Maxim 3: Act only so that the will through its maxims could regard itself at the same time so universally lawgiving (Crane and Matten, 2007: 98). In this point, the motive for bank managers is ‘desire’ and so triggers them to exaggerate their lending which causes the increase in value of homes. This means that bank managers would not want their actions to be publicised, and so this act is immoral.
- What clashes of rights are involved in this situation? Is it possible to judge their relative importance? Whose rights matter most in this situation?
Natural rights are certain basic, important, unalienable entitlements that should be respected and protected in every single action (Crane and Matten, 2007: 100).
House owners’ rights matter the most because those who borrowed off banks with mortgages were given false information about the hidden loans that were unlikely to be unpaid, let alone they had poor credit history. This relates to Maxim 2, whereas consumers were only used as a merely means, because bank managers’ focus were bonuses. Therefore, it is not morally right that they were faced with negative equity and inability to sell, and so borrowers may have their assets repossessed because they are unable to pay back mortgages without the bank’s support.
Subsequently, depositors’ rights matter because when the financial crisis happened, banks were not getting a good return on capital, and so the only way they could have financed themselves were to opt the savings that depositors put into the banks. Clearly, this could have been a violation as the case study says ‘depositors may have lost most of their savings’. This is what led to massive deposits of withdrawals and accounts closing down so that those associated with the bank can save their money elsewhere.
Finally, shareholders’ rights are the least important compare to the other stakeholder groups, because they were only affected by share price but not by the loss of their liquid assets that depositors faced. They also have rights because they invest and put trust in the company and so if the company is underperforming or not achieving, shareholders are not getting a good rate of return. Therefore, they have the right to withdraw their shares in the company and invest in another reliable bank.
- Which other approaches to ethical analysis could help evaluate the current situation?
An approach that could be applied to the current situation is postmodern ethics. According to Crane and Matten (2007) post-modern ethics is an approach that locates morality beyond the sphere of rationality in an emotional ‘moral impulse’ towards others.
The application of post-modern perspectives would appeal to the ‘moral impulse’ and guilty feeling of the bank managers. The fact that deregulation was established, this allowed them to maximise lending and so this decision caused actual misery and economic destruction to the stakeholders (borrowers, shareholders etc.) involved. Parts of the decision were:
- Holistic approach: the question could be whether bank managers have similar attitudes with regards to suffering in their financial circumstances?
- Examples vs. principles: arguing in favour of borrowers and shareholder claims acknowledges important principles of business life in general. In this situation, these principles complicate the moral issue of the economic suffering that is happening in the crisis.
- Think local, act global: post-modern perspectives not only look at their decisions seriously but could decide on an issue in one way today and in other way tomorrow (Crane and Matten, 2007: 119). In this case, the governments are decision makers and they have to take one decision after the other as there is no moral principle valid for each and every situation. This relates to the governments bailing out banks in the UK for the sake of the global economy not to be affected.
- Preliminary character: post-modern ethicists are often seen as more pessimistic than their modern counterparts (Crane and Matten, 2007: 119). In this example, this would suggest that an ethical decision on deregulation by the government would not mean that financial banks should start selling loans to anyone for the sake of bonuses. Rather one would argue that moral judgements have a preliminary character.
In conclusion, these perspectives suggest that if bank managers of the financial industry would be exposed to the misery they caused on their stakeholders, especially borrowers who believed to have suffered the most, their moral judgement would be different from just the way we see them as not using their borrowers as a means to an end.
- Select a major financial organisation and critically appraise its current approach to Corporate Social Responsibility.
Carroll and Buchholtz (2000:35) state that corporate social responsibility encompasses the economic, legal and ethical and philanthropic expectations placed on organisations by society at a given point in time.
For CSR to be accepted by a conscientious business person, it should be framed in a way that the entire of business responsibilities are embraced. There are four kinds of social responsibilities which form CSR; these include economic, legal, ethical and philanthropic. Also, these four components of CSR are presented as a pyramid and deserve closer consideration (Carroll, 1991).
HSBC is headquartered in London, it is one of the largest banking and financial services organisations in the world. HSBC’s international network comprises around 7,200 offices in over 80 countries and territories in Europe, the Asia-Pacific region, the Americas, the Middle East and Africa (HSBC, 2012).
