Ethical Challenges in Finance


The finance sector has a bad reputation in the area of ethics. Many companies around the world have been found guilty of one ethics violation or another. There are numerous issues identified that lead the public to have an unfavorable opinion of the finance industry. A few of these contemporary issues include discriminatory hiring practices, illegal accounting and schemes, exploitation of workers and resources, and unreasonable demands on employees. Greed for profit is the underlying factor for each of these issues. Large corporations are likely to engage in unethical practices to meet their bottom line. Ethics are frequently neglected for the sake of gaining more money and clients. Furthermore, many businesses do not consider the long-term implications of leaving morals out of their business practices. Consumers and employers are harmed by unethical practices. There are ways to prevent unethical practices from taking place in business. Starting with education and going up to corporate level training, employees can have in-depth knowledge of ethics. Secondly, individuals will have better preparation for the ethical challenges ahead. By examining business ethics case studies over the past 15 years, I can prepare myself for a career in the finance industry through analysing ethical challenges and prepare for future ones.

Contemporary Ethical Issues and Problems

There are numerous practices in the business world that quality as unethical just a there are many companies that practice them. Many issues and scandals have arisen in the past few decades concerning business ethics. Chase Bank and Enron are primary examples of corporations that engage in illegal accounting practices and money schemes. Enron Corporation was a leader in the energy and commodities sector. In 2001, the Enron scandal broke revealing the depth of the accounting fraud by the company. The company misstated its earnings through fraudulent accounting practices. Secondly, Enron  “had made about a dozen “partnerships” with companies it had created, and it used those partnerships to hide huge debts and heavy losses on its trading businesses” (Edmonds, 2016). Throughout this unethical behavior, top company officials along with an auditor were complicit in these schemes. The result of this behaviour is that Enron had to file for bankruptcy, face criminal charges, and many people lost their jobs and money. Enron’s case is a clear example of companies not using ethical behaviour in its financial transactions. Another group that followed a similar path is Chase bank even though they fared a little better than Enron.

Chase Bank, formerly known as JP Morgan Chase, conducted at Ponzi scheme on a massive scale led by Bernie Madoff. Madoff was an investor, stockbroker, and financier that scammed millions of people out of their money. Katy Troutman (2015) states that Madoff “conducted a $65 billion Ponzi scheme which is, to date, the largest investment scam in history. The bank since agreed to pay $1.7 billion in the biggest bank forfeiture in history. The forfeiture is being directed victims of Madoff’s schemes, per The New York Times.” Madoff and those involved in his schemes were more concerned with making a profit than worrying about the victims of their schemes. Their behaviour shows a high-level of moral ambiguity and lack of empathy. The scandal further highlighted how easy it is to run a finance scheme and have it go unnoticed for years. The Ponzi scheme was not the only unethical practice that the company engaged in during this. Leading up the recession of 2008, the company sold millions of dollars’ worth of bad mortgages and credit cards. People lost their money and homes to Chase’s unethical money and accounting practices. Schemes such as these are common in the world of finance. Many governments to not have thorough oversight into the banking and investment industry. There are laws in place around the world to prevent banking scheme. However, these laws are not enough to govern the behaviour of the major financial institutions. JP Morgan Chase was part of the massive tax bailout that saved the company. During this critical time at the bank, the CEO gave himself a substantial monetary bonus. Ethics are neglected in favour of personal interest, and the greater good is not brought into the equation. Another contemporary issue is that of corporate responsibility and worker exploitation.

The exploitation employees and misuse of resources are not new problems. History has shown that employers are will to cut costs and overwork their employees to make a profit. However, the modern consumer and the government are more concerned about the welfare of workers and the use of resources to make their products. Nestle, the famous chocolate maker, is infamous for its exploitation of employees and resources. At the top of its list of unethical behaviour, child labour is a the top.  During one investigation of the company, it “saw researchers visit 260 farms used by the company in Ivory Coast from September to December 2014. The researchers found 56 workers under the age of 18, of which 27 were under 15” (Clarke, 2015). Child labour is a significant problem in developing countries. Unethical companies like to have a workforce in poorer countries because they do not have to pay them a living wage. They are saving the company money at the cost of people’s livelihood. Nestle is not practicing responsible sourcing or corporate responsibility in their business decisions. Responsible sourcing involves using suppliers that pay their workers an adequate, wisely use resources, and not using child workers. Nestle claimed that is solved these issues years before, but the new investigation reveals that these problems are still happening. As more businesses become globalised, the issue of responsibility versus profit will continue. Companies like Nestle can slip under the radar for a certain amount of time to conduct their unethical practices. Reporting of unethical behaviour seldom comes from the workers themselves. They are afraid of the consequences of blowing the whistle on unscrupulous employers. Child labour is easier to cover up than a large-scale environmental disaster. Unethical environmental practices in the environmental sector are another major reason why the finance sector has a bad reputation.

