by Renae Richardson

Created on: December 17, 2008

Could flawed ethics in business have triggered the black sink hole of the current economic crisis?

The answer is.

No, it could have but it did not.

When speaking if business ethics we speak of an established code or set of rules that have been created to govern right actions in the corporate environment. While this code is proposed to be a just and equitable form of action it does not specifically mirror a specific set of moral standards but yet seeks to perform in a just manner on behalf of investors, consumers, and entrepreneurs. Some board establishes rules that seem to best serve these purposes. These rules can be ruled as ethical to some and unethical to others.

Were the rules established broken?

Assuredly yes. Many businesses during a period of upheaval played loose and free with the rules. Corporations operated in the grey areas. The grey areas that I am referring to are gaps found in the code.

More accurately put, the business operated in way where there was no physical appearance of unjust practices or officious malignancy. In actuality there was an underlying movement to advance the position of one subset within the organization. Presto we have the makings of the Enron scandal.

Profit margins were plumped up, and basically projections were presented as real numbers. Investors brought into the illusion. There was a lack of responsible actions on both the part of the investors and corporate boards. The corporate boards refused to report real numbers and the investors failed to do self investigation, resulting in the collapse of several businesses as well as the creation of new watchdog policies such as the Sarbanes Oxley act. This did not cause the economic collapse.

What did cause the economic collapse?

Lax standards in credit markets during periods of presumed economic stability serves as the root cause of the current economic crisis.

During more affluent economic periods many of the lending institutions chose to overlook real numbers and focus on projected numbers based on faulty market theorems.

The surplus of funds that were allowed to circulate through the fiscal system had no backing, meaning that a lot of unvalued money was being circulated. While the money had future value there was no current real value. The theorist denied the traditional theorems that explain market action or basic scientific theory. What goes up must come down. Despite all clues that would suggest that playing so loosely would ultimately cause a collapse lenders continued to take

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