1.1) Identify each of the stakeholders and how they are affected.

What are the main harms and benefits in this case for the different stakeholders based on the current situation? Each of the Stakeholders and their main harms and benefits are listed on the table below. STAKEHOLDERS Traditional Shareholders HARMS Lost investments Losses incurred which may never be recovered because of Government intervention. Dilution of ownership due to state intervention. Diminishing long-term share price. Minimal or no shortterm profits. Less ability to be temporary and opportunistic due to Dodd-Frank Wall Street reform. Harder to get a loan or mortgage. Lack of confidence in stability and safety of financial systems. Higher taxation and cuts in public expenditure Falling value for the housing market. (subprime market) Harder to secure continued financing Tightly regulated banking centres Change in bonus culture BENEFITS

Institutional Shareholders Hedge Funds

Customers (private)

Deposits and savings saved due to nationalization of banks.

Customers (with mortgage)

Companies/ industries

Deposits and savings saved due to nationalization of banks. Jobs secured due to state bail-outs. Jobs saved due to government intervention Chance to be the first with sensational news to gain audience. Holding a significant US debt Page 1

Employees Unions Media

Chinese Government

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Financial Services Authority (FSA)/ Bank Commission (CBFA) National Banks (e.g. Bank of England) Banks/ Financial institutions European Central Bank

Facing a sovereign debt crisis (massive amount invested to support struggling banks) which may lead to a default. Criticized for its inability to regulate the unregulated in time. Risk of a financial meltdown Risk of getting bankrupt. European economy and banking systems at a greater risk. Threat to the open economic trade area

Greater control over financial institutions. Able to secure trust and security.

Increased power Increased power Rescue packages from the Government.

European Commission Political Parties

CEOs (e.g. Fred Goodwin)

Top Management/ Directors

Criticized for unethical practices. Risk of losing position. Less profitability leading to less or no bonus. Loss of position if sold to foreign banks due to bankruptcy.

Opportunity to offer alternative efforts to overcome the crisis, and gain public support. Massive pension packages/ bonuses. The bail-outs may contribute to the bonus culture once again.

1.2)From a utilitarian perspective, would you argue for or against the proposed tightening of UK banking regulation? According to Renouard (2011), Utilitarianism is a philosophical line of thought whose aim was defined by Bentham (1815) as maximizing the utility or happiness of the greatest possible number of people. In order to understand whether the tightening regulation was fair or not we need to look through the lens of rule utilitarianism, which defined by Crane and Matten(2010) suggests that it looks at classes of action and asks whether the underlying principles of an action produce more pleasure than pain for society in the long run.

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From the table in 1.1 we can acknowledge that a great number of people were harmed because of the collapse of the major banks in the western world, namely Lehman Brothers, Northern Rock, and Fortis. If the governments were to not save the latter two it would have caused the entire banking system to crash because of the public loss of confidence in the banking systems leading to massive withdrawals of deposits. This surely would have created a widespread panic, leaving any economy in an irreparable loss. But this poses the question of why the government should be allowed to tax citizens in order to bailout the national and international shareholders of a bank? Is bankruptcy not fairer than nationalization? Well, from a utilitarian perspective I believe the state should rescue the bankrupt companies in a way that protects the interests of the creditors (Kilpi, 1998). The costbenefit analysis in case of bailout of a large bank might display less harm for the depositors than the cost for the countrys economy in case of bankruptcy (cited by Fassin, Y., and D. Gosselin. 2011). Many forecasters blamed the financial crash had inflicted permanent damage on the economy and had left a borrowing black hole that had to be filled, as suggested by Sarah OConnor and Chris Giles (2011). And so building on what Travis Plunket of the Consumer Federation of America advised, I would say that if the UK banking regulation was tight enough before the crisis to prevent loan terms or practices that harmed the consumers, it would have vastly improved the financial solidity of the banks today.

1.3) Using arguments based on the maxims of duty, would you consider the UK banks to have acted ethically in their operation?

