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How To Approach Business Ethics In Financial Corporations

There are companies operating today that are practicing proper business ethics and some that are not keeping to the rules. In the past, corporate scandals caused much distrust with the public in regards to conducting business affairs with a number of financial corporations. This led to a large decline in consumer confidence in banks, security firms, insurance companies, mutual funds organizations, mortgage lenders and pension funds as well as all other companies in the financial sector. In September and October of 2008, Wall Street went through a financial collapse and almost the entire US economy followed due to unethical practices of some big monetary corporations. So how do you as an end user determine which companies are living up to the standard of practice laid down by the Ethics Committee?

Know your rights

In some sections of consumer affairs, people are not knowledgeable about what is due to them. This can be summarized into three main areas: little or no mentoring, lack of teaching and a lack of enthusiasm to go beyond one's viewpoint.

If you are a firm believer that a financial corporation's only goal should be to make profit then you are being led down the wrong road. Corporations that tend to only have making big bucks as their perspective usually are the ones operating in unethical ways. Since their prime target is profit, the feelings of the consumers are not tolerated. Such financial companies need to ask themselves, "If it was not for consumers, how could we make a profit."

The US is known as a capitalist society that gives companies the right to operate in a free market to make as much profit as they can. These companies often try to make as much money as possible in short lengths of time instead of going the distance. Thus, this is where the greed factor enters the equation.

To know what to expect when dealing with a financial corporation (especially a large one), you must know what you are entitled to. Gather the right information about ethical practices that all financial entities should adhere to whether online, through newspapers, experienced persons or you may want to contact the Ethics Committee on financial matters in your home state. Another way in which you can gather proper information is by consulting the Consumer Protection Act. As the saying goes, "If you don't know your rights, you won't know what to expect."

Don't confuse legal behavior with moral behavior

While some actions may be legal to carry out in the financial sector, still, such actions may not be morally correct. According to one article I read in the past, the writer states that obeying the letter of the law does not justifies a financial company obeying the spirit of the law. I quite agree with this statement.

Some companies will work to avoid penalties pass down by the law, yet their motive for doing so is wrong. It is not always right for financial companies to avoid the law only to end up seeming unethical in their action to consumers who have a limited amount of understanding in such matters.

See yourself as a stakeholder

Who is a stakeholder in a financial corporation? A Stakeholder can be investors or stockholders, employees, customers or just about any member of the society who does business, whether occasionally or regularly with a company. Depending on what type of business you conduct with a firm, you should still see yourself as a valuable person who is helping the business to grow. Seeing yourself as a valued stakeholder can give you the enthusiasm to find out whether the financial company you are doing business with is following the rules laid down by the US Ethics Committee or not.

Since all businesses should adhere to the practice of raising our standard of living as well as to promote sustainable growth in the society which we operate in, it is to the advantage of all financial businesses that they deal fairly with us their stakeholders if they are to ensure continuous profitability. After all, the method of promoting fair trade among consumers is yet another leg of capitalism in action.

Learn to spot deception

A deceptive act is done whenever a financial company deliberately misleads you whether orally, written, visual, descriptive or the company seems to show conduct unbecoming while in the process of transacting business with you or on your behalf. If you are doing a transaction for the first time, make sure to ask questions every step of the way. See to it that you are getting what the contract specifies by making sure to read the fine prints before signing the document.

Sometimes you might not realize that a deceptive act has been committed against you until after the transaction is complete, even sometimes days, weeks, months or even years later. In the case of insurance companies, you may take out a policy but the agent knowingly held back certain information from you. Take for example that you meet in an accident and you turn up at the company's office to collect for accident indemnity, only to find out that there is no such thing attached to the plan and yet all those years you thought you were covered against the event of an accident happening. It even gets worst if the agent has been collecting your money in person on false pretenses. Therefore, it is in your best interest to keep all relevant receipts and correspondences in a safe place until you are satisfied that the transaction has gone through successfully and there is no way of any failure occurring.

Why financial companies must practice business ethics

I am of the belief that financial corporations that do not practice good business ethics end up only denying themselves from gaining new customers and in most cases there will be a decline in profit. Once you realize that the company is not keeping to ethics rules laid down, you might not see the need to become a returning customer or refer anyone. In fact, if you know that a company in the financial sector is not practicing good ethics, you have the right to report such a company to the proper authorities.

Once we know that a company belonging to the financial section is being unethical then we should desist from conducting business with that firm. The decision to refuse to do business with such a company can save us much stress and money.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.