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Business Ethics: “Liar’s Poker” by Michael Lewis Report

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Updated: Mar 30th, 2020

Michael Lewis tells the story of his being a part of a huge corporation in the golden times of Wall Street. People often see this account as a kind of textbook for those who want to enter the world of Wall Street. At the same time, the book is a good source for analysis of ethical issues that were unveiled in the 1980 and, actually, still persist in the business world. Thus, financial innovation is one of the most important aspects in the financial business as it is associated with development. It is possible to consider the way ethics of financial innovation can be traced in the book to find some reasons for the financial crises that took place later and to be able to avoid the same issues in the future.

Admittedly, people are expected to behave ethically in all aspects of their life but when it comes to money lots of individuals forget about ethics. One of examples of a financial operation, which is associated with high risks and is often closely connected with unethical behavior, is leverage. Lewis compares leverage with gambling, the work in his department with a casino and clients with “crowds” which “would overwhelm a casino in which everyone who plays wins big” (201). This comparison makes it clear that the author gives a negative evaluation of such operations in such quantity. People stop thinking about risks and morality when they feel they can ‘win big’. Such companies as Salomon Brothers took advantage of this quality of people’s character.

Apart from leverage, the author also provides a number of cases of unethical behavior related to fiduciary obligations. The very beginning of the author’s career in the company is a conspicuous illustration of improper fiduciary relationship. Thus, the author did not check the information he provided to his client, a German businessman, who totally trusted him. As a result, this client was “sacrificed for the greater good of Salomon” (Lewis 207). Admittedly, this was an unethical conduct. In the financial market, customers often expect to get reliable information and trust their financial consultants. Lewis shows that such companies as Salomon Brothers as well as numerous other companies in the 1980s (or even now) often betray their customers’ trust as they focus on their own profits.

The instance with the German gentleman is also an example of the way acceptable risk is viewed in Salomon Brothers. Lewis stresses that financial companies in the 1980s used to “make their money by taking large risks” (42). It is also noteworthy that the author stresses that companies are ready to lose but they are more afraid of “solitude” as they would lose with others rather than be the only company to lose. Clearly, this is hardly ethical to strive for losses in other companies and take large risks undermining the wellbeing of their customers and the entire society.

The instances mentioned in the book and evaluated by the author can help to identify obligations of people working in the financial market. In the first place, these workers have to adhere to deontological values. They should try their best to give proper advice and help customers to wisely allocate their funds. Financial workers have to develop effective fiduciary relationships with their customers and make sure they will not betray their customers’ trust. It is crucial to obtain and provide comprehensive and accurate data. Financial workers should not ‘sacrifice’ people’s interests and money for the sake of their companies as this can lead for negative outcomes for all stakeholders.

Thus, the author depicts a variety of examples when financial workers and companies distorted data and engaged themselves into risky operations which often resulted in big losses for all stakeholders involved. Thus, unthoughtful financial operations led to a crisis in the 1980s and 2000s as people got involved in high-risk operations (including mortgage, leverage and so on). The crisis in the financial sector led to severe issues in other sectors of global economy. Economies were not ready for such a challenge and a period of stagnation started in many countries. Notably, financial sector ties all the rest sectors of the economy and, hence, a crisis in this sphere will inevitably lead to considerable constraints in other areas of economy.

On balance, it is possible to note that Lewis tells a story of the financial market of the 1980s using an account concerning one company. The author unveils the importance of ethical conduct and reveals possible outcomes of unethical behavior of employees as well as companies. The book helps people see that ethical behavior is not a utopic concept but necessity. Employees and entire companies have to conduct ethically as this secures effective financial operations since people behave in a more responsible way. Adherence to ethical values makes people more cautious and they are unwilling to get involved into risky operations. Clearly, such conduct can be associated with smaller profit for companies but it will help avoid bankruptcies and severe financial crises.

Works Cited

Lewis, Michael. Liar’s Poker. New York, NY: W.W. Norton & Company, 2010. Print.

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