Maxim 1: Act only according to that maxim by which you can at the same time will that it should become a universal law. This first maxim explores whether everyone could follow a consistent underlying principle. The UK Banks were offering excessive loans to people who were unable to ever repay it; sold these irrecoverable debts in the financial market, to achieve bonuses that were not linked to their share prices. Needless to say, the banks would never want this from each other. An evidence to suggest that is when they all discovered their weakening financial position and started charging the LIBOUR rate. Maxim 2: Act so that you treat humanity, whether in your own person or in that of another, always as an end and never as a means only. This second maxim suggests that Banks should never ignore the human dignity. It is crystal clear that the setting up of teaser rates to tempt people to take on unaffordable loans, and bundling of irrecoverable debts in CDOs was in violation of the human dignity. The banks were least bothered about whether a customer could afford the loan, rather they used them as means to maximize their lending. Maxim 3: Act only so that the will through its maxims could regard itself at the same time as universally lawgiving.

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The third maxim refers to whether every human being would universally come to understand that the aggressive lending practices of the banks were acceptable. Fassin and Gosselin (2011) found out that the innovative financial products, such as sub-primes and CDOs, had been designed with a lack of transparency and with a complexity to escape regulation. This is evident enough to suggest that the banks would be pretty displeased if this secret was unearthed.

1.4) What clashes of rights are involved in this situation? Is it possible to judge their relative importance? Whose rights matter most in this situation?

Crane and Matten (2010) described natural rights as certain basic, important, unalienable entitlements that should be respected and protected in every single action. In the late financial crisis of 2008 there are countless examples of infringement of rights. But before moving on to state the clashes of rights in this situation it is worth mentioning that in turbulent and difficult times most stakeholders- individual shareholders, larger groups, creditors but also the governments- tend to safeguard their self-interest, especially when they have got the perception of having being treated unfairly (Fassin and Gosselin, 2011). The intra-heterogeneity between the stakeholder groups and the multiple roles played by some stakeholders make it somewhat difficult to state the relevant rights. But the most inalienable ones would be: Customers have a right to information - the banks concealed the truth (neglecting the Truth in Lending Act) and sold loans to consumers who had little knowledge of what they were buying. Shareholders have a right to protect their investments and recover the losses made by opposing any state intervention. Employees who were not a part of the rash acquisition and diversification policies, which lead to bankruptcy, have a right to continuing employment. Governments have a right to protect the countrys economy by saving the deposits of customers through nationalization of banks. Tax payers have a right to be charged a fair amount of tax. Companies and industries have a right to finance their operations through borrowing. Banks have a right to pursue their own business strategies The most inalienable right would be that of customers, leading to the government saving the whole economy (securing jobs and deposits). That is why shareholders have been sacrificed by the government against the employees and the customers of the bank.

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1.5)Which other approaches to ethical analysis could help evaluate the current situation?

The current situation can be analyzed using a number of contemporary theories as stated by Crane & Matten (2010). For instance: a) Virtue ethics which contend that morally correct actions are those undertaken by actors with virtuous characters can be used. The formation of a virtuous character is the first step towards morally correct behavior. The banks had virtues such as loyalty and fairness to their shareholders but did not have virtues such as honesty or fairness as they ignored their statutory obligations to operate in a manner that is equitable and fair for their customers and the communities in which they operated. b) Feminist ethics can also be used as this approach prioritizes empathy, harmonious and healthy social relationships, care for one another, and avoidance of harm above abstract principles. Had the banks actively taken on the responsibility of assessing risks and cared more about how their own financial weakness could affect the economy, the disaster would have been less severe. They should have taken lessons from previous collapses that occurred in order to maintain a healthy relationship with all of their stakeholders. c) Discourse ethics which aims to solve ethical conflicts by providing a process of norm generation through rational reflection on the real life experience of all relevant participants can also be used. In the case of Lehman Brothers from where it all began, the US Government, the directors of the bank, managers, shareholders, representatives from the employees and customers and the general public could sit together (fulfilling the philosophical criteria of impartiality, nonpersuasiveness, non-coercion, and expertise of the participants) before the collapse in order to settle the conflict through a norm-generating discourse. This could have prevented the domino effect of the crisis.

(Word Count-1553)

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2) Select a major financial services organization and critically appraise its current approach to Corporate Social Responsibility.

