Case Study 3: On Values in Finance and Ethics

DEPARTMENT OF BUSINESS ADMINISTRATION STUDENT TRAINING PROGRAM

Name: Jan Dwaena M. Yares Date: May 17, 2022

Case Study 3: On Values in Finance and Ethics (Forgotten Trails and Promising Pathways) by Henry Schafer

CHAPTER 6: Concluding Remarks

6.2 Inside Out and Outside In

The article talks about the sustainable development strategy, as exemplified by the SDGs, now focuses on the negative impact of economic transactions and value chains within production plants, service establishments, networks, and so on external stakeholders, the environment, and so on. Such sites should be damaged as little as possible, if not entirely avoided. Due to the indisputable concerns of global warming resulting in severe weather events, ethical considerations in finance should move to the subject of how finance might help an economy and society become more robust, i.e., to manage the negative impacts of previous unsustainable behavior. This type of dialogue is still uncommon, and it requires immediate attention.

An article entitled Social and economic factors responsible for environmental performance: A global analysis by Wang, C., et al in 2020 have talked about the several factors that interact to influence environmental performance, but ethnic fractionalization, political freedom, financial growth, and institutional quality all play a role in explaining environmental performance among economies. The study's findings show that ethnic diversity, institutional quality, and political freedom all help to reduce CO2 emissions, but energy consumption, GDP growth, and financial development all contribute to

environmental degradation. Good quality institutions attract foreign direct investment, resulting in the introduction of more environmentally friendly technologies as well as incentives for subsequent breakthroughs that may assist to reduce CO2 emissions. GDP growth, financial development, and energy consumption, on the other hand, promote industrialization and urbanization, resulting in increased CO2 emissions. Cohesion among diverse ethnic groups, improved institutional quality, people's political freedom, and an inclusive financial sector are all proposed for policymakers to acknowledge the less polluted environment. With these both articles presented, my overall insights are that the company’s value chain should come up to strategies that would promote sustainability and development. Multiple studies already confirm that the economic transactions lead to ecological damage and does not promote sustainability.

Both of the articles have provided me with deeper insight as to how the economic transaction depleted the environment as a whole. The world and all nations see to it that their financial stability and all factors that would consider a country 1st world or is a booming country is met. Evidently, these countries or all nations is not making an action to make their environmental action mater. All nations are putting all their efforts in financial, political, technological, and social. Don’t get me wrong, this is not a bad thing, but the least priority that these nations are given to the environmental aspect. Thus, the unethical act in this article. This article will surely be helping in my future career. The article has given me a depth and credible information as to the happening of our financial aspect in return of the environmental depletion. The article has proven that future professionals should also consider the harmful effects of the plans and strategies that they would implement soon enough for the company that they are working.

6.3 Shades of Gray

The article has talked about a broader viewpoint of ethics and finance. A single and dominant organization that establishes broadly accepted moral and ethical viewpoints no longer exists for many people in industrialized countries. Morality and ethics have become privatized. Beyond a (ideally) distinct collection of ethical ideas, each person's

attitude determines what is right and what is wrong. Different ethical viewpoints would result in different utility functions, which could contradict with the mainstream notion of value in economics, namely monetary worth.

I agree with the article that a company’s reputation and image would reflect the decision making of the investors. Since there is no fixed ethical stand, hence, everyone share a different ethics and morality. As per Carberry, E., et al. (2018), The US Environmental Protection Agency announced on September 18, 2015 that Volkswagen (VW), a German automaker, had broken the Clean Air Act by placing software in over half a million cars that allowed them to cheat on emissions testing. The news sparked widespread media attention, revealing that the software had been installed in over 11 million automobiles worldwide. VW was soon chastised by a variety of stakeholders and the general public, CEO Martin Winterkorn resigned, and German officials launched their own probes. The price of VW shares had dropped by half a week after the initial statement. Such a drop following the revelation of corporate wrongdoing is unsurprising: not only will the misconduct cost VW money in legal bills and recalls, but it will also change how consumers, suppliers, and other stakeholders see the company in the future. However, in April 2014, the US Department of Justice launched a lawsuit against General Motors (GM) for faulty ignition switches that were linked to 124 deaths. In the next week, GM's stock price fell only 1.8 percent. As a result, companies who participate in misbehavior have an average stock price loss of -1.41 percent in the five days leading up to the event, according to the event study's findings. A one-and-a-half percent stock market penalty would result in a €150 million loss in value for a business with a market capitalization of €10 billion euros.

