Moody and the Bloggers cases (1)

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1 Moody and the Bloggers cases Student’s Name Institutional Affiliation Course Name Date

2 Moody's Case Synopsis Moody's Credit Rating and Subprime Mortgage Collapse Case Study explores Moody's influence in contributing to the 2008 worldwide financial crisis triggered by the subprime mortgage disaster. This case study explores Moody's impactful credit ratings during a financial crisis and their devastating repercussions for homeowners, investment businesses, lenders and other key players in society. Moody's joined Standard & Poor's and Fitch in being recognized by the Securities and Exchange Commission (SEC) as Nationally Recognized Statistical Rating Organizations (NRSROs). Moody's was granted quasi-regulatory powers that gave them quasi- regulatory abilities for rating bond issues; these measures raised concerns of potential conflicts of interests. In response to the housing boom of the previous decade, structured finance instruments, specifically residential mortgage-backed securities (RMBS), became highly in demand due to their highly lucrative yields. Unfortunately, however, these financial products involving packaged home loans lacked clarity and required complex mechanisms for securitization. Moody's business model underwent significant change, placing greater importance on seizing more market share and producing greater returns for shareholders, rather than providing impartial ratings. Growing dependence on structured finance instruments, which accounted for around 40% of sales, signaled an increasingly important emphasis on financial success over ethical concerns at the company. Raymond McDaniel, Moody's Chief Executive Officer, played an essential part in overseeing this transition period. Its collapse was blamed on two primary factors - greed and an apparent clash of interests among its stakeholders. Moody's and other rating agencies demonstrated an insufficient degree of impartiality and objectivity during the housing bubble era, contributing to its acceleration through lack of supervision or

3 control of Moody's active participation in that market. Case analysis indicates that while Moody's did not violate any legal regulations, they failed to abide by expected ethical norms and demonstrate effective leadership before the financial crisis. As part of its effort to prevent another financial market crisis from taking place, this study proposes the incorporation of ethical measures into everyday practices and stresses the significance of impartiality and objectivity when providing credit ratings to avoid conflicts of interest and maintain lasting market stability. Questions Question 1 Moody's, one of three prominent credit rating agencies known collectively as 'The Big Three,' faced intense public scrutiny due to its connection with the subprime mortgage crisis. Moody's evaluated various financial instruments backed by subprime loans for mortgage-backed securities and collateralized debt obligations throughout this crisis; making mistakes that compounded it further, like providing overly optimistic ratings on these securities that supported subprime mortgages. Moody's faced heavy criticism for providing too many positive ratings to such securities which contained high concentrations of subprime mortgage debt (Clemon, 2023). Investors relied on Moody's ratings as an accurate way of assessing asset risk; believing high investment-grade ratings indicated reduced probability of default. Nevertheless, Moody's methodology soon revealed its shortcomings by failing to capture subprime mortgage default risks accurately. Moody's misjudgments were compounded by its revenue model, which relied heavily on fees paid from issuers of securities it rated. Moody's was incentivized to provide positive ratings to win business from these issuers and attract additional business with them, creating a potential conflict of interest that necessitated favorable rating decisions by Moody's to secure future

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4 business from them (Clemon, 2023). Credit rating agencies must act impartially and independently, serving investors and the market instead of issuers seeking favorable ratings as their top priority. In such a conflict-ridden market environment, this makes credit rating agencies hard to trust as they must uphold investor interests first and foremost rather than issuers seeking favorable ratings from them. Moody's' lack of transparency and due diligence when rating structured finance products only compounded this issue further. Investors were subjected to complex and opaque rating processes that made it challenging for them to fully grasp the true risk associated with securities. Furthermore, due diligence checks on mortgage loan quality proved insufficient resulting in misleadingly high ratings given to MBSs and CDOs. Moody's conduct also fell short when responding to shifting market conditions. For instance, as housing began its gradual descent, Moody's was slow in downgrading MBSs and CDOs that they rated. Moody's was accused of failing to inform investors timely of the declining quality of securities that investors held, compounding an already perilous situation further. Furthermore, during this subprime mortgage crisis, Moody's faced various accusations of wrongdoing against it (Clemon, 2023). At its heart are several problems related to rating methodologies: providing overly optimistic ratings; giving in to conflicts of interest due to its revenue model; lacking transparency and due diligence regarding rating methodologies; and delaying responses to changing market conditions. These collective missteps had severe repercussions, contributing to the collapse of housing markets and subsequent global financial crises. Moody's is yet another reminder of why credit rating industry reform is necessary to avoid similar ethical or systemic failures in the future. Question 2