For HSBC, corporate social responsibility means managing their business responsibly and sensitively for long-term success. Their goal is not, and never has been, profit at any cost because they know that tomorrow’s success depends on the trust we build today. They also look to address the expectations of our customers, shareholders, employees and other stakeholders (HSBC, 2012).
The following benefits of HSBC’s approach to CSR are:
Positive reputation and corporate image
Parry (2003) says that nowadays people and the society care about environment friendly products, so if a business could have positive image in this area, they are more likely to benefit themselves by gaining more loyalty and reputation from the environmental reputation. AME (2012) states that HSBC is one of the sponsors of the Earth Hour 2012 programme. On 31st March 2012, all lights and non-essential appliances were switched off in all HSBC branches and offices for the hour between 8:30pm – 9:30pm.
"We have been part of Earth Hour activities for over 3 years in Qatar to demonstrate our involvement in environmentally friendly actions. Through these actions we are part of a global united community that wants to protect the planet and its resources. This year our senior managers participated in the global "I will if you will" campaign and through their pledges challenged employees and customers to become more aware of their own actions and habits. (AME, 2012)"
Abdul Hakeem Mostafawi, CEO of HSBC in Qatar
This allows customers to think that HSBC is a green bank that helps the world to protect the environment. It also allows HSBC to have a positive corporate image in the market and helps banks to improve their demand by attracting more customers. Furthermore, looking at the HSBC news Archive (2007), it says ‘HSBC has come top in the second annual ethical reputation rankings published by Geneva-based consultancy Covalence’. This increases the reputation and so allows HSBC to retain their customers, as well as, increasing their revenue and the level of their sustainable profits.
Differentiation from competitors
According to Business Green (2009) ‘HSBC becomes 100th firm to secure Carbon Trust seal of approval’. HSBC has won many awards for such activities. It was the first global bank to go “carbon neutral”, meaning it buys credits for its carbon emissions (South China Morning Post, 2007). Also, they received the Institute of Customer Services (ICS) Satisfaction Award.
Although, these awards improve the bank’s reputation, they also certainly lead to positive publicity and word-of-mouth. It might attract new employees and increase demand thus increasing profit margin. The bank’s reputation has led the company to be a well-known global bank, and this allows HSBC to innovate more services, i.e. the Premium Personal Account, so that customers are attracted to invest more capital or increase their savings with HSBC.
Developing and enhancing relationships with stakeholders
According to HSBC News Archive (2007), they are the world’s first major bank to become natural and have committed a further US$90 million over five years to reduce the bank’s impact on the environment through innovation and technology, which include introducing renewable energy technology, water and waste reduction programmes and employee engagement.
The Global Environmental Efficiency Programme will enable HSBC offices worldwide to showcase environmental innovation and share best practice to help the bank achieve its environmental reduction targets. This will be reviewed annually to consider the success of trials, emerging technology, innovation and business needs (HSBC, 2012).
“HSBC is determined to develop a sustainable business. Our shareholders, customers and employees consider these issues to be important – and this clearly demonstrates our continuing progress in placing sustainability at the very core of how we do business (HSBC, 2012)”.
Simon Martin, HSBC Head of Group Sustainability and Corporate Responsibility
The approach of this programme has attracted interest from stakeholders, brought value to staff and increased contact and communications with customers (Article 13, 2007).
The following disadvantages of HSBC’s approach to CSR are:
Failing to manage reputation risk
Crane and Matten (2010: 34) say that the triple bottom line represents the idea that business does not have just one single goal – namely adding economic value – but that it has an extended goal set which necessitates adding environmental and social value.
According to the HSBC media briefing (2003) it says that HSBC directors are failing on all three aspects of the triple bottom line: financial, social and environmental performance.
HSBC claims to regularly update their policies and procedures to safeguard against such risks and in their recent 2002 Annual Report, they claim that “the HSBC Group has always operated to the highest standards of conduct and, as a matter of routine, takes account of the reputation risks of its business”. The bank claims to be reviewing its policies that cover environmental, social and ethical issues and its operational procedures in all areas of reputation risk including environmental impact, anti-corruption and employee relations.
