Respond to at least two of your fellow students or instructor posts in a substantive manner. ?Each response should have a minimum of 100 words and be respectful

Steve’s Post

SVB

Every ethical example of corporate social responsibility contains examples of personal ethics at its core. The new scandal over the banking industry includes Silicon Valley Bank (SVB). The issues raised over the conflict of SVB is that the company operated within the rules and regulations of the Dodd-Frank Act; specifically, within the Volcker Rule. Geler described the rule as regulating how banks invest in hedge funds and private equity (2020). The issue with SVB had nothing to do with private equity investments or hedge funds.

SVB operated just as their name suggested. They provided banking services to Silicon Valley companies. SVB serviced half of all venture-backed start ups and almost half of tech and health companies which went public last year (Barrabi, 2023). SVB was a successful bank by all accounts and as fraction reserve banking was replaced by no reserve banking in 2020, they were free to invest their depositors’ money in safe securities, such as Treasuries, Mortgage-Backed Securities, and government bonds (Rugaber and Sweet, 2023). These options were within compliance of the Dodd-Frank Act.

Issues developed as the United States underwent record inflation and the Fed responded by constantly raising interest rates. This on its own did not directly prompt SVB’s failure but was a contributor. The next catalyst was a prolonged failure of the tech industry. De Vynck listed Twitter, Meta, Stripe, and many other tech giants laying off double-digit percentages of their workers (2022). There was a shrinking effect in the tech world, and these and many other companies needed alternative methods to raise capital to continue working. Once private companies decided to go public, but still failed to raise necessary capital.

Relying on their own liquid assets, SVB’s customers opted to pull out money to start paying their financial obligations. The Treasury Secretary, Janet Yellen addressed the tech industry’s downturn and layoffs but did not attribute SVB’s failure to them. She listed the falling market value of SVB’s securities and assets, and when there was an unanticipated short run on the bank, they were not able to cover the costs of these quick sales (CBS Interactive, 2023). Such an investment failure should have been identified prior to 2023, but a missing Chief Risk Officer (CRO) contributed to SVB’s failure.

A CRO is responsible for identifying points of financial failure and steering the bank toward fiducial responsibility. Unfortunately, Laura Izurieta, SVB’s CRO, stepped down in April of 2022 and was replaced eight months later by Kim Olson (Prakash, 2023). The eight-month absence of a CRO was tumultuous with the Fed continuously raising the interest rates.

Had any one person’s personal ethics bothered to enter the world of corporate social responsibility involving SVB, the entire crisis would have been minimized. Loan officers and account managers should have recognized their customers’ struggle and tried to create a more diverse customer base. Executive officers and board members should have noticed the CRO vacancy. The asset managers of the securities and bonds should have noticed the continued rise in interest rates. Every section and single individual performed as they should, but nobody bothered to look beyond and see how the market was affecting the overall bank. SVB did not do any one specific thing wrong. It was a perfect storm of poor performance and an overall lack of accountability.

In an effort to minimize the damage to the economy brought on by all of these policy failures, the Fed, the Treasury, and the general government are looking to directly loan money to any bank suffering a run on their capital. The result is possible losses to those which purchased the bank’s bonds and securities, while depositors suffer no losses. Limited or no accountability will only encourage similar actions to occur in the future.

Marc Baker

While every person involved in the SVB debacle is an example of self-centered personal ethics, Marc Baker is an instance of somebody acting against a corrupt system. Marc Baker originally filed allegations against Walgreens in 2012; however, the lawsuit was settled in 2019. Walgreens offered discounts for private purchases of pharmaceuticals; but when purchases were charged to Medicare or Medicaid, Walgreens upsold the medication since the government would reimburse the costs. Marc Baker blew the whistle on the operation and received $22.3 million for his nearly decade long fight (PR Newswire, 2019). The settlement with Marc Baker was in line with the Sarbanes-Oxley Act protecting whistleblowers and offering a substantial reward to promote future ethical behavior.

Unfortunately, the actions of Marc Baker protecting the government are isolated only in such examples. A similar occurrence happens regularly within the medical industry every day. While every person without insurance is obligated to pay exorbitant prices for medical services, insurance companies pay minimal fractions for the exact same procedures. The price of medical goods and services should not be dependent on whether an individual pays it, or a company; just as the price of medication should not change whether an individual pays it, or the government.

Evie’s Post

A situation I encountered in the workplace in which poor ethics was demonstrated was a payroll scandal for which one of my Marine Corps coworkers was responsible. My coworker was in charge of issuing payroll for the entire unit. Because he was in charge of the entire division, he could manipulate his monthly pay to be much more than he was supposed to receive. He got away with this scandal for two years but eventually got caught, arrested, and kicked out of the military. This example was a prime illustration of poor ethics pertaining to the financial field within the workplace and the consequences of such actions.

"Corporate social responsibility (CSR) is a business model in which for-profit companies seek ways to create social and environmental benefits while pursuing organizational goals, like revenue growth and maximizing shareholder value" (Gavin, 2019). Organizations utilize CSR to give back to society. It also can be employed as a competitive advantage because individuals desire to see their money mean something or make a difference. Many companies have executed pervasive CSR programs and devoted entire units to ensure that the CSR programs thrive. An instance of a company that displays CSR is Lego. Lego is the sole toy business named a World Wildlife Fund Climate Savers Partner. Lego was anointed because it vowed to lessen its carbon impact and its adherence to sustainability (Gavin, 2019). The company will withdraw all single- use plastic packaging from its products by 2025. This ethical example shows a company displaying CSR and caring about society.

The Sarbanes-Oxley Act of 2002 is a law that the United States Congress passed on July 30, 2002. The law's objective was to protect investors from a company participating in fraudulent financial reporting. "Also known as the SOX Act of 2002 and the Corporate Responsibility Act of 2002, it directed uncompromising reforms to current securities regulations and levied tough new punishments on lawbreakers" (Kenton, 2020, pp. 1). The SOX Act of 2002 was passed due to financial scandals in the early 2000s. The SOX Act enforced four significant new reforms: corporate responsibility, increased criminal punishment, accounting regulations, and new protections. The SOX Act encourages ethical behavior by regulating corporations and their CEOs to maintain an effective code of ethics and protect whistleblowers from retaliation. It also encourages ethical conduct by requiring associations to be transparent with customers and investors.