Ethics Paper--Bailout
Bailout Ethics
Americans are outraged. Billions of taxpayer dollars were committed last year to rescuing firms such as Citigroup and the American International Group (AIG). Earlier this year, several companies who received Troubled Asset Relief Program (TARP) assistance were awarding top executives with extravagant bonuses. According to the Wall Street Journal, the U.S. government lent $238 billion in TARP taxpayer funds to almost 700 banks; 44 of these banks have repaid a $71 billion (Johnston, para 6). There remains $167 billion invested in banks. Some critics argue that a “mere” $167 billion is not significant to warrant public indignation against bonuses. However, the issue is not about specific bonus amounts but the principle of business ethics and responsibility.
It stands to reason to ask: Is it ethical for companies who have benefited from government bailouts to reward themselves with bonuses? Answering this question is not simple. The ethical dilemma pits the sanctity of bonus contracts against the American government’s interest in maintaining a stable economy. Companies fear losing crucial employees if bonuses are cut too deeply. Critics of bailout bonuses, such as Sen. Olympia Snowe (R-Maine), ask: “Bonuses for what?” (Johnston, para 13). The question is commonly asked because these “crucial” executives are ironically seen as the likely culprits responsible for the ongoing financial crisis. On the other hand, proponents argue that interfering with the bonuses constitutes a violation of “sacred” contracts (Collins, para 4). Although there may be legal claims to bonuses, some of their moral aspects do not stand to scrutiny. This ethical dilemma can be best understood by applying ethical standards such as the Rights and Common Good Approaches.
Rights Approach: Definition and Analysis
The Rights Approach focuses on protecting and respecting the moral rights of entities affected by an ethical situation or dilemma. The approach says that each human being
Americans are outraged. Billions of taxpayer dollars were committed last year to rescuing firms such as Citigroup and the American International Group (AIG). Earlier this year, several companies who received Troubled Asset Relief Program (TARP) assistance were awarding top executives with extravagant bonuses. According to the Wall Street Journal, the U.S. government lent $238 billion in TARP taxpayer funds to almost 700 banks; 44 of these banks have repaid a $71 billion (Johnston, para 6). There remains $167 billion invested in banks. Some critics argue that a “mere” $167 billion is not significant to warrant public indignation against bonuses. However, the issue is not about specific bonus amounts but the principle of business ethics and responsibility.
It stands to reason to ask: Is it ethical for companies who have benefited from government bailouts to reward themselves with bonuses? Answering this question is not simple. The ethical dilemma pits the sanctity of bonus contracts against the American government’s interest in maintaining a stable economy. Companies fear losing crucial employees if bonuses are cut too deeply. Critics of bailout bonuses, such as Sen. Olympia Snowe (R-Maine), ask: “Bonuses for what?” (Johnston, para 13). The question is commonly asked because these “crucial” executives are ironically seen as the likely culprits responsible for the ongoing financial crisis. On the other hand, proponents argue that interfering with the bonuses constitutes a violation of “sacred” contracts (Collins, para 4). Although there may be legal claims to bonuses, some of their moral aspects do not stand to scrutiny. This ethical dilemma can be best understood by applying ethical standards such as the Rights and Common Good Approaches.
Rights Approach: Definition and Analysis
The Rights Approach focuses on protecting and respecting the moral rights of entities affected by an ethical situation or dilemma. The approach says that each human being
Cited: Collins, Mary. “Corporate Bailouts.” ABA Journal. March 2009. ProQuest National Magazines Core. ProQuest. University of Southern California Lib., Los Angeles, CA. 5 November 2009. <http://www.proquest.com/>. Johnston, Jordan. “Executive Bonuses?” CFO. 10 September 2009. ProQuest National Magazines Core. ProQuest. University of Southern California Lib., Los Angeles, CA. 5 November 2009. <http://www.proquest.com/>. Markkula Center for Applied Ethics “A Framework for Thinking Ethically” Santa Clara University. 5 November 2009. <http://www.scu.edu/ethics/practicing/decision/framework.html>. Sorkin, Andrew Ross. "If Goldman Returns Aid, Will Others :[Business/Financial Desk]." New York Times. 24 March 2009. ProQuest National Magazines Core. ProQuest. University of Southern California Lib., Los Angeles, CA. 5 November 2009. <http://www.proquest.com/>.