Question

Relationships between businesses differ from country to country. Some countries believe that forming long-term relationships with one or two banks, and then using those banks for funding, is the best practice, while other countries will move from bank to bank depending on who offers the best rates. Discuss which policy is more likely to encourage ethical conduct from the corporation.

Answer 1

Policy of forming long-term relationships with one or two banks is more likely to encourage ethical conduct from the corporation. This statement can be justified with following facts-

1. Banking bears real risks and ethical considerations form an important part of our risk-taking activities in business. The welfare of their lending , in good and bad times, is of major concern in any business proposition. Sometimes commercial considerations can be at odds where ethics are considered.

2. Relationship with Bankers is based on trust. When we believe, over specific bank/s, we are trusted by those banks who ask us to use their money for a long without disturbing, and we have a duty to use that money responsibly in our business.

3. It influences the behaviour of relevant banks so they consider the company as its own part and help the company in the financial crisis and sometime relation becomes the base for financial benefits like- loans without mortgage, lower interest rates etc.

So on the basis of above facts we can say that Policy of forming long-term relationships with one or two banks is more likely to encourage ethical conduct from the corporation in comparison to profit motive aspect like moving from bank to bank depending on who offers the best rates.

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