Operation Hope unethical partnership decision with Union Bank and Nix Check Cashing - Essay Example

Operation Hope unethical partnership decision with Union Bank and Nix Check Cashing Introduction Union Bank of California has entered in to partnership with Operation Hope which is a non-profit making organization and also Nix Check Cashing to offer financial services to low-income households. Many residents have low incomes thus consider savings-oriented services less attractive. Bryant of Operation Hope is initially reluctant to join the Union/Nix ownership model that includes financial literacy and market opportunities for Union Bank. Surprisingly, Operation Hope becomes the first non-governmental organization to sell 40 percent of its Hope Center in Willowbrook to a financial institution. This partnership links a bank which provides high interest payday loans to Operation Hope that is supposed to safeguard the welfare of the community b y providing services to low income households. The banking officers are reluctant to offer short term loans. The partnership may expose customer privacy information since Union Bank may share customer confidential information with Nix and Operation Hope. Nix employees are inefficient and have to give a 10 day waiting period before processing the loans. According to Union Bank, the aim of the partnership is to create 6,000 new bank customers and provide 750,000 ATM transactions (Bradley 7). Though from the Union Bank should comply with 1977 community Reinvestment Act by meeting the credit needs of communities. Nix alliance has compromised the role of Operation Hope since it cannot play a public watchdog role while it is a partner to the partnership. The construction of the partnership is aimed at ensuring profitability and success of Union Bank and Nix Check Cashing. The partnership agreement between the three institutions is unethical. The partnership is geared at increasing the profitability of Union Bank and meeting regulatory requirements like Community Reinvestment Act which requires Union Bank to offer services to communities (Bradley 7). Virtue ethics According to virtue ethics, the current state of affairs is unethical since it is not guided by ethical virtues. The virtues of Operation Hope management require them to act in a virtuous manner and act as community watchdog. Operation Hope as a non-profit institution should not enter in to a partnership which seeks to exploit the local low income households by providing expensive financial services. Operation hope should have avoided a partnership that has the potential of exposing private customer information and contravening human dignity virtues. In order to safeguard community welfare, Operation Hope should display virtues such as integrity, compassion, wisdom and courage and reject any partnership that seeks to provide expensive loans to low income households. According to Aristotle, the virtue ethics will consist of the mean between the extremes of excess and deficiency which are vices but some actions have no extremes like murder since it is virtuously wrong (Bowie 87). According to Aristotle, pleasure will impede ethical choices. For instance, the management of Operation Hope has acted with fear in order to uphold the partnership instead of safeguarding the community welfare. Union Bank is also unethical in its decision to partner with Nix and Operation Hope since its main objective is to adhere to requirements of Community Reinvestment Act and increase market share and profitability and not to provide the cheap loans required by the low income households. Union Bank decision is unethical since it only wants to increase market share at the expense of the society welfare. The decision of Operation Hope to join the partnership has been motivated by the pleasure of being associated with Union Bank which is a reputable Wall Street institution and Nix which is well known for cashing services. The partnership is unethical since it only promotes profit interests of Union Bank shareholders and not common interests of the low income households that desire cheap and efficient financial services. Nix alliance has negated its virtue ethics of offering efficient and timely loans since employees must wait for about ten days for loan processing. Union Bank has also contravened virtue ethics of safeguarding customer confidentiality by requiring Nix to undertake customer loan processing activities on its behalf. Nix is guided by the profit motive from the check cashing business and not assisting low income households with cheap loans. Utilitarianism ethics According to utilitarianism ethics, an ethical choice should result to beneficial consequences. The partnership is not intended to benefit the low income households with low interest loans. An action is ethical if it promotes happiness and wrong if it tries to reverse happiness. The partnership should be geared at promoting happiness over the pain that the low income households are likely to suffer or have been suffering. According to this branch of ethics, utility principle which approves ethical actions according to the happiness and utility to the society. The identity principle equates good with pleasure to the community and evil actions with pain to the society (Bowie 40). The eudemonism principle asserts that happiness is the ultimate end of human life thus ethical actions should result to utility and happiness to the society. The consequentialism view asserts that the moral view of the actions should be guided by the consequences to the society. The hedonic calculus can be used to ascertain whether the above case is ethical or unethical. This will include gauging the cost-benefit analysis of the action and ascertaining the net happiness of the action. The dimensions of pleasure and pain include the intensity, duration, certainty or uncertainty, remoteness or propinquity, fecundity and purity. Purity and fecundity will measure the pleasure or pain resulting from the decision while the other factors will measure the degree of pleasure or pain from the action (Bowie 40). The intensity and duration of the pain from this partnership to the community is high while the pain is certain since some customers have already started complaining on high interest rates and delayed loans. The remoteness of the pain is high; the pain is already being witnessed while the number of low