Essay on The Normative Approaches to Treating Scandals
The tax avoidance scandal of HSBC is considered to be one of the biggest banking link in the financial history of United Kingdom. This scandal apparently led to a police raid at the Geneva offices of this private bank. This raid took place after the criminal investigation against the bank, which was apparently alleged, of “aggravated money laundering”. The incident surprisingly s enlightened the fact how this private bank helped hundreds of its clients to avoid and evade the tax. A closer look at the history of HSBC bank helps understanding the background of this infamous tax avoidance scandal. HSBC moved into private banking in the year 1999. After s Stephen Green became the chairperson of this bank in 2006, in 2008 Herve Falciani, the IT expert of the bank was arrested as he hacked some of the bank files. In October 2013 it was reported that almost 3000 secret Swiss accounts were at HSBC and 70% of which were held by several diamond dealers. The scandal mainly emerged after more details were published in association with the Falciani leaks and after this particular incident; HSBC apologized through multiple national newspapers.
Considering this particular tax fraud it is necessary to consider several changes which needs to be made regarding the bonus payment of the bankers of UK. It is important to discuss this issue because after such tax defrauds HSBC announced a huge amount of bonuses as the bank bailed out the taxpayers. The scandal hit and its consequences are analyzed in this essay with three different philosophical perspective. This particular essay provides a Utilitarian analysis, Kantian analysis and virtue ethics analysis of the issue whether several amendments are needed in the bonus payments of the bankers in UK.
As most of the allegations against HSBC have proved to be legitimate, the moral perspective of this particular issue needs to be analyzed. The bankers are highly paid and enjoying the advantages of high bonus amounts in spite of the tax dodging. Apart from this despite of the tax controversy, HSBC bankers were awarded £ 2.2 billion in bonuses. Different sources claimed that the Swiss arm of this particular bank helped the wealthy customers to dodge tax. Along with this it was also blamed that the bailed out tax dodgers were set to give an approximateSum amount of 900 million pounds in payouts. Several campaigners opined that such high bonuses would only increase the misery of the tax payers (Berrone, Cruz, & Gómez-Mejía, 2014). This issue further problematizes the fact if at all the bankers deserve such huge amount of bonus or not as the declaration of the bonus in this case has hit the country's finances very hard and the experts commented that the government had got to get the cost of the funding although they belong to the private sector.
If this particular is issue is judged under the moral perspective the consequence of such actions will surely have adverse effect. Laundering money is a punishable offense and it can not5 have any positive contribution in the society. The moral question that has emerged from this particular issue is that whether the bankers deserve such high amount of bonus after being involved in this immoral social breach of tax dodging. If this particular issue suggests that because of the high amount of bonus, the taxpayers are being immorally wronged and the bankers do not deserve such high amount of bonus then the issue has been judged under the light of utilitarian philosophy. According to this particular moral aspect or reasoning, the right course of action requires to be taken under consideration in order to produce greatest balance of benefits over the harms of the affected people.
The principle of utilitarianism is traced in the works of social reformer Jeremy Bentham. He as a legal reformer based the possible laws that England needs to incorporate in association to the publicly acceptable norm (Bhasin, 2015). According to this philosophy in order to reach an rightful agreement the most promising path so to select a policy which can bring about the greatest benefits to the society if one takes the harms into account. This philosophy emphasizes the greatest possible good for the greatest number of people of the society. This particular issue certainly does not serve the purpose of the greatest number of people. The bankers are hereby being benefitted in spite of several criminal offence and the taxpayers are being consequentially the prey of the circumstances. Though Bentham had defined the virtue and harms in terms of pleasure and pain, this reasoning today has a much greater aspect than that. John Stuart Mill for example discussed the benefits and harms not only in the terms of pleasure or pain but with reference to the intensity of such pleasure and pain. In the recent times, the utilitarian describe the benefits and harms in terms of the personal preference and satisfaction regarding economic terms of monetary benefits over monetary costs. But this particular issue requires moral decision making and utilitarianism cannot be considered to be the sole ethical theory on which one can rely completely.
It is difficult to assign values to the benefits and harms resulting from the actions. The greatest difficulty with utilitarianism is that is does not consider the aspect of justice. In this case, the majority of the society will not be benefitted if the bankers are unjustly paid huge amount of bonus. If we consider the aspect of benefit and pleasure, the bankers indeed are benefitted by the decision but the majority of the taxpayers will not encounter any justice.
