Bank of America: The "Robo- Signing Scandal" (2011)
Based on a paper by Corey Johnson (2012)
Summary by Geoff Brennen
Bank of America Corporation is an American multinational
banking and financial services corporation headquartered in North Carolina.
Forbes listed Bank of America Corp. as the third biggest company in the world
in 2010. Bank of America’s acquisition of Merrill Lynch in 2008 made them the
world’s largest wealth management corporation. Between 2008 and 2011 Bank of
America was involved in a “robo” signing scandal that caused 750,000
homeowners to lose their homes through illegal foreclosures. “Robo- signing" refers to the illegal practice of banks signing off on documents and affidavits
without really going through and verifying the information. Rather than going
to court to legally acquire the foreclosed property, Bank of America employees
signed off on document without truly knowing what they were signing. The "robo-signing" crisis happened because Bank of America's management failed on enforcing lower-level employees to thoroughly go over foreclosure documents before writing them off.The “robo-signing" scandal resulted in a shortage of foreclosure properties for sale. There are
thousands of cases where people may potentially lose their home because it was
not the legal property of the bank to sell.
According to the four basic ethical theories, Bank of America
acted irresponsibly and unethical when they “robo- signed” off on foreclosures.
The individualism theory states the primary goal of a business is to maximize profit
for shareholders without deception or fraud. Even though Bank of America
profited over the years from the “robo-signing” scandal they did it illegally
and it cost them $25 billion legal penalties. The economic theory would view
Bank of America’s actions as unethical because they used illegal methods in
order to achieve profits. Similar to the economic theory, the utilitarianism theory
would believe that Bank of America was in the wrong and behaved unethically.
The utilitarianism theory has the goal of maximizing overall good and
achieving the greatest good for the greatest amount of people. The stakeholders in this case are Bank of America management, Bank of America employees who signed off on illegal foreclosures, and the homeowners. The only people
who benefited from this scandal are top executives who benefited with money.
Bank of America’s actions caused 750,000 homeowners to wrongfully lose their homes.
The utilitarianism theory would believe that the amount of pain suffered by
homeowners outweighs the overall good achieved by top executives.
Kant's ethical theory states one must act rationally
and be motivated by good will. Under Kant's theory everybody should follow the
same rules and no one should ever act out of self-interest. Kant would view
Bank of America’s actions as unethical because they acted out of their own
self-interest rather than out of good will. The employees who were doing the “robo-signing”
were not acting rationally because they did not take the time to examine each
document and did not have enough information to make a rational decision. Bank
of America engaged in illegal activity and broke rules. Bank of America’s
actions strongly contradict the Kant's theory and therefore would be viewed
as unethical. According to the virtue theory there are four “good virtues”,
honesty, courage, temperance, and justice. Bank of America violated three out
of the four virtues. They did not act honestly when they lied about fully
examining all documents they signed off on without really reading. The
executives of Bank of America acted very cowardly by initially denying the
allegations. Bank of America did not act with any temperance or self-restraint
by taking advantage of the foreclosure system. Their business practices were
unfair and illegal and go against the virtue of justice. Millions of people
trust Bank of America to protect their life savings; however, when they act
unethically it makes it a lot harder.
Based on paper written by Corey Johnson on April 12, 2012
Hoovers. “Bank of America Corporation / Company profile from
Hoovers / 704-386-5681. “Hoovers/Business
Solutions from Hoovers."
http://www.hoovers.com/company/Bank_of_America_Coorporation/hxccci-1-1njht4
Forbes. “Bank of America on the Forbes Global 2000 List.”
Information for the World’s Business Leaders–
Forbes.com
http://www.forbes.com/companies/bank-of-america
“Bank of America Heritage.” Bank of America
http://www.message.bankofamerica.com/heritage/#/merger-history/bankamerical-corp
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