Business Managament - Ethics

TABLE OF CONTENTS

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Question 1Question 2Question 3Bibliography | 2101824 |

Question 1:

There probably aren't many, if any corporations, that in recent years that have not been scathed to some degree by the global financial turmoil we have all faced and are still facing. There was simply no way to avoid it, the US financial crisis that occurred in 2008 sent shockwaves around the world and resulted in literally millions of job losses. If one is still fortunate to have a job, there is still the looming threat of restructure, demotion or even pay cuts. Fig 1. below details the increase in unemployment within the US after the economic decline, in 2010 it reached its highest level since 1982.

Fig 1.

Source: Wikipedia [online]

Available from: http://en.wikipedia.org/wiki/File:US_Unemployment_1890-2009.gif

Accessed: 9th August 2012

In addition to this, one is faced with rising fuel costs, food costs, electricity costs and general increases to the cost of living. Yet, in many cases, actual worker salary increases have not kept in line with inflation thus resulting in contracted buying power for many households. The bottom line is that the challenge involved in sustaining a reasonable standard of living is becoming ever more difficult.

But how did this happen in the first place? i.e. What were the significant factors that led to the financial meltdown?

In a nutshell, many believe that the economic woes in the US were triggered by the real estate bubble. Not only were housing prices prior to 2007 over-inflated but lenders took advantage of the sub-prime lending practice which made funds readily available to those that would not normally qualify (the young, those with limited credit history, those without enough money to put down a deposit, etc.). Sub-prime lenders would also pay higher premiums than prime lenders based on their risk profile. This meant that on the balance sheet, lenders had an asset with an over-inflated value and...