From the utilitarian perspective, the costs and the benefits of this case need to be analyzed. The bankers who are awarded with the beneficial reward of a huge amount of money are indeed the people who have been benefitted from this act but from a greater aspect, it has not been beneficial for the taxpayers. a certain section of the society is being benefitted while the legitimate taxpayers can ask for the justification of the issue. The measures that this bank had taken were completely for the benefit of their customers but the complete process was an unlawful activity.
The disadvantage of using utilitarian philosophy in order to analyze this particular issue is that the utilitarian philosophy can justify the acts of the bank to some extent as the bankers are being benefitted by their decisions as well as the customers of the bank who faced a huge benefit and profit as they did not have to pay a huge amount of annual tax (Bhasin, 2016). According to many reliable reports this particular private bank even endorsed to justify several unlawful account holders of this bank by different means. The bank authority decided to apologize in front of the media only when such confidential information regarding the tax dodging had been leaked. The complete activity from utilitarian perspective can be justified as it is providing pleasure to a certain group of people who are being benefitted by this immoral and unethical activity of this particular bank. But a closer look at this particular situation provides an insight that the overall economy of the country has been harmed due to this particular organization. Therefore, it is not providing most benefit to the most people. Maximum people of the country primarily the honest taxpayers and the greater section of the society is harmed. Considering this particular issue it can be stated that the current bonus system of the bankers needs to be revised and improvised so that the major section of the society can be benefitted not only a smaller section of the society.
Another important factor that requires mentioning is that the complete action of the bank was not only unethical but the activity was unlawful as well. Therefore, though certain number of people was benefitted from the action, HSBC cannot justify their measures of dodging the payable tax.
The opportunity cost of paying for the bonuses is the additional burden that taxpayers are carrying. Since most of the allegations put against the respective financial institutions are proved in court and sound unhealthy, it is safer to assume that these types of actions are strict prohibition even if it brings happiness to one of the concerned parties. Here HSBC intends to save its worthy customers by altering their payable tax amount. Unlike Mill’s philosophies, Kant believed in complete prohibition of unhealthy substances that cause human harm directly or indirectly. Rationally it is irrational to allow such incidences for the safe and normal functioning of a society. Since money laundering is a punishable crime, it is the duty of the administration to make sure that they do not occur. It is the duty of the individuals to ensure not committing anything irrational even if it brings temporal happiness. Thus, incidences of terror like terrorist attacks, murders, etc are illegal under any circumstances whatsoever. Kantian analysis also opines that if the individual actions do not respect the human goals, rather disrupts it, it should not be done. Thus, incidences of religious/cultural conflict that disrespects other beliefs should be illegalized as well (Blumler, & Cushion 2014). Thus, Kant’s philosophy deals with the morality factor of a certain incidence. It is a crime if it does not cover the basic two requisites. Kantians believe that the rightfulness/wrongness talks about the fundamental duties that a citizen is bound to follow irrespective of many factors. Thus irrespective of the consequences of the work, it is considered something that citizens should refrain from doing.
The money laundering case exhibited by HSBC, Lloyd, etc does not follow any of the conditions that Kantian philosophy circles around. The deontological moral theory of Kant states that cases where the interests of one person, a society, state or the nation as a whole is disturbed should not be allowed to happen. Since it is the hard earned money of the taxpayers that is in stake, it is not rational to percolate parts of it to staff. Again, from the perspective of the morality of the incident in question, it is not correct for an individual or a business institution to hurt the interests and feelings of one party at the expense of another. Since it is the tax of the general people that the institution has dealt with, it is its responsibility to refrain from using the same funds to fill other pockets.
Thus, Kant’s philosophy deals with the ethical duties that one individual is expected to follow. On principles of universality, it is irrational to play with public money to comfort individual or company interest. Moreover HSBC and other banks are also alleged to have involved to save their worthy customers against tax penalties. This double barrel is taking a huge toll on the public and the economy of the country as a whole. According to the Kantian analysis, the basic norms and analysis apply to everyone irrespective o any of his attributes. Thus, one should refrain from doing something that hurts the sentiments of other people thereby causing physical/mental/financial harm. Thus, it is obvious that Kant refers to the universality of the principles laid down by him. Thus, a moral path lays down the foundation of a definite structure which appeals to its citizens to follow it no matter what. Not only is it rationally acceptable but it serves to better business of other prospects. Banks and financial institutions are vested with the ability to accept and deliver cash deposits from the people. It is its job to ensure safe custodian of the money and ensure that its customers do not indulge in fraudulent practices like tax evasion.