Friends of the Earth have asked for these copies of the new policy, but the request was refused. Also, HSBC have refused to provide any evidence that they have refused loans or used financial influence to minimise the risk of serious environmental, social or ethical impacts from a potential or existing corporate client (HSBC, 2003).
Friends of the Earth welcome genuine attempts by companies towards corporate social and environmental sustainability. But HSBC failed to make significant changes to its core business activities. This makes it difficult to see how HSBC can square its failure to put a system in place that ensures its investments don’t damage people or the planet with its social and environmental principles. Also, HSBC not only continues to put short term profits above all else, it is also funding environmentally and socially damaging companies around the world (HSBC, 2003).
Cost of capital investment
HSBC would need costs to develop the CSR. According to ASRIA (2009) ‘HSBC has raised €117 million ($156 million) of a targeted €500 million into its Environmental Infrastructure Fund’. This fund is managed by HSBC Specialist Investments and they will invest in the development and construction of infrastructure, using proven commercial technologies in renewable energy, water treatment and waste management.
The impact of these associated costs will be the possible negative perception of HSBC’s shareholders. The company would have to ensure that their investment is successful enough to satisfy the financial expectations of company owners with the social and environmental requirements of other stakeholders. However, some shareholders may not approve of the aforementioned expenses of operating under CSR guidelines (IEA, 2001).
Conclusion
HSBC are more likely to benefit from HSBC although costs may be involved, even though they will reap rewards. As a global bank, reputation and corporate image are very important to the company because they determine the demand of customers worldwide that would like to join HSBC.
According to HSBC 3rd Quarter 2012 reports, their profits dropped by 25% in 2012 at $11,931m than 2011 at $15,283m, reason being because they had a lower income and greater operating expenses. This would dissatisfy shareholders because they are experiencing a lower rate of return. However, their customer accounts rose by 2.6% as in 2012, they had 1,312,136 compared to 2011, they had 1,278,489. This may show that more customers are willing to join HSBC due to brand loyalty. Therefore, CSR has an impact in various ways to ensure future success.
In the long-term, HSBC should consider more about their environmental responsibility. According to the Sustainability Report 2011, they have reduced 29% of waste consumption, and so this could decrease expenditure and strengthen their positioning as being a leader in bank’s CSR and ethical ranking.
References
AME (2012) HSBC supports Earth Hour 2012 [Online]. Available at: [Accessed: 19 November 2012]
Article 13 (2007) HSBC – Global Environmental Efficiency Programme [Online]. Available at: [Accessed: 19 November 2012]
ASRIA (2009) HSBC Hits €117m for 1st Close of Green Infrastructure Fund [Online]. Available at: [Accessed: 19 November 2012]
Business Green (2009) Carbon Trust Standard celebrates century of certificates [Online]. Available at: [Accessed: 19 November 2012]
Carroll, A. (1991) The Pyramid of Corporate Social Responsibility: Toward the Moral Management of Organizational Stakeholders, Business Horizons, and July-August 1991
Crane, A. and Matten, D. (2007) Business Ethics: Managing corporate citizenship and sustainability in the age of globalization. 2nd ed. Published Oxford: Oxford University Press 2007
HSBC (2003) Media Briefing [Online]. Available at: [Accessed: 19 November 2012]
HSBC (2007) HSBC announces US$90 million Global Environmental Efficiency Programme [Online]. Available at: [Accessed: 19 November 2012]
HSBC (2007) HSBC named best bank in ethical business survey [Online]. Available: [Accessed: 19 November 2012]
HSBC (2011) Sustainability Interactive Report [Online]. Available at: [Accessed: 19 November 2012]
HSBC (2012) About Us [Online]. Available at: [Accessed: 19 November 2012]
HSBC (2012) Corporate Social Responsibility [Online]. Available at: [Accessed: 19 November 2012]
HSBC (2012) Interim Management Statement – 3Q 2012 [Online]. Available at: [Accessed: 19 November 2012]
IEA (2001) Corporate social responsibility raises costs, undermines market [Online]. Available at: [Accessed: 19 November 2012]
Parry, Caroline (2003) Marketing Week. Copyright 2009 Centaur Communications Limited
The South China Morning Post (2007) HSBC irks fund managers over Samling support [Online]. Available at: [Accessed: 19 November 2012]
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