Corporate Social Responsibility, recently known more as corporate responsibility (CR), was an issue that sparked in the US almost fifty years ago. Today that issue seems to be centered on most business decisions taken in Europe. Evidence suggests that it makes good business sense for corporations to act in a socially responsible manner. According to Carroll and Buchholtz (2009: 44) corporate responsibility includes the economic, legal, ethical, and philanthropic expectations placed on organizations by society at a given point in time (cited by Crane & Matten, 2010). The economic and legal responsibilities tend to be required by the society where as, the ethical and philanthropic responsibilities are rather expected and desired respectively. Although it may seem that CR can somewhat be defined, but in reality CR cannot be generalized as it is time and context dependent. What that really means is that since expectations change over time so does the threshold of acceptable corporate practice. And soon expectations become institutionalized into norms of behavior as well as laws and regulations, so that corporate activities that are considered to be unheard of at one point are considered to be responsible at another time, expected at a third, and required at a fourth (California Management Review 2011). So how is it that a company such as HSBC able to keep up with the changing societal needs and also differentiate itself from the competition in terms of CSR commitments? Is it one of the progressive firms that are able to adopt certain practices which ultimately become either required by law or accepted practice and hence a new norm for doing business? Some of these questions may be answered through the application of Carrolls four-part model of corporate social responsibility.

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Economic Responsibilities: This is the first and most basic step which any company needs to fulfill if they want to be a properly functioning unit and stay in business. All that it really means is giving the shareholders a good return on their investments, creating jobs for employees, and providing customers with innovative financial products at a fair price. Evidence suggests that HSBC has been doing this very well. They were only UK bank that did not get caught up in the financial crisis due to any economic irresponsibility. Their Sustainability report of 2010 suggests, HSBC made a $US19,037 million profit before tax (a massive increase from $US7,079m in 2009) Distributed $US7.1 billion to its shareholders (an increase from $US6.5b last year). Total employees of 307,000 (gone up from 302,000 in 2009). Total number of customers around 95 million.

Legal Responsibilities: this by definition means the compliance of the firm with the law. It is an essential requirement by the society as it determines the right and wrong practices. Evidence suggests that HSBC has been doing this reasonably well when compared to its counterparts in the UK. They paid a net cash tax of $US1.8 billion and collected $US1.9 billion for the UK Government. Their sustainability report claims that they have clear policies and procedures in place to prevent money laundering, bribery, and corruption in all the jurisdictions where the bank operates. Although according to The Guardian (8 April 2008), there may be concerns regarding HSBC facing the possibility of a regulatory inquiry and heavy fines after it was forced to confirm it had lost an unencrypted disk containing life insurance policy details for 370,000 customers. This may be an example of a breach in the legal responsibilities as the Data Protection Act requires the protection of sensitive data of customers.

Ethical Responsibilities: this step in Carrolls CSR pyramid requires companies to go above the legal framework and do what is right, just, and fair. It makes a good business sense to do so as there are mounting pressures from consumers. HSBC claims to be engaged in many ethical practices in 2010. Some of which may be; Charitable cash donations of $US107.7 million in the field of education and environment. Employee volunteering of 725,535 hours. 897,000 tonnes of CO2 emissions were completely neutralized through purchase of carbon offsets.

In spite of all the contribution, HSBC was not spared from criticisms regarding its cultural insensitivity when in an advertising campaign they were accused of mocking the Japanese culture through the appearance of a fake sumo wrestler.

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Another ethical dilemma that HSBC faced according to an article in the Telegraph published on 24th August 2008 is when they suddenly withdrew their interest-free overdrafts to graduates. This sparked massive protests from the students union and due to the mounting pressure they eventually had to freeze the charges. Philanthropic responsibilities: are composed of the activities that are desired by the society. It may be suggested that the financial success frees the company to indulge in such sort of activities. Apart from large sums of donations as mentioned above, HSBC in their sustainability report 2010 claims to have been proactive in a number of philanthropic activities. For instance, they voluntarily agreed to abide by a number of external principles and global initiatives such as: Climate Principles- which help individuals understand and manage the risks, opportunities, and adoption needs relating to climate change. Equator principles- which address the environmental and social issues that arise in financial projects. Extractive Industries Transparency initiative- which counter misuse of payments to governments for mineral rights and mining. Global Business Coalition on HIV/AIDS- to keep the fight against HIV/AIDS, tuberculosis, and malaria a global priority. UN Global Compact- which requires supporting and advancing key principles in four fields: labour standards, human rights, environmental responsibility and anti-corruption. Wolfs-berg Principles- a founding member aimed at developing the financial services industry standards and related products for Know Your Customer, Anti-Money Laundering and CounterTerrorist Financing policies.