Producing products requires a lot of resources and manufacturing. Certain industries, like oil, taking more resources than others. Many companies ignore environmental protocol to make the best profit. BP Oil caused one of the greatest environmental disasters in history because of their unethical business practices. BP was responsible for one the most major oil spills in history in the Gulf of Mexico. The Deepwater Horizon Oil Rig exploded on 11 April 2010, killing 11 men and 3.19 million barrels of oil into the Gulf. The Gulf environment was severely polluted, and it affected the livelihood of people who had fishing and shrimping businesses in the region. Additionally, “for years following the spill there were reports of fish with lesions and deformities, and some reports of eyeless and deformed shrimp after the spill” (Ocean Portal, 2016). The cause of the disaster was several unethical choices by the company. First, the cost cutting measures used on the oil rig’s construction led to its explosion. For example, the cement that was supposed to seal the valves was loose, and it allowed oil and gas to build up in the valves. Secondly, the company did not train the rig workers in proper emergency management procedures and risk assessment. The company chose to save the money instead of investing in safety.  Finally,  BP violated several laws that oil companies are expected to follow during drilling. The did this knowingly so they could save money. Their decisions reveal amoral behaviour and a disregard for the environment. A lack of consideration for the environment is something that many companies operate under. Safe environmental practices are often neglected in favour of cheaper methods of construction and operation. Finally, businesses that use discriminatory hiring practices are engaging in unethical behaviour.

Wal-Mart is a global retail giant with locations all around the world. Over the years, Wal-Mart has come under intense scrutiny for various unethical practices. One of these practices is their hiring practices. Several lawsuits were filed in the past decade for unfair hiring and firing of employees. Gender, race, and sexuality were the two largest reasons for Wal-Mart’s discrimination.  A case recently settled by the courts involved five women suing Wal-Mart for sex discrimination during their time at Wal-Mart. Al Norman (2016) states, “The original litigation alleged that female employees at Wal-Mart and Sam’s Club were discriminated against based on their gender, with respect to pay and promotion to management positions—in violation of Title VII of the Civil Rights Act of 1964, which became law two years after Wal-Mart opened for business.” In most countries around the globe, it is illegal for companies to base their hiring decisions on personal bias and prejudices. The practice happens in all areas of the finance sector. Minorities are denied opportunities because of these unethical hiring practices. There is a mindset that only particular types of people can have different kinds of careers. There is a preference for Caucasian, educated males to work in the finance sector and other major companies. Women and people of other minorities, even though they have the same level of skill, are often not hired because of their gender and race.

Historically, the finance industry is dominated by white males. Females were thought not to have the financial acumen as men. Women are slowly entering the banking industry, even though they are still not treated the same way as men. From cashiers to executives, women are not treated equally. Recruiting efforts in the finance sector are focused on hiring white males instead of females. This is unethical because all employees and potential hires deserve to be treated equally. Furthermore, male employees do not like working with women because they have higher expectations of their employers.  Karen Demasters (2015), “Women advisors want flexible hours, the ability to work from home, and their fair share of the big accounts…Younger advisors not only want good pay and benefits, but they also want jobs that make them feel fulfilled and valuable.” Asking for these benefits puts the company bottom line at risk, and many employers do not wish to give out these benefits. Therefore, companies will hang onto this bias to protect the industry. Even with people having recourse for these actions, companies still engage in unethical hiring and firing. Although there is a risk of not hiring someone based on race or gender, companies do not cease these actions. There are multiple causes behind wrong decisions in business. Understanding the reasoning behind them will assist in handling ethical issues in business in the future.

