Financial Meltdown: A Management PerspectiveBy Faisal Hoque | Posted 2008-09-24 Print
The lenders, the borrowers and the pundits all now say we should have seen the financial crisis coming. The politicians are spinning to solve a crisis they had a hand in creating. The real question here is where was the real business governance? The failures of Wall Street, government agencies and financial institutions to police themselves begs the question: Do governance, business ethics and business models need to be redefined?
After the meltdown on Wall Street, fingers are pointing in every direction. We are seeing yet another national feeding frenzy of recrimination. The lenders, the borrowers and the pundits all now say we should have seen it coming. The politicians have leapt in to solve a crisis they had a hand in creating.
We thought we could purchase a house we couldn’t afford because of the magic of always-appreciating home values. The bankers thought they could get away with lending to us because they could bundle the debt into a magic ball and toss it to someone else. And when the ball landed in the laps of two quasi-governmental organizations (Fannie Mae and Freddie Mac), everyone assumed the game could go on forever.
We were just kidding ourselves–and each other. Some of it was innocent, but a lot of it was not. We can hope that government regulation will set things straight, but when has that ever made things perfect? It’s not about us asking some authority to make us do the right thing. It’s about us as a society understanding the right thing and doing it.
Ethos–Does It Matter?
The primary purpose of business should be to create a greater good for society— one that society values enough to reward us for our efforts. No, the purpose of business is not coming in at one cent over estimates for this quarter. That’s a game. No, we don’t give away our labors, either; we deserve our fair share for meeting a genuine need. A profit is an indicator that we are indeed meeting a need. However, anything more than what a free market would grant us is a game. Monopolies, oligopolies, tariffs, legislative favors and imperfect knowledge all indicate a less-than-free market, and we can play them for short-term gain—and, then, move on.
This is an idealistic viewpoint, I know. But it comes from years of being in the nitty gritty of this quarter’s numbers at large corporations and years of sweating out the day-by-day survival of my own businesses. I am idealistic, but not naíve. In the end, I believe that conducting one’s self according to certain ideals is the only way to be successful in life, and it is also the only way to be successful in business. Ethos does matter.
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