maddox began his financial career in 1960 by establishing his firm Bernard L. Maddox Investment Securities LLC, a trader of low priced stocks from small public companies. His venture was supported by wealthy relatives, who referred his company to a close circle of friends.

Maddox was able to compete with traders on the New York Stock Exchange’s trading floor by using computing software to generate its quotes. This technology became the National Association of Securities Dealers Automatic Quotations (NASDAQ), of which Maddox was the Chairman of the Board of Directors (Washington Post, 2008). He developed a reputation of exclusivity due to his sensitivity regarding his business and its financial statements, a lack of transparency indicative of questionable ethical behavior.

Madam’s firm continued to grow and established a wealth fund for his clients, where he managed to deliver unusually constant returns of approximately ten per cent. In 1999, financial analyst Harry Marko’s informed the Boston SEC that Madam’s hedge fund was the world’s largest Opinion Scheme’ (Marko’s 2005, p. 2). Simply, he was issuing returns using funds from new investors, a system Maddox was able to continue due to his secrecy and low returns, relative to other managed funds.

The exclusivity of Madam’s hedge fund caused investors to be wary of withdrawing their funds in case they lost their opportunity. Marko’s estimated Madam’s hedge fund was worth approximately $30 billion. A self-described ‘derivatives expert’, Marko’s was ignored by the Boston SEC, and later the New York SEC as he continued his pursuit to uncover Madam’s fraud (Marko’s 2005, p. L). As of 2012, the SEC website acknowledges ‘hedge funds are not subject to some of the regulations that are designed to protect consumers’.

Marko’s states a fraud of this magnitude was ‘bound to happen’ due to the lack of effective regulation (Marko’s 2005, p. 2). As markets declined due to he onset of the global financial crisis, investors sought to withdraw funds and sons they pay out employee bonuses early and, once questioned, Maddox admitted his fund was ‘one big lie’ (Washington Post, 2008). His sons alerted the Federal Bureau of Investigation and Maddox was charged with criminal securities fraud (Guardian, 2011).

Once uncovered, Maddox and his wife attempted suicide (Reuters, 2011). Not only did his self-interest affect Madam’s clients by losing over $10 billion in investments but his son committed suicide two years after his father’s arrest. The percussions of Madam’s fraud prove the danger of a purely self-interested business model and a lack of regard for other parties. A study into the negative implications of Madam’s Opinion scheme proves the profound importance of social awareness within the ethics of a company.

Earlier I acknowledged the role of egoism in business innovation, which coincided with views from my initial writing that self-interest can be a factor in decision-making. In the case of Maddox, he may have acted this way during the establishment of his business. However, continuing an egoist and illegal business model cost investors their life paving and retirement funds and caused the death of his son. This case supplements my understanding of socially responsible commerce and the need to consider all stakeholders.

If Maddox was acting in accordance with utilitarianism, even to a small degree, he may not have committed such fraud and caused disruption to an extensive number of lives. Blame also partly falls on the SEC, which failed to properly investigate Maddox after being offered significant evidence from Marko’s. The commission released a report investigating its failure to uncover the scheme, here they acknowledge a primary reason Marko’s’ complaint was not pursued was because the Boston District Office’s Assistant District Administrator ‘did not understand the information presented’ (SEC 2009, p. 7). Madam’s actions severed trust between investors and firms at a time characterized by low confidence in financial institutions, which was likely worsened by this scandal. The scale of his fraud and its widespread ramifications has deepened my perspective regarding socially responsible commerce and its importance in the modern ethical standards of businesses. Contrasting my initial writing with my present understanding of the significance of a social element within the ethics of business facilitated a reflection of my learning journey throughout the semester.