Ethical Challenges in the Finance Industry

The desire to make a profit drives the majority of decisions that a company makes in future planning. Some companies use ethics during the decisions making process and do not let the desire for profit put anyone at risk. However, looking at the cases in the previous sections reveals how often ethics are neglected. Money is the root of unethical decision making and something that future employees will encounter. There is little restriction on the desire that people have for profit. John Hendry (2015) writes, “On top of this, money is itself inherently de-moralising. As the ancient Greeks already recognised, it is the unique object of unlimited desire. The greed of the glutton or libertine is inherently self-limiting and its immorality painfully visible, but the greed for money knows no limits.” There is no way to put a limitation on a company’s desire for profit. The only restrictions that stand in the way are a person’s moral code, regulations, and laws. Most of the ethical issues that occur in business stem from this one desire. Companies will engage in cost cutting measures to get more money out of the business deals. Practices like illegal accounting and money schemes are the primary result of greed in business. Companies feel like they are invincible because of this desire for profit and coming out ahead of the competition. The feeling of invincibility leads them to engage in money scams that still money from many people. Chase Bank and Enron overlooked regulations and laws to delve into illegal actions. Future employees will have to deal with a certain disassociation that business has from morality.

In the finance sector, employees will likely face several ethical and moral dilemmas in the workplace. The finance sector, as evidenced by the case studies above, operate under a different moral and ethical code. As greed drives profit-driven behaviour, it also creates a neutral stance against certain types of behaviour.  According to John Hendry (2015), “Money is culturally neutral and has a global reach. It is not tied, as goods and services are, to the context of a community, and since moral values are essentially community values – indeed, they are what hold communities together – money eludes them. The result is that the activities of the financial sector are actually dissociated from the physical and moral communities that shape all other business sectors.” The divorce from morality, caused by money, leads to companies expecting the same behaviour from its employees. Companies will place pressure on their employees to engage in unethical practices. There are many cases around the world of companies using threats and pressure to make employees do what they want.

Ethical dilemmas are common in the finance industry. There are conflicts of interest on all levels of employment. However, the ones that face the most pressures is mid to lower level employees. When a company engages in unethical practices, they will seek out employees below them to carry out the work. They know they can bully or coerce them into participating or ignoring the unethical actions. The case of Matthew Martoma is a prime example of conflict of interest and an ethical dilemma. Martoma was in a position to offer evidence against Stephen A. Cohen of SAC Capital Advisors. Cohen was accused of insider trading, and the government had already prosecuted other members of the company. Martoma had the evidence prosecutors needed to convict Cohen, but it would also mean Martoma would be sentenced. Martoma was faced with an ethical dilemma. He could sacrifice himself for the greater good, or he could protect his self-interest. There were multiple outcomes for Martoma’s case: “If only one confesses, he goes free, and the other gets a harsh sentence. If both confess, each gets a reduced sentence, but still, goes to jail. If neither confesses, the government lacks the evidence needed to convict, and both go free” (Stewart, 2013). Martoma had to weigh the outcomes to make what he deemed was the best ethical decision. Self-preservation is not the only factor that causes employees to be hesitant about taking action. Employees may fear reprisal from their employer and other sources if they speak out against their employer. Martoma ended up receiving a nine-year prison sentence after pleading not guilty. He chose to try to protect himself instead of offering evidence against Cohen. His actions led to him receiving a harsher punishment and choosing a less noble path. Martoma’s case is also an example of what happens when future finance workers are not prepared for ethical dilemmas. There are some ways that educators and professors can prepare for the future.

Challenge Preparation

Preparing future finance employees begins at the college level. Business professors must make ethics a priority during their lessons. Each action must be shown to have a consequence in the finance world. Ethics cannot be shown to take second place to profits in the business community. Education at the college level will assist in changing the mindset people have about the finance industry. John Hendry (2015) states, “it’s going to require a new mindset. Rebuilding reputation and trust will require a broad range of new policies and practices, including new training procedures, more third-party accountability, and a shift in education at the university level. It’s going to have to start from the bottom, with the next generation of financial leaders.” Teachers provide the first lessons in business ethics that students require. Learning business ethics at this level will prepare students to handle future issues in the workplace. Once students have these essential skills, they can carry them over to their future place of employment.