The articles have enlightened ne in regards to ethics and finance. Indeed, ethics and the ethical and moral stand of an investor as to their decision making. Both companies are well-known automobile manufacturers, and officials appear to have acted unethically on purpose in both cases. In VW's case, officials consciously cheated customers by evading environmental standards, whereas executives at GM knowingly defrauded customers by knowing about the lethal part for over a decade but failing to remedy it. Both conduct

resulted in and will result in costs associated with legal penalties, product recalls, and reputational damage. Why did the stock market react so negatively to the Volkswagen incident but not to GM's, despite the fact that GM's faulty ignition switches killed over 100 people? Although empirical evidence has been offered in a number of areas, including business ethics, economics, law, and management, investors react negatively to corporate wrongdoing. This topic would surely be a lesson for me in my future career. I may or may not be an investor someday, but the knowledge this topic has imparted in me is significant in order to understand the banking and finance industry. This topic has supplied me with information and the significance of proper conduct and ethical standard that a company should impose to their products and services.

6.7 Power to the People

This article has talked about the foundation of the integration of ethical considerations in general and sustainable issues in the existence of ethical goodwill among individuals. The idea that businesses, governments, and other investment entities should function in harmony with nature and promote social well-being is based on the assumption that stakeholders have a general understanding of ethics and morals and are willing to follow it.

I have learned that product sustainability is difficult to achieve because of the buying power of the consumers. The article has given a concise analysis of the buying behavior of the consumers. Wherein majority are concerned but not willing to act as a result of the measurement of their willingness to pay for products with environmental & social benefits. I have realized that no matter how environmental friendly and sustainable the products are, consumers would only patronize these products when they are convenient and with quality. Base on the article, consumers only a lot of the respondents are concerned but they are not willing to act in accordance to their beliefs. According to Joshi, Y. & Rahman, Z. in their study Factors Affecting Green Purchase Behaviour and Future Research Directions; Unplanned purchases of items can significantly harm the environment, so environmentally responsible purchasing is critical. According to Grunert (1995), consumer home purchases were responsible for 40% of environmental damage.

By purchasing green items, consumers can help to prevent or mitigate environmental damage. The research also found out that low price sensitivity was found to positively affect green purchase behavior (, while high price sensitivity was found to negatively affect green purchase behavior (Ma et al., 2013). As a result, it is obvious that high prices have a detrimental impact on green purchase intention and behavior. These two articles show how consumers or people could provide financial stability in terms of innovating green products. Upon reading these research paper and article, the results have given me quite an impression as to consumers acting as if they are concerned by the environment but acts in the opposite way. According to Stopwaste, Green purchasing can have a significant financial impact on a company. Hundreds of environmentally preferable products, ranging from office paper to janitorial cleansers, electronics, transportation, and landscape supplies, are comparable in quality while costing the same as or less than comparable conventional options over the product's lifetime. Many of these items also save money by using less energy, water, fuel, and other resources. Environmentally desirable products decrease or eliminate the expense of waste and/or hazardous material handling since they are designed to generate little or no waste.

These things would be helpful in my career, as the trend now focuses on the environmental sustainability; strategies and product development can be inspired by this topic. I believe that the world will not be the same as today. The environmental state that we have now would not be the same next year. The world has experienced so much detrimental effects by the things we are all using, producing, and disposing. The world has been quite a waste and we are not doing anything to save it. The articles have proven that almost all consumers tend to fight in imposing environmental sustainability but is acting otherwise in buying goods. This topic would be very helpful for me and my future career as I have been enlightened to the various preferences and reasons of buyers. It’s also given me the learnings from the respondents’ mistakes and decision making.

References:

Carberry, E., et al. (2018). Which Firms Get Punished for Unethical Behavior? Explaining Variation in Stock Market Reactions to Corporate Misconduct. Cambridge University Press.

Retrieved from

https://www.cambridge.org/core/journals/business-ethics-quarterly/article/whichfirmsget-punished-for-unethical-behavior-explaining-variation-in-stock-marketreactions-tocorporate-misconduct/E98BB4819063F847C0FA12FDFF0136C2

Joshi, Y. & Rhaman, Z. (2015). Factors Affecting Green Purchase Behaviour and Future Research

Directions. Science Direct. Received from

https://reader.elsevier.com/reader/sd/pii/S2306774815000034?token=D438ABF3 600453

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3C5D7467E471F6915A&originRegion=eu-west1&originCreation=20220514084309

Stopwaste. (2022). Green Purchasing Benefits. Stopwaste. Retrieved from https://www.stopwaste.org/at-work/green-purchasing/green-purchasingbenefits

Wang, C., et al. (2020). Social and economic factors responsible for environmental performance: A global analysis. Plos One. Retrieved from https://journals.plos.org/plosone/article?id=10.1371/journal.pone.0237597