5 Moody's actions during the subprime mortgage meltdown had far-reaching consequences, impacting various stakeholders in both positive and negative ways. Stakeholders Helped by Moody's Actions: 1. Investment Banks and Issuers: Initial action by Moody's proved profitable to investment banks and issuers of mortgage-backed securities and collateralized debt obligations with high investment-grade ratings assigned by Moody's; MBS issued under these ratings were sold at premium prices that attracted investors searching for low-risk, high-return opportunities. This provided significant profits to investment banks and issuers of these complex financial products while simultaneously creating lucrative markets for them. 2. Regulatory Bodies: Regulators such as government agencies responsible for overseeing financial markets and maintaining stability initially saw Moody's high credit ratings as evidence that these products were healthy and reliable. Agencies used these ratings to assess risk levels among securities, making informed decisions regarding regulatory measures (Hemraj, 2015). However, as soon as the subprime mortgage crisis occurred it became obvious that Moody's credit ratings did not accurately represent risk. As this realization became apparent, regulatory bodies reconsidered their reliance on credit rating agencies and called for reform within the financial industry. As the crisis continued to unfold, regulatory bodies took measures to increase transparency, enhance risk assessment, and decrease the chances of future financial catastrophes. The crisis revealed failures within credit rating processes and regulatory practices, as well as stressing the necessity of increased oversight and risk management. Stakeholders Hurt by Moody's Actions:

6 1. Investors: Institutional and individual investors, such as pension funds and retirement accounts, were severely damaged by Moody's actions. Relying on its high ratings, investors put money into MBSs and CDOs, expecting stable returns. When this proved false and the housing bubble burst unexpectedly, significant losses occurred and resulted in significant portfolio erosion for institutional investors as well as a detrimental impact on individual retirement accounts and accounts managed for those planning. 2. Homeowners: Moody's actions had disastrous repercussions for homeowners who received mortgages they were unable to afford during the housing bubble era, including risky loans extended outward to individuals unable to fulfill financial obligations (Hemraj, 2015). This led them into foreclosure and distressful property loss when its burst and subprime crisis unfolded. Many faced foreclosures because Moody failed to accurately evaluate risks associated with subprime mortgages - something Moody failed to accurately do themselves, exacerbating these homeowners' problems further. 3. The Global Economy: Moody's actions had far-reaching ramifications on both individual stakeholders and on global economies as a whole. The subprime mortgage crisis that ensued from the collapse of the housing market had far-reaching ramifications, including economic adversity, employment reductions, and decreased consumer trust. Due to global interconnection, this crisis originated in U.S. housing markets and had widespread and profound ramifications across various markets worldwide. Moody's failure to deliver accurate credit ratings significantly contributed to the severity of the economic downturn. Question 3

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7 Moody was unquestionably confronted with multiple conflicts of interest during the subprime mortgage meltdown; these manifested themselves through many channels and raised serious ethical concerns. At its heart was Moody's principal-agent relationship which caused substantial ethical conflicts to emerge. Issuers of securities served as principals, paying Moody's as their agent to receive ratings services from Moody's (Hemraj, 2015). Under such arrangements, Moody's had an indirect financial incentive to meet issuer satisfaction, who were also its paying clients. Moody's found itself at risk from this dynamic when they may favor issuer interests over adhering to accurate and impartial ratings, thus jeopardizing investors relying on those ratings in making informed decisions. Moody's' financial ties with issuers created an incentive for them to provide favorable ratings that might obscure or downplay the risk associated with these instruments, potentially overlooking or understating true risks involved with them. Moody's, as a credit rating agency, had to assess these securities' creditworthiness; yet this conflict resulted in more favorable assessments from them due to possible incentivizing. Steps to Reduce Conflict: Recognizing this conflict of interest, various measures were suggested to mitigate it and increase the independence and objectivity of credit ratings: One such proposed solution involved restructuring fee arrangements between issuers and rating agencies intending to eliminate direct payments by issuers directly to rating agencies for services received thus reducing financial dependence from issuers which may create conflicts of interest for rating agencies. Perhaps employing third-party entities or regulatory bodies overseeing payment processing to diminish direct financial links between issuers and rating agencies. Another effective means to address conflicts of interest is the strengthening of regulatory oversight. Strengthening the credit rating agency regulatory framework would entail setting clear