According to Kant, the moral actions are those to which everyone is bounded by legal grounds, non-abidance to which might result in punishment as devised by the state. The state works upon the legal jurisprudence of legislation, judiciary and the executive. The constitution of a country, whether written or unwritten lays down the norms and formulations that directs how citizens should behave for the joint interests. Nobody should divulge in actions that do not fulfill his/her duty. The fundamental duties include freedom of speech, freedom to profess religions, freedom to engage in business ventures for self/societal interests. Thus in the light of the norms laid down by the jurisdiction of a country, it is illegal to evade taxes because taxes are considered to be the source of government income (Cranmer, Menninga, & Mucha, 2015). Government utilizes this tax income for the benefit of the citizens. The government pays its direct employees, pays for subsidies to encourage certain indigenous industries to encourage them to invest for the benefit of the citizens. In addition, Government uses the expenditure to invest on constructing government schools, colleges and other institutions that are not guarded by private institutions. The government does not procure a considerable amount of income for itself. It is rather used a surplus for feeding its policies and for the benefit of the masses (Schwartz, 2017).
Kant’s philosophy can also be guarded from a utilitarian approach, which ponders on the importance of maintaining and abiding by certain duties which the masses are destined to follow. The utilitarian approach takes care of the outcome of the above scenario. As is obvious there are several negative outcomes of the above-mentioned scandal and how the companies concerned agree to deal with it. From this perspective, it is the taxpayers who lose. Firstly from the point of the view of the banking institutions like HSBC and Lloyd, exciting a considerable amount as evasions does harm to the nation’s economy. In addition, it also degrades the condition of the company itself. It is always advisable for a financial institution to keep a considerable portion of their deposits as reserves. Considering that, the banks considerable breaking the reserves to pay for their employees is unethical. This also means that the institutions are not fulfilling their duty to safeguard money. This might result in massive depressionary situations. This should remind the reader about the Great depression in the US, 1930s. It arose from unexpected speculations regarding prices structure of housing and real estates. Ultimately it led to stock market crash which raised inflation rates manifold. Referring to the situation mentioned here, a similar depressionary situation might also arise in UK owing to the unprecedented approach adopted by its backbones, namely the financial institutions to harm the interests of the nations as a whole.
Thus, one should take notice of the outcomes that might arise. This unhealthy trade off might cause a chaos leading to revolts, riots and mob fury. That might be detrimental for the institutions as well. Thus, the company may choose to shut down its operations in the country leading to cancellation of licenses and payment of fines. Since it is the fate of the compatriots, which is at stake, morality, and rationality plays important roles in safeguarding people’s rights. Activists and human rights guardians might find try the concerned companies in court and if guilty, it may be engulfed completely in government jurisdiction (Ferrero, & Sison, 2014).
Virtue ethics analysis
Virtue ethics commonly known as virtue theory is an approach, which is related to ethics that emphasizes on a system's policies and characters as one of the essential parameter of ethical thinking rather than their consequences and performances. In this context, all the allegations against the concerned bank HSBC have been proven in the court, which is financially unhealthy for the country. Despite of tax controversy, the HSBC bankers are awarded near about £ 2.2 billion in bonuses. Along with this, at scandal-hit HSBC, the bankers are awarded 5 billion pound in bonuses involving 2.2 billion pound bonuses only for the staffs. According to John O’Connell, the cost of bank bailouts is very unhealthy for the financial condition of the country and the huge bonuses for the staffs has made the situation worse (Haslem, 2015). Therefore, according to the virtue ethics theory, it is important to maintain happiness and well being of the society with the help of ethical practices within the workplace environment. According to the viewpoint of (Russell,2013), virtue ethics need to include prudence, justice and temperance. From this perspective, all the practices that are performed by the concerned bank is completely unethical. However, most of the virtue ethics consider their inspiration from the moral philosophy of Aristotle and focuses on the fact that, a virtuous system is the one that deals with ideal character traits. All these traits can be achieved from a number of natural internal tendencies. However, all these natural tendencies need to constantly nurture. As opined by (Russell,2013), once the virtue of ethics is established, they become stable for future practices. However, all the banks like HSBC, Lloyds do not practices all such ethical activities within workplace environment just to achieve more profit. All these practices are entirely unethical as the virtue ethics focuses on the morale and justice of individual.