During the late financial crisis of 2007/8, HSBC was the only UK bank that did not need to raise extra funds to weather the storm. Was this solely because of their prudency and risk awareness? Or was it also because of the sustainable business decisions they made? According to Crane and Matten (2010), sustainability refers to the long-term maintenance of systems in terms of the environmental, economic and social considerations. In other words the methodology of the Triple Bottom Line can be used to assess the CSR claims of HSBC. Douglas Flint the Group Chairman at HSBC suggested that, Sustainability must lie at the heart of any business if it is to achieve the long term success that allows it to contribute to the economic well-being of

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In terms of the environmental perspectives of sustainability we need to consider whether HSBC is effectively managing its physical resources so that they are preserved for the future. Since all the biosystems are believed to have limited resources, it is important to understand that human activity must not do anything to threaten the wellbeing of those systems. HSBC claims to have made some good grounds in terms of their environmental commitments. Most noticeably, in 2005 it managed to be the first bank and FTSE100 Company to become carbon neutral by managing their direct impact on the environment by operating as efficiently as possible and integrating environmental measures throughout their functions. Furthermore, through lending, investment and insurance products and services, HSBC anticipates playing a leading role in the transition to a lower carbon economy over the long term. The economical perspectives try to capture the attitude towards and impacts upon the economic framework in which HSBC is embedded. One of the ways they contribute to sustainability in this aspect is by managing potential environmental and social risk in their lending and investment activities. A large chunk of their donations are aimed at educational support that primarily focuses on: Disadvantaged children Financial and business literacy Environmental education and understanding

The Social component of the triple bottom line is primarily concerned with investments in communities. The UN millennium development goals outline a target to be achieved by 2015. HSBC being a MNC has taken up a number of responsibilities to help achieve that target. For instance, HSBC claims to have changed the lives of 133,000 disabled children through education from 2007. 600 teachers have been trained in China to date affecting 500,000 rural children in need. HSBC has invested $US7.8m in the What Money Means programme and aims to involve 10,000 HSBC employees. They made a new commitment to contribute $US2.5m to engage more than 100,000 students in many countries through the HSBC Eco-Schools Climate Initiative. The HSBC Climate Partnership is backed by a five-year commitment of $US100m. HSBC collected a total donation of $US28.2m following the 2008 earthquake in Sichuan Province China.

(Source: HSBC Community Investment Report 2010.)

We focus our community investment on education and environment because we believe they provide the fundamental building blocks for the development of society as said by Stephen Green, Group Chairman at HSBC Holdings Plc.

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Based on the analysis done using Carrolls model and the Triple Bottom Line, my understanding is HSBC is a multinational company that has been able to successfully integrate the concept of sustainability into its organizational culture. They seem to understand what Solomon (1997) tried to say, Responsibility need not mean you are the cause of the problem. It does mean however, that you are in a position to do something about it. Responsibility is accountability, but it is also do-ability (cited by Fassin and Gosselin, 2011)
(Word Count- 1488)

SOURCES TEXTS Boatright, John R. (2009b). Ethics and the conduct of business. Upper Saddle River NJ: Prentice Hall Crane, A. & Matten, D. Business Ethics. (2010). 3rd ed. Oxford: Oxford University Press Fisher, C. and Lovell, A. (2006). Business Ethics and Values: Individual, Corporate and International Perspectives. 2nd ed. Harlow: Pearson Education Ltd. McIntosh, M. (2003). Living corporate citizenship: strategic routes to socially responsible business. Harlow: Financial Times Prentice Hall

JOURNALS
Cai, Y., H. Jo, and C. Pan. 2011. Vice or Virtue? The Impact of Corporate Social Responsibility on Executive Compensation. Journal of Business Ethics 104, no. 2, (December 1): 159173. http://www.proquest.com/ (accessed November 23, 2011).