8 ethical standards and guidelines, with regulatory bodies like Securities and Exchange Commission (SEC) playing an active role in assuring rating agencies adhere to such requirements; such enhanced oversight acts as a safeguard, protecting rating agencies against pressure from issuers while simultaneously increasing transparency within rating processes. Additionally, independent reviews of rating agency methodologies and ratings were another proposed measure, meant to add another layer of scrutiny into the rating process, making sure Moody's methodologies were sound while their ratings accurately represented financial instrument risk. Independent reviews could be carried out by third-party entities or regulatory bodies and assessed against credibility and reliability criteria set by rating agencies themselves. Question 4 The 2008 subprime mortgage crisis was an intricate and diverse occurrence involving several factors. While Moody's and its executives had a notable impact, the guilt for the catastrophe is distributed among different parties. Moody's and Executives Moody's, as one of the major credit rating agencies, bears much responsibility for this crisis. They were responsible for evaluating financial instruments' quality yet gave too-positive ratings to mortgage-backed securities and collateralized debt obligations. An inadequate business model and conflict of interests led to overstated ratings that created a false sense of safety among investors and led them down a path leading to widespread adoption and eventual collapse of these complex financial instruments. Moody's changes in business strategy, which focused more heavily on expanding market share and increasing shareholder profits rather than offering impartial ratings, led them to increasingly depend on structured finance instruments for profit generation. Moody's increased its share of revenues generated through these instruments to

9 nearly 40% over time, which indicated poor leadership and ethical standards within its firm. Instead, more emphasis was put on financial gains than maintaining the integrity of rating processes. Moody's leaders, particularly CEO Raymond McDaniel, played an essential part in crafting their plan to take back market control from lenders and credit rating agencies. However, these leaders share responsibility as their focus was more on immediate profits rather than providing reliable evaluations of complex financial products. Numerous parties contributed to the 2008 financial crisis. Home buyers contributed by taking out mortgages that exceeded their financial capabilities, leading to an explosion of subprime mortgages and consequently rising default rates. Instability in the housing market can be partially blamed on individuals entering into mortgage agreements without sufficient financial capacity, contributing to its instability. Mortgage lenders bear part of the blame as well, having issued subprime mortgages without properly screening potential borrowers' ability to repay. A key driver of the financial crisis was the widespread practice of providing risky loans to people without sufficient means, leading to rising default rates and setting off defaulting loans as they quickly matured into delinquency. Investment banks played an instrumental role in securitizing risky mortgages and aggressively marketing the resulting securities, seeking short-term profits without doing due diligence to assess any associated risks leading to subprime mortgage proliferation and eventual housing market failure. Moreover, government regulators and policymakers bear responsibility for failing to properly oversee and regulate financial industry firms like credit rating agencies; their failure allowed risks associated with housing market instruments to accumulate, leading directly to this crisis. Investors, both institutional and individual alike, also played their part by not conducting rigorous due diligence checks before accepting risky securities through Moody's rating agencies; this further compounded it all.

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10 Question 5 The subprime mortgage meltdown of 2008 revealed severe flaws in our financial system and made clear its need for reform to avoid another such crisis. There are various steps we can take now to tackle the root causes of such crises while creating more resilient and transparent environments within financial services. 1. Strengthening Management and Practices: Moody's, like other rating agencies, must put into effect more stringent internal controls and transparency into its rating processes to reduce risk and to provide greater accountability in their assessments. This requires adopting sound methodologies with well-documented documents subject to intense examination and conducting internal audits or external assessments with periodic reviews to detect conflicts of interest. Increasing independence and objectivity is paramount when rebuilding trust in rating agency assessments. 2. Enhancing Government Regulation: Government regulators require additional authority to closely oversee rating agencies and intervene as necessary. Stricter regulatory oversight could include conducting regular audits of rating agency practices, checking ethical compliance standards and evaluating risk analysis methodologies, conducting periodic reviews about any violations, as well as having authority over corrective actions and penalties in cases of noncompliance with ethical principles or unethical behavior from rating agencies; all this regulatory scrutiny plays a pivotal role in maintaining financial system integrity while mitigating undue risks. 3. Promoting Responsible Public Policy: Public policy plays an essential part in shaping the behavior of financial institutions, consumers, and the overall economy. Policies should promote responsible borrowing and lending practices while financial education

