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As Demsey (1999) puts it: "Ethics represents the attempt to resolve the conflict between selfishness and selflessness between our material needs and our conscience."Įthical dilemmas and ethical violations in finance can be attributed to an inconsistency in the conceptual framework of modern financial-economic theory and the widespread use of a principal-agent model of relationship in financial transactions. In such situations, ethical norms are needed to guide our behavior. There may arise situations in which the need to care for ourselves runs into conflict with the need to care for others. In the process of social evolution, we have developed not only an instinct to care for ourselves but also a conscience to care for others. Recognition of others' needs and aspirations, fairness, and cooperative efforts to deal with common issues are, for example, aspects of social behavior that contribute to social stability. Financial ethics is, therefore, a subset of general ethics.Įthical norms are essential for maintaining stability and harmony in social life, where people interact with one another.
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They relate to all aspects of life, including business and finance. General ethical norms encompass truthfulness, honesty, integrity, respect for others, fairness, and justice. Ethics in general is concerned with human behavior that is acceptable or "right" and that is not acceptable or "wrong" based on conventional morality.