Fassin, Y., and D. Gosselin. 2011. The Collapse of a European Bank in the Financial Crisis: An Analysis from Stakeholder and Ethical Perspectives. Journal of Business Ethics 102, no. 2, (August 1): 169-191. http://www.proquest.com/ (accessed November 28, 2011).

Khademian A. The Financial Crisis: A Retrospective. Public Administration Review [serial online]. November 2011;71(6):841-849. Available from: Business Source Premier, Ipswich, MA. (Accessed November 29, 2011.)

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Kim, S., and H. Park. 2011. Corporate Social Responsibility as an Organizational Attractiveness for Prospective Public Relations Practitioners. Journal of Business Ethics 103, no. 4, (November 1): 639653. http://www.proquest.com/ (accessed November 27, 2011).

Renouard, C. 2011. Corporate Social Responsibility, Utilitarianism, and the Capabilities Approach. Journal of Business Ethics 98, no. 1, (January 1): 85-97. http://www.proquest.com/ (accessed December 2, 2011).

Rivoli, P, & Waddock, S 2011, '"First They Ignore You...": THE TIME-CONTEXT DYNAMIC AND CORPORATE RESPONSIBILITY', California Management Review, 53, 2, pp. 87-104, Business Source Premier, EBSCOhost, [viewed 29 November 2011.]

Ye, K., and R. Zhang. 2011. Do Lenders Value Corporate Social Responsibility? Evidence from China. Journal of Business Ethics 104, no. 2, (December 1): 197206. http://www.proquest.com/ (accessed November 19, 2011).

OTHER RELEVENT WEBSITES HSBC Sustainability Report 2010 Available @ http://www.hsbc.com/1/PA_1_1_S5/content/assets/sustainability/110526_sustainability_repor t_2010.pdf [accessed Nov 15, 2011] HSBC Community Investment Report 2010. Available @ http://www.hsbc.com/1/PA_1_1_S5/content/assets/sustainability/090726_community_invest ment.pdf [accessed Nov 14, 2011]

The Economist. (Nov 10th 2011). Two-speed Europe, or two Europes? |BRUSSELS Available @ http://www.economist.com/blogs/charlemagne/2011/11/future-eu [accessed Dec 1, 2011]

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The Economist. (Nov 23rd 2011). The screw tightens. | LONDON Available @ http://www.economist.com/blogs/freeexchange/2011/11/euro-crisis-16 [accessed Nov 30, 2011] The Economist. (Nov 25th 2011). Is this the end? | WASHINGTON Available @ http://www.economist.com/blogs/freeexchange/2011/11/euro-crisis-18 [accessed Dec 3, 2011] Bowers S. (Tuesday 8 April 2008). HSBC loses disk with policy details of 370,000 customers. The Guardian. Available @ http://www.guardian.co.uk/business/2008/apr/08/hsbcholdingsbusiness.banking [accessed 2 Dec, 2011] Collinson, P., Levene, T. (25 August 2007). Now it's Facebook vs HSBC. The Guardian (London). Available @ http://www.guardian.co.uk/money/2007/aug/25/moneysupplement.studentfinance. [accessed Dec 5, 2011] OConnor, S. and Giles, C. (November 30, 2011). Britain braced for debt storm. The Financial Times Available @ http://www.ft.com/cms/s/0/8f749330-1a77-11e1ae4e00144feabdc0.html#axzz1fC66402p5rf [accessed Dec 1, 2011] MacLeod, D. (30 August 2007). Students celebrate Facebook triumph over HSBC. The Guardian (London). Available @ http://education.guardian.co.uk/students/finance/story/0,,2159178,00.html. [accessed Dec 20, 2011] Salter, J. (24 August 2008). HSBC embroiled in 'slit-eye row' over advert. |The Telegraph (London). Available @ http://www.telegraph.co.uk/news/2612563/HSBC-embroiled-in-slit-eyerow-over-advert.html. [accessed Dec 19, 2011]

Institute of business ethics [Online] Available @ www.ibe.org.uk Company that developed triple bottom line methodology *Online+ Available at: www.sustainability.co.uk

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