11 equips consumers to make educated choices regarding mortgages or other products they need. Furthermore, policymakers must implement measures that discourage predatory lending practices while encouraging sustainable homeownership through measures to discourage predatory lending practices. By cultivating an environment of responsibility, policies can contribute to creating a safer financial landscape. 4. Reforming the Ratings Industry Structure: The concentration of power within major credit rating agencies has long been recognized as a vulnerability, so diversifying the industry by encouraging additional rating agencies - whether non-profit or public agencies - to enter could bring healthy competition and lower systemic risks. Incentivizing new entrants while encouraging transparency could further diversify perspectives within this field, providing for more accurate risk analysis when rating financial instruments. By comprehensively addressing these areas, the financial system can become more resilient, transparent, and accountable. The aim is to foster an environment in which incentives align with long-term market stability and investor protection; reforms aim to prevent conflicts of interest, enhance regulatory oversight, encourage responsible financial practices, and diversify credit rating industries. While no system is completely immune from crises, implementation of such reforms may significantly decrease their likelihood and severity should another subprime mortgage meltdown or similar financial crises occur again in the future. Blogger Case Synopsis The Carolina Pad and Blogger Case addresses an ethical quandary faced by Carolina Pad, an established office supply firm known for its colorful office supplies. Carolina Pad reportedly

12 sent items directly to bloggers in order to secure reviews from them and acquire reviews in return. An increasingly concerning trend among bloggers has been their demand for financial compensation in exchange for reviews. At stake is how this ethically compares with the more conventional practice of exchanging things for reviews. This instance illustrates Whitlock's challenge of deciding if providing cash compensation or covering travel costs of bloggers would be a more efficient use of promotional resources than traditional approaches such as traditional ads. Carolina Pad prioritized ethical considerations. Therefore, they assessed whether cash payments might undermine genuine reviews while remaining consistent with company principles and their company mission statement. This ethical quandary extends well beyond making an immediate choice; its impact extends into considering potential effects on a company's brand reputation and customer trust. This case provides an intriguing examination of innovation and entrepreneurship, including key elements such as value proposition, communication ethics internet marketing sales. The Carolina Pad and Blogger Case presents an insightful exploration of both ethical and commercial implications associated with compensating bloggers for product evaluations. This text encourages readers to engage actively in analytic thinking on marketing tactics in an ever-evolving digital era, emphasizing their importance and stressing ethical principles in business methods. A case provides a perfect venue to examine this relationship between ethics and marketing tactics - providing essential guidance on navigating modern business. Question 1 April Whitlock of Carolina Pad is in a difficult spot when it comes to ethical considerations for compensating bloggers for reviewing products from Carolina Pad. As manager, she must decide if financial transfers serve as motivations for bloggers who review

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13 Carolina Pad products. Whitlock must evaluate his situation by carefully considering all relevant information, from sources both internal and external to his business, including customer trust issues as a part of this analysis (Cox et al., 2017). A key aspect to keep an eye on when doing this assessment is how this could influence brand reputation and customer relationships within his firm. Carolina Pad is famed for providing chic office supplies. However, its transition away from evaluation-related goods towards offering cash compensation presents an interesting new element that may compromise its brand recognition in its target audience. Whitlock must carefully balance earning positive ratings while maintaining client trust since any misstep could have lasting repercussions. Whitlock must consider both the comparative efficacy of blogger reviews compared to conventional advertising as part of his assessment of blogger evaluations. Whitlock is testing out various marketing initiatives by looking at whether providing financial rewards to bloggers could result in greater returns compared to traditional advertising tactics. Making such an unconventional choice has significant ramifications for their advertising activities thus necessitating Whitlock to predict all their possible ramifications. Whitlock's problem raises important concerns about the legal and ethical consequences. The increasing practice of bloggers demanding monetary remuneration presents certain legal obstacles, and Carolina Pad must guarantee that any kind of compensation adheres to legal norms and industry laws (Cox et al., 2017). Whitlock must carefully evaluate the ethical implications of paying for reviews, since it may undermine the authenticity and integrity of the ratings. This entails a meticulous analysis of the company's principles and its dedication to open and sincere interaction with both bloggers and customers. Significantly, Whitlock has presumed that remunerating bloggers might result in a greater number of favorable evaluations and hence boost sales. This assumption is based on the premise that bloggers would be motivated by

