Of Banks and Bonuses
Business Ethics/ETH 501
Trident University International
February 28, 2011
A question is presented, “should top bank executives that received bailout money get big bonuses?” Plain and simple, “no.” Over the past year or two there have been numerous articles about large executive compensation packages and in particular about compensation packages to executives in companies that received bail out money from the government at the taxpayers’ expense. These same companies were laying off a massive amount of their lower level employees all for the sake of their bottom line. The gap between top and lower level employees is huge which causes anger among the ranks. Top ...view middle of the document...
248). What leads to this discussion is that most individuals and to include corporations have their own ideas of good, bad, right, and wrong. And corporate culture is also guided by perspectives that rise out the member’s patterns of beliefs, orientations, values, and aspirations (Morgan, 1997).
Deontology is the perspective of doing what is morally right, regardless of the amount of good or evil that results from the right action (Frankena, 1973). The behavior is the important thing, not the outcome. Behavior is determined by moral obligation. Moral obligation is not determined by what the outcome of the behavior is, but is determined by rules or norms that compliance to achieve ethical actions. I feel the TARP payout had good intentions and that was to bring vitality back in the economy. I have to be careful not to assume that the pursuit of profit is unethical. Milton Friedman, the world famous economist, makes a convincing case that the social responsibility of business is simply to abide by legal regulations and pursue profit because such pursuit results in the most efficient allocation of resources and the greatest maximization of social good. Yet for many companies, bad practices are ok if they are legal. Because maximizing return to shareholders is legally required of corporate officers, profit must be the ultimate measure of all corporate decisions. But many argue that there should be more to a corporate balance sheet than profit. Profit should not necessarily take precedence over community well-being, worker safety, public health, peace, environmental preservation, and national security. However, once the banks/bankers received their portion of payout, their intentions did not line up with the governments and they took precedence over everything else. How could it possibly be morally right to “give” the executives millions of dollars as rewards? Understandably it takes knowledge, experience to run a company successfully. Unfortunately that is not the situation with the major companies that took the handout. The taxpayers put out $350 billion and didn’t even get the right to find out what the money was being spent on, let alone have a say in what the banks did with it. TARP’s failure comes as no surprise: incentives matter. Bankers won’t restart lending unless they have a reason to do so or are forced. Receiving billions of dollars in bonus pay for racking up record losses is a peculiar “incentive” structure. Bankers have been accused of unbounded greed using hard-earned taxpayer dollars for bonuses and dividends. I feel that leaders can and should plan for possible challenges that my accompany crises and avoid some of the uncertainty associated with unanticipated events. If uneasiness and doubt are reduced, perhaps there will be sufficient time for careful thought in selecting the best ethical steps and determining the best solution to resolve the current crises.
Utilitarian ethics is founded on two principles:...