Just like consequentiality and deontological theories, all the theories of virtue ethics do not pays attention on the recognition of universal principles that can be applied in any situation that deals with morale and therefore, the theories of virtue ethics focus on the social and moral values of a system and the definition of good practices (Kahane et al 2015). Therefore, on the principles of virtue ethics, it is very irrelevant to play with the confidentially of people and these banks deliberately plays all these unethical activities. As per the documents, the files of 30000 account holders are leaked. Moreover, the Lloyds, HSBC and other banks are declared as the unethical practitioners as they are involved with the customers who are not interested to pay taxes and it has been alleged against the banks to channel an ample amount of sums of the customers who dodged taxes. Therefore, according to the theories of virtue ethics, it is essential to apply some of the basic norms and principles to the each person irrespective of their brutality. Thus, this theory states that, it is necessary for everyone to stay aside from such activities that harm the financial condition of the entire country (Mellado, 2015).
As far as normative approaches are concerned, virtue ethics plays a major role in identifying certain rules and regulations that revolves around the moral character of an individual. It does not take into consideration the consequences actions or how individuals should behave maintaining the duties he is bound with. Thus, this theory differs from the deontology and consequentialism and observes the moral liability of an individual. It should break his/her oral character to involve if fraudulent practices that not only hurts the sentiments of the tax payers but also lets the masses have less trust on these institutions. The Virtue analysis deals with the most obvious behavioral step that people should consider adopting. Thus one should come up to help a bleeding person by virtue of his/her moral characteristics. Thus the virtue ethics analysis deal with the moral rules and regulations that individuals are expected to abide by irrespective of the consequences or actions that might occur in case one does not abide by it. Thus these theories refer to the general psychology of an occurrence in response to which one is bound to react. Thus it also sees the events from a potentially benevolent or charitable perspective. In general lists of rules and laws circling round each of the 3 approaches mentioned above has go room for rules, consequences and virtues. This makes the jurisdiction unbiased, legally bound and binding on all the residents of a state irrespective of his existential attributes (Wells, 2017). Whereas consequentiality will define virtues as traits that yield good consequences and deontologists will define them as traits possessed by those who reliably fulfill their duties, virtue ethicists will resist the attempt to define virtues in terms of some other concept that is taken to be more fundamental. Rather, virtues and vices will be foundational for virtue ethical theories and other normative notions will be grounded in them.
Sub-approaches to this approach include a eudemonic, Plutonian and target based approach. When talking about the first approach one should define virtues in terms of eudemonia. It has emerged from a Greek word which means happiness or pleasure or well being. Thus this approach refers to the ethical part of the citizen’s courses of action which brings individual as well as collective happiness. It holds only for human beings and does not refer to the well being of other living or nonliving creatures even after it flourishes or caters for collective happiness. Happiness and other states of mind are subjective and they may not mean to provide happiness to all. Although there is always a trade off of enjoying happiness, it does not necessarily benefit others. Thus from this approach,. HSBC’s fraudulent methods of protecting its wealthy customers by helping them evade taxes surely goes against the normative approaches. It is all too easy to be mistaken about whether one’s life is eudaimon (the adjective from eudaimonia) not simply because it is easy to deceive oneself, but because it is easy to have a mistaken conception of eudaimonia, or of what it is to live well as a human being, believing it to consist largely in physical pleasure or luxury for example (Routledge et al 2015).
A virtue on the account of target-centered ethics can either be the disposition to the respond to or acknowledge the entire item within the field of this ethics or the fields in the good or excellent way, which must be enough one. A virtuous act can be an act, which further can hit the goal of a virtue that is for saying which it can succeed while responding to the items in the field in a specified manner. Providing a perfect definition based on a target-centered ethics in regards of right action that finally requires a step for moving beyond an analysis process of the single virtue along with the actions, which needs to follow from it. This is due to the reason that there is a single action based context, which can involve a huge number of various fields because of overlapping. Determination can lead anyone for persisting while trying for completing a tough job or task. Moreover, even if they involve for doing so, they will require singleness for the purposes (Uhlmann, Pizarro, & Diermeier, 2015).
2.2 million is indeed not a meager sum and the financial institutions who are alleged of playing with the above sum in paying to their employees are certainly not abiding my rational laws. While Kant and several other philosophers ponder on the morality and rationality of the actions that an individual exerts, the banks mentioned here do not seem to abide by the same. The consequences of the same may be huge. This may result in social conflicts, which tend to condemn the individuals or the ventures combine and apply punishable laws on them. This either may result in them running out of business or may let them compensate the affected. Compensation may be in the form of lump sum tax and other fines or may even be in the form of discounting money holding. Thus, these institutions pose bad examples for their competition or for newly formed similar institutions to follow. As a whole it does not cater to the corporate social responsibilities that ventures are expected to abide by. Banks and financial institutions are vested with public money and help in controlling the Monterey condition of the country. The Central bank of the country may come up with laws that are more stringent and pass commissions for their strict governance.