Once a student becomes an employee, they will have an idea of what an ethica business climate should be and how to function within one. It is essential for employees to continue to encourage ethical practices in the workplace. Perception is important in the workplace because it governs the behaviour of the employees. For example, “perceptions of what should be the direction and strength of the relationship between business ethics and business outcomes provide insight into the state of society and its moral values” (Luthar & Karri, 2005). The ethical perception of business can continue with professional training programs. Employers should continually provide ethical training for their employees. It will help their employees meet the challenges they will encounter in the workplace. Furthermore, it will firmly enforce ethics into their decision-making process. Once the employee understands that ethics are part of their environment, they will have less fear of reporting ethics violations in the workplace.

Understanding ethical behaviour and how it governs business decisions is only the first step. An employee should understand their rights when they entered a workplace. They should know the steps they can take to report unethical behaviour at their place of employment. Secondly, the should know what protections they have in place if they wish to report unethical practices to a higher authority. Justice and fairness are an essential aspect of handling ethical problems in the workplace. According to Velasquez et al., (1990), “justice is an expression of our mutual recognition of each other’s basic dignity, and an acknowledgment that if we are to live together in an interdependent community, we must treat each other as equals.” Treating all workers as equal is another positive step towards encouraging moral actions in the workplace. When employees feel protected, and assured that they will be treated fairly, they are more likely to act ethically. For many years, the finance industry has been perceived as unethical and having little regard for its customers and lower-level employees. However, this perception can be changed by the future employees. When a new generation of employees enters the workforce with a strong sense of ethics, they can help change the finance industry for the better. Conflicts of interest will be lessened, and there will be less unethical demands on employees.


Many issues arise in the finance sector that is unethical in nature. All these matters stem from a desire for greed and profit along with a divorce from morality. Illegal investment scams, false accounting, discrimination, exploitation, and unsafe environmental practices dominate the industry because of a lack of ethics. Many cases involving major companies have appeared over the years featuring these ethical issues. Large corporations feel they are above laws and regulations when they make business decisions. Secondly, they can exert unfair pressure to make sure their unethical demands are met. There are ways to help the future workforce meet unethical challenges. Preparing business students in ethics studies and continuing that training in the workplace will help in improving the morale and ethics inside a company. Furthermore, cultivating an atmosphere of equality, fairness and justice will help in businesses becoming more ethical. Adequate preparation and training can help future finance employees remain ethical throughout their career.


Bell, R., Friedman, H. and Friedman, L. (2016). Conflict of Interest: The Common Thread Underlying Ethical Lapses. Electronic Journal of Business Ethics and Organization Studies.Broder, J. (2011). BP Shortcuts Led to Gulf Oil Spill, Report Says. [online] Available at: [Accessed 26 Dec. 2016].

Clarke, J. (2015). Child labour on Nestlé farms: chocolate giant’s problems continue. [online] the Guardian. Available at: [Accessed 26 Dec. 2016].

Demasters, K. (2015). Male-Dominated Financial Industry Has To Change, Says Corporate Insight. [online] Financial Advisor. Available at:–says-corporate-insight-21610.html [Accessed 27 Dec. 2016].

Edmonds, P. (2016). NPR : Fall of Enron. [online] Available at: [Accessed 26 Dec. 2016].

Goldstein, M. (2014). Martoma, SAC Capital Ex-Trader, Gets 9 Years in Prison. [online] DealBook. Available at: [Accessed 27 Dec. 2016].

Hendry, J. (2015). Ethics in Finance: Why is it such a problem?. [online] Available at: [Accessed 27 Dec. 2016].

Luthar, H.K. and Karri, R., 2005. Exposure to ethics education and the perception of linkage between organizational ethical behavior and business outcomes. Journal of Business Ethics61(4), pp.353-368.

Norman, A. (2016). Sex Discrimination Wal-Mart: The “Bitches” Story That Won’t Go Away. [online] The Huffington Post. Available at: [Accessed 27 Dec. 2016].

Ocean Portal. (2016). Gulf Oil Spill. [online] Available at: [Accessed 26 Dec. 2016].

Stewart, J. (2013). SAC Case Tests a Classic Dilemma. [online] Available at: [Accessed 26 Dec. 2016].

Troutman, K. (2015). 5 of the Most Hated Businesses in America. [online] The Cheat Sheet. Available at: [Accessed 26 Dec. 2016].

Velasquez, M., Andre, C., Shanks, T., Meyer, S. and Meyer, M. (1990). Justice and Fairness – Ethical Decision Making. [online] Available at: [Accessed 27 Dec. 2016].