Dodd-Frank is in the news a year after the reform, reminding us of the reason it was implemented: the role of banks in ‘08. Lets pick on Goldman Sachs.
Action: Betting against the viability of its customers.
Goldman made bets that some of its customers would decline financially. Customers including Washington Mutual, Bear Sterns and AIG did eventually go under, failures exacerbated by their bets with Goldman. This also contributed to the general downtown in the US economy.
Ethical issue: Are bets against customers which entail potential conflicts of interest by banks privy to important information ethical?
Friedman: The sole responsibility of a corporation is to turn profit within legal bounds, ethics are the business of regulators.
Freeman: By neglecting all stakeholders but financiers, the firm is in decline because it loses its customer and community support.
Fast forward to 2011: Goldman still looks like its on top. It made through the crisis and is still a leading bank with many customers. Now they’re employing lobbyists to fight Dodd Frank, citing competitiveness issues, again all in the name of profit.
Which brings the question: Are ethics alone really the responsibility of businesses or should businesses only engage in factors affecting profit?