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Ethics, Greed, & Psychology Within the Libor Scandal

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Ethics, Greed, & Psychology Within the Libor Scandal
Ethics, Greed, & Psychology within the Libor Scandal Ethical dilemmas within the business environment have always garnered considerable attention and reaction from all global stakeholders. Issues such as fraud, insider trading, discrimination, bribery, and compensation are only some of the ethical problems that have disrupted the global financial system. In response to these ethical issues, stakeholders have undertaken various protective measures; for example, businesses have progressed corporate social responsibility and corporate governance while still fulfilling their fiduciary responsibilities to shareholders. Reactive measures guiding ethics within the business environment typically stem from two systems: law and societal acceptance. Recently, an ethical issue has violated both of those systems, leading this analysis to question the dynamic relationship between ethical principles and the pursuit of profit. Given that ethical pretense, this paper will seek to explore the multi-dimensional environment of the current “Libor (London Interbank Offered Rate) Scandal” – as it’s often referred to in the news, social media, and academia. In order to cover the scope of the issue, this paper will observe from the scope of three pertinent questions; what exactly is the Libor, why would it be manipulated, and what is the reaction to its discovery?
What is the Libor? Libor, the language of capital markets, is the average of the self-reported rates at which eighteen major commercial banks are offered large unsecured loans (BBA, 2013). It assesses the health of the financial system through an interest rate that reflects the confidence its participants have in the global economy. Over $360 trillion in financial contracts, like interest-rate swaps, syndicated loans, and mortgages, are benchmarked to the Libor (Slater & White, 2012). Being a byproduct of the British Bankers’ Association (BBA), Libor is inherently prone to possible


Cited: "BBA Libor." BBA Libor - The Basics. British Bankers Association, 2013. Web. 30 Jan. 2013. <http://www.bbalibor.com/bbalibor-explained/the-basics>. Binham, Caroline. "US Woman Takes on Banks Over Libor." CNBC.com. Financial Times, 15 Oct. 2012. Web. 30 Jan. 2013. <http://www.cnbc.com/id/49412365>. Bradford, Harry. "RBS Cuts Bonuses To Help Pay For Libor Rigging Fines." The Huffington Post. TheHuffingtonPost.com, 11 Jan. 2013. Web. 30 Jan. 2013. <http://www.huffingtonpost.com/2013/01/11/rbs-bonuses-libor-cuts-fines_n_2454634.html>. "CFTC Orders Barclays to Pay $200 Million." CFTC, 06 June 2012. Web. 30 Jan. 2013. <http://www.cftc.gov/PressRoom/PressReleases/pr6289-12>. Doyle, Larry. "Barclays Libor Scandal Whos Really to Blame?" Sense on Cents. N.p., 10 July 2012. Web. 30 Jan. 2013. <http://www.senseoncents.com/2012/07/barclays-libor-scandal-whos-really-to-blame/>. Durden, Tyler. "Does Libor Manipulation Deserve The Death Penalty?" Zero Hedge. N.p., 12 Dec. 2012. Web. 30 Jan. 2013. <http://www.zerohedge.com/news/2012-12-24/does-libor-manipulation-deserve-death-penalty>. "Greed - Definition." Merriam-Webster. N.p., n.d. Web. 30 Jan. 2013. <http://www.merriam-webster.com/dictionary/greed>. Finch, Gavin, and Mattingly, Phil. "RBS Drops as U.S. Authorities Said to Ask for Libor Plea." Bloomberg, 01 Jan. 2013. Web. 30 Jan. 2013. <http://www.bloomberg.com/news/2013-01-29/rbs-said-to-cut-bonuses-to-393-million-as-libor-fine-looms-2-.html>. Masters, Brooke. "Banks ' Libor Costs May Hit $22bn." Financial Times. N.p., 12 July 2012. Web. 30 Jan. 2013. <http://www.ft.com/cms/s/0/0231ace4-cc1d-11e1-839a-00144feabdc0.html#axzz2JOxYnMcu>. Niose, David. "Why Corporations Are Psychotic." Psychology Today. Our Humanity, Naturally, 16 Mar. 2012. Web. 30 Jan. 2013. <http://www.psychologytoday.com/blog/our-humanity-naturally/201103/why-corporations-are-psychotic>. Rauterberg, Gabriel V. and Verstein, Andrew, Index Theory: The Law, Promise and Failure of Financial Indices (October 5, 2012). Yale Journal on Regulation, Vol. 30, No. 1, 2012. Saad, Gad. The Consuming Instinct: What Juicy Burgers, Ferraris, Pornography, and Gift Giving Reveal about Human Nature. Amherst, NY: Prometheus, 2011. Print. Seltzer, Leon. "Greed: The Ultimate Addiction." Psychology Today. Evolution of Self, 17 Oct. 2012. Web. 30 Jan. 2013. <http://www.psychologytoday.com/blog/evolution-the-self/201210/greed-the-ultimate-addiction Slater, Steve, and Sarah White
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