The United States has hit a recent subprime mortgage crisis. At its core this was brought on by questionable lending practices to people that really shouldn’t have been given loans. All of this was done in the name of revenue and profits for the banking institutions.
Unfortunately, this highlights how companies can get greedy and start down a path of questionable ethics which may lead to short term revenue growth but ultimately ends in disaster.
I saw an email from ING Direct‘s CEO Arkadi Kuhlmann where he explained how his company has avoided the current mortgage crisis:
Global financial markets ended 2007 with many challenges ahead. While ING DIRECT avoided the sub-prime mortgage problem, we understand that this housing crisis threatens the well-being of countless families and, in the end, it will be seen as a major failing of the mortgage industry and its regulators.
The fact that ING DIRECT was not adversely affected is a testament to our operating philosophy that, as Americans, we should only buy houses we can afford. That way we can keep them for years to come. We believe a mortgage is a contract that both parties should execute in good faith and expect to see through to its conclusion. We will not waiver from our sworn promise to provide you with great value, service and convenience.
Kuhlmann mentions two very import points that should be at the core of every business transaction:
- Customers should only buy what they can afford
- Contracts should be executed with the trust that they will be honored
Imagine if more lenders lived by these principles. Surely we’d be in less trouble than we are today. Of course not all the blame falls on the mortgage industry and regulators. The homeowners who entered these contracts often knew what they were getting into. However, if more mortgage providers had denied questionable loans, they would have prevented customers from making mistakes in the first place.
Your business must hold on to the moral high ground. Don’t engage in unethical or questionable practices. This includes helping your customers and even potential clients avoid entering transactions that ultimately aren’t in their best interest.