In finances, ethics is traditionally defined as a subset of general ethics that considers ethical dilemmas in the subfield of finance (Garcia-Ruiz & Edwards, 2011, p. 177). It should be noted, though, that financial ethics is split into two categories, i.e., “normative” and “positive,” the former embracing the principles of the ethical code, and the latter taking the shape of cause-and-effect statements that are meant to address a particular ethical dilemma (Aragon, 2011, p. 3).
As a rule, ten key elements of ethical behavior are used to define impeccable ethical relationships between financial partners or stakeholders (Koslowski, 2011), honesty and integrity being the first to mention. For example, if a potential client is unaware of a certain fee, or interests taken from his deposit, a financial manager must warn the customer about the given fee even if such a step means losing the client.
Making information available to all those concerned is another point in the code of ethical behavior. An honest financial manager is not to suggest that the customer sign a contract as long as there is a single item that the customer is unaware of. The same concerns abiding by the law. When offered a profitable financial deal by a potential partner with less than a stellar reputation and criminal record, a financial manager should refuse it.
Following the confidentiality policy is another crucial issue to pay attention to. A financial manager must not disclose information regarding the company and/or clients to any third party. Sharing knowledge is also important; a financial manager must encourage the staff and peers to share information instead of competing in the acquisition and use of the given information.
A financial manager must keep his/her professional skills updated. Once new informational technology is developed for improving the quality of work, a financial manager is supposed to learn to integrate it into the working process. Promoting ethical behavior among the staff is also required. Even if most of the staff is corrupted, a financial manager must remain honest; thus, (s)he can become the model of the company’s organizational behavior.
A good financial manager creates the premises for building an ethically safe environment. In the circumstances that predispose the staff to be dishonest (i.e., in case of availability of large amounts of money), a financial manager must reinforce corporate values and ethical code. Using power responsibly is another demand. Managing impressive amounts of money on a regular basis, a financial manager is not to be tempted by the availability of the resources and must not use them to his/her advantage. Finally, a good financial manager must report the violation of the code of ethics. In case a fellow employee breaks the code of ethics, it is desirable to let him/her know that his/her misconduct has been spotted and voice concerns about the case. If the employee continues breaking the ethical code, it will be necessary to report on him to the manager.
Importance of Ethics in Finances
When planted into financial environment, ethics takes a specific shape, which is different from the one that is traditionally observed in any other field (McGee, 2011). To start with, it should be noted that the very phenomenon of financial ethics concerns two fields simultaneously, which are, not surprisingly, finances and ethics. Therefore, ethical principles in the given field comply with the laws of the financial world. As a result, the reinforcement of moral black-and-whiteness becomes the key feature of financial ethics, as Aragon (2011) explains.
Hence the significance of ethics in finances stems. Without ethical guidelines, it would be impossible to coordinate business operations; moreover, the mere concept of partnership would cease to exist, with either of the parties having no trust in each other. Financial ethics is the glue that keeps businesses together and prevents entrepreneurs from making dishonest financial decisions.
Ethical Issues in Finances
Despite the existence of a simple and coherent list of ethical norms and rules, ethical issues keep blocking people’s way to building trustworthy relationships with business partners. Because of the variety of factors that any business deal depends on, issues in ethics are very diverse; however, taxonomy for major problems can still be provided. These include self-interest leading to greed, stunted moral development of one of the business partners, putting morality on the same level with financial ethics, conflict of professional duty and company requirements, conflict of individual responsibilities and the requirements of the customer, stock market fraud, whistleblowing, choice between a high-risk strategy that can make the company’s revenues increase and a less profitable yet more reliable strategy, distribution of bonuses and incentives among the employees with different experience and skills and a choice between financial transparency and the security of the financial data in case of mistrust within the organization (Boatright, 2010).
Despite the abundance of stumbling blocks on people’s way to arrange deals, run their own business and engage into financial transactions, with the help of financial ethics, people are capable of engaging in honest partnership. Financial ethics does impose many restrictions on business people, yet it also provides safe environment for financial transactions. A crucial part of running any entrepreneurship, financial ethics must serve as guidance for every single business person.
Aragon, G. A. (2011). Financial ethics: A positivist analysis. Oxford, UK: Oxford University Press.
Boatright, J. (2010). Finance ethics: Critical issues in theory and practice. Hoboken, NJ: Wiley & Sons.
Garcia-Ruiz, M. A. & Edwards, A. (2011). Technology for facilitating humanity and combating social deviations: Interdisciplinary perspectives. Hershey, NY: IGI Global.
Koslowski, P. (2011). The ethics of banking: Conclusions from the financial crisis. North Miami, FL: Springer.
McGee, R. W. (2011). The ethics of tax evasion: Perspectives in theory and practice. North Miami, FL: Springer.