income households affected by the ethical decision is large. This partnership is unethical since it will generate more pain to all the parties and society. For instance, Operation Hope will suffer negative reputation in the society if it does not act as public watchdog for the welfare of the low income households. The low income households will stop using credit facilities from Union Bank since the interest rates are high. There are fears that Nix might lose some of its traditional business to Union Bank. The low income households will suffer more pain than happiness from the partnership. For instance, Nix does not understand the needs of low income households while Union Bank still offers expensive and long term loans to the low income households. Operation Hope has sold some of its Hope Centers to Union Bank and Nix thus limiting its ability to safeguard the welfare of the low income households (Tannsjo 30). In the short-term, Union Bank will attract 6,000 new bank accounts and make 750,000 ATM transactions from the partnership. However, due to expensive loans the Bank will suffer pain in the long term due to decreased demand of expensive loans. Union Bank is now exposed to costly lawsuits emanating from failure to guarantee customer privacy and confidentiality thus will suffer a lot of pain in the future. The good reputation of Operation Hope will diminish in the future once the low income households realize that their interests are not safeguarded by the association. dimension Utility Intensity -7 Duration -8 Certainty -10 Propinquity -7 Fecundity 0 Purity - 40 Total -42 The utility to society is negative. Deontological ethics According to deontology, the only unequivocal good is the good will. According to deontology, an act is ethical if it is done out of duty rather than the consequences. The intentions of the moral agent are the most important in determining whether the act is ethical behavior. According to Kant’s categorical imperative, the moral agents should develop the maxim under which the moral problem falls and decide a maxim that they would wish to be followed by other rational people as the universal law (White 46). According to the Union Bank Maxim, it has the legal duty to offer cheap services to community and safeguard the privacy of customers. Operation Hope has the duty to act as a non-profit institution that safeguards the welfare of the community (Hinman 80). The partnership is not motivated by good will since Union Bank is aimed at increasing market share and not meeting the needs of the community. Nix is also aiming at increasing its market share and not meeting the needs of the low income households. Operation Hope is torn between promoting the partnership and safeguarding the welfare of the community. The right ethical maxim in this case would be to promote the needs of the low income households by offering them short term loans at low interest rates. This partnership is not geared at meeting this universal maxim thus all parties should dissolve the partnership (Hinman 80). According to Kant’s second formulation in the categorical imperative, moral agents should treat others not as a means only, but also as ends in themselves and rational nature will exist as an end in itself (Sullivan 200). All human beings have inherent dignity which should be respected. Both Union Bank and Nix are not treating the low income residents how they would wish also be treated if they were part of the low income customers. Union Bank has used Operation Hope as a means of achieving its end of meeting regulatory requirements and increasing profitability by requiring Operation Hope to market Union Bank and Nix services to the community. According to rational nature, all human needs desire cheap financial services and their privacy to be protected since human beings have inherent dignity (Tannsjo 45). Remedies for eliminating the moral problem In eliminating the unethical behavior, Operation Hope should conduct its activities as Microfinance and desist from the partnership with Union Bank which offers expensive loans to clients. Union Bank should end the partnership since it exposes customer confidential information to other institutions and Nix should concentrate on its core check-cashing business. Operation Hope should promote the welfare of the low income loans by providing cheap loans. According to Grameen Bank-microfinance model by Muhammad Yunus, Operation Hope can alleviate poverty by providing educational services to the community on how to save and manage small business projects (Yunus and Weber 100). Operation Hope should provide technical assistance, build the projects for the low income individuals and transfer the project after recovering its investment in the project. Operation Hope should provide small finances to viable projects in the communities. Operation Hope can utilize Kiva Microfinance model by organizing groups of low income residents with common goals and lend them money for common investment in an income generating project (Chen 200). Conclusion The current state of the partnership is unethical since it will lead to more pain than pleasure to low income households. The partnership is a breach of regulatory framework of Banks. The partnership creates a conflict of interest to Operation Hope. Operation Hope should provide cheap loans to low income households and provide technical assistance on productive activities. Works cited: Bowie, Robert. Ethical studies. Cheltenham: Nelson Thornes, 2004. Print. Bradley, Googins. “Сreating community banking solutions: Union Bank and Operation Hope”, The center for corporate citizenship at Boston College. Boston: Boston College. Print. Chen, Te. Implementing new business models in for-profit and non-profit organizations: technologies and applications. Hershey: Business Science, 2011. Print. Hinman, Lawrence. Ethics: a pluralistic approach to moral theory. Boston: Wadsworth Publications, 2012. Print. Sullivan, Roger. Immanuel Kan’ts moral theory. Cambridge: Cambridge University Press. 1989. Tannsjo, Torbjorn. Understanding ethics: an introduction to moral theory. Edinburgh: Edinburgh University Press, 2008. White, James. Contemporary moral problems. New York: Wadsworth, 2009. Print. Yunus, Muhammad and Weber, Karl. Creating a world without poverty: social business and the future of capitalism. New York: Public Affairs, 2007. Print. Read More