STEWARDSHIP ETHICS IN DEBT MANAGEMENT

Transcription

1 STEWARDSHIP ETHICS IN DEBT MANAGEMENT

2 Issues in Business Ethics VOLUME 12 Series Editors Henk van Luijk, Nijenrode, Netherlands of Business, Breukelen, The Netherlands Patricia Werhane, University of Virginia, U.S.A. Editorial Board Brenda Almond, University of Hull, Hull, U.K. Antonio Argandoiia, lese, Barcelona, Spain William C. Frederick, University of Pittsburgh, U.S.A. Georges Enderle, University of Notre Dame, U.S.A. Norman E. Bowie, University of Minnesota, U.S.A. Brian Harvey, Manchester Business School, U.K. Horst Steinmann, University of Erlangen-Numberg, Numberg, Germany

3 StevvardshipEthics in Debt Management by ROYMOHON University of Sunderland, Sunderland, U.K. SPRINGER SCIENCE+BUSINESS MEDIA, B.V.

4 A C.I.P. Catalogue record for this book is available from the Library of Congress. ISBN ISBN (ebook) DOI / Printed on acid-free paper AII Rights Reserved 1999 Springer Science+Business Media Dordrecht Originally published by Kluwer Academic Publishers in 1999 Softcover reprint of the hardcover 1 st edition 1999 No part of the material protected by this copyright notice may be reproduced or utilized in any form or by any means, electronic or mechanical, inc\uding photocopying, recording Of by any information storage and retrieval system, without written permission from the copyright owner.

5 CONTENTS Preface ix Introduction 1 Focusing on Stewardship to Consider Debt Management 1 Stewardship and accountancy 2 Stewardship and corporate governance 3 Stewardship and environmental strategy 3 Stewardship and Christian values 4 A strategy for testing in business ethics 4 Literature resources for ethical debt management 6 The Structure of this Book 7 Notes to Introduction 9 Chapter 1 The Context of Stewardship: The Debt Problem Historical Context Usury and scripture The historical context The present day Moral Concerns and the Debt Problem Economics Business Private individuals Technical Aspects ofthe Morality of Debt Economic issues Borrowers Lenders Borrower-lender relationship Conclusion Factors not suitable for incorporation into an ethical model The relevance of stewardship 44 Notes to chapter 1 47 v

6 vi CONTENTS Chapter 2 The Stewardship Concept Definitions of Stewardship in Business Stewardship accounting Agency theory A Critical Defense of Stewardship Stewardship distinguished from other views Stewardship defended from current criticisms Development of the Concept of Stewardship Product stewardship Religious stewardship Stewarding and the environment The stewardship concept and its core values Key elements of stewardship for debt management The Dynamics of Stewardship Decision-making The environmental context The market context The business context 83 Notes to Chapter 2 88 Chapter 3 Borrowers and Borrowing Stewardship Stewardship in existing financial management Stewardship and ethical debt management Entrustedness in Personal Debt Management Matching Defining the financial starting point Measuring asset enhancement Reliable information for strategic direction Family stewardship Effectiveness Development Resisting external pressures III Defining realistic objectives Accountability Accountable control Domestic budgeting lis

7 CONTENTS vii Mastering budgeting problems Fairness Strategic Decisions for Contemporary Issues Strategy selection Stewardship of debt 120 Notes to Chapter Chapter 4 Bankers, Business Finance and Consumer Lending Business Finance Principles: evaluation of the canons of lending Practice: evaluation of lending procedures Consumer Lending Stewardship and individual appraisal Stewardship and systems appraisal methods Conclusions 149 Notes to Chapter ChapterS Mortgage Finance and Money Advice The Issue of Justice Mortgage Finance Mortgage finance and criteria of justice Mortgage debt management Debt dependency Money Advice Advice services and access Stewardship values in money advice provision Conclusion 184 Notes to Chapter Chapter 6 The Stewardship Debt Management Model The Concept of Stewardship The four prerequisites Stewardship concept values The Stewardship Debt Management Model 191

8 viii CONTENTS Entrustedness Matching (a) bankers Effectiveness Matching (b) borrowers Development Accountability Fairness Limitations of the model Conclusion Notes to Chapter Bibliography Index

9 PREFACE As we move forward into the Third Millennium AD the perennial problem of unmanageable debt is still with us. As if to prove the point, in late November 1997, the Tokuyo City Bank in Japan closed down its business, reminding the world that default still stalks families, institutions and governments. It seems that little has been achieved in handling debt since 1216 when the Magna Carta limited the actions of bailiffs against debtors willing and able to make payment. Current literature about consumer credit, business finance and mortgages reveals the urgent need to tackle the ethics of borrowing and lending on some commonly understood and acceptable basis. In this book, the stewardship concept familiar in accounting, corporate governance, environmental strategy and Christian social ethics is analyzed to provide a framework. The book demonstrates that analysis of the concept of stewardship provides a set of resource-related social values which shed light upon ethical issues in debt management and enable the construction of a decision support model to secure improvements in debt management practice. The values are applied to operational debt management as experienced by personal borrowers, small businesses and home buyers. The roles of both lenders and money advisers are considered in relation to this experience. The familiarity of the stewardship concept to a various sections of society provides a starting point for a financial services industry wide ethic for debt management. The stewardship values have been embedded together with technical finance and within the practitioner's world so that borrowers, bankers and money advisers will feel at home as the argument of the book unfolds. The book could not have been written independently of the literary resources that have provided the raw materials for the ethical interaction contained in the following chapters and the author would like to acknowledge his debt to the various authors cited in this work and to the relevant copyright holders.