14 financial incentives to provide positive evaluations of Carolina Pad's goods. Nevertheless, there is a potential drawback to this strategy, since it might undermine the genuineness of the assessments. Bloggers may experience pressure to exhibit a favorable inclination, which might undermine the confidence customers have in these evaluations as authentic and impartial viewpoints. Whitlock must strike a delicate balance when approaching her dilemma of finding an equilibrium between using blogger influence to elevate Carolina Pad's brand and sales while upholding review process integrity. Her decision will shape Carolina Pad's marketing strategy while setting a precedent on its ethical considerations during business practices; its multidimensionality highlights just how complex ethical decision-making in contemporary marketing and business environments really can be. Question 2 Whitlock can rely on various options available to her when making complex decisions like these, each carrying unique ramifications and considerations. 1. Continue the current practice of providing products without additional compensation: Whitlock can opt for keeping things as is by continuing the current practice of giving products without offering additional monetary compensation to bloggers, similar to traditional influencer marketing where companies give away products in return for impartial reviews from bloggers. Although this approach preserves the authenticity of reviews while not drawing in as many bloggers due to recent shifts toward financially compensating bloggers. 2. Offer cash payments to bloggers for reviews: Whitlock may take action in response to the changing dynamics of influencer marketing by offering cash payments in return for

15 positive product reviews from bloggers. While this approach could increase influencer participation and provide added incentives for favorable reviews of Carolina Pad products from influencers, its downside could be compromised authenticity of reviews because bloggers may become motivated more by financial gain rather than true product quality. 3. Provide non-monetary incentives, such as exclusive access to new products or company events: An alternative approach would be to offer non-monetary incentives that appeal to bloggers. Whitlock could offer exclusive access to new product launches or company events aligned with influencer interests - offering non-cash benefits may help maintain motivation while sidestepping some potential downsides of cash payments. However, their effectiveness must still be carefully considered against cash payments. 4. Develop a transparent policy regarding blogger compensation and disclose it publicly: Whitlock may use transparency as the solution to ethical considerations surrounding blogger compensation, by developing and publicly disclosing a policy outlining how bloggers are compensated and disclosing it publicly. By setting guidelines and being forthcoming concerning its compensation structure Carolina Pad can more successfully negotiate an ethical landscape while showing its dedication to integrity with influencer marketing practices. Each action comes with its own set of tradeoffs; which one would best meet Carolina Pad's goals and values will depend on which option best meets those criteria. Whitlock must assess any impact on his company's brand image, consumer trust, and influencer marketing efficacy before proceeding. Furthermore, she must consider both legal and ethical implications associated with each option and make sure it complies with both industry standards as well as her

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16 company's commitment to ethical business practices. Decision-making in Carolina Pad involves carefully considering all available actions and solutions to devise a strategy that not only addresses its current issue but also improves Carolina Pad's chances of succeeding within influencer marketing's ever-evolving environment. Question 3 When assessing the several courses of action that April Whitlock may take in the Carolina Pad and the Blogger's case, it is essential to acknowledge the specific consequences that each decision has on different parties. 1. Option 1: Continue the current practice of providing products without additional compensation:  Stakeholders affected: Bloggers  Impact: This option primarily impacts bloggers who currently receive compensation solely in the form of Carolina Pad products for reviewing them, maintaining authenticity in reviews. While this might remain attractive for bloggers who desire financial compensation for their efforts, such changes could reduce motivation or interest to review Carolina Pad products. 2. Option 2: Offer cash payments to bloggers for reviews:  Stakeholders affected: Bloggers, Company, Consumers  Impact: Bloggers will gain financially from this option as they receive compensation in return for reviews written about Carolina Pad's products, but there may also be unintended ramifications such as biased or less genuine assessments which affect consumer trust of Carolina Pad. This

17 might result in misleading or falsified assessments which do not accurately portray quality products made available from Carolina Pad. Consumers could potentially suffer as they trust more in a brand less when reviews don't accurately represent its quality impacting their trust in the company. 3. Option 3: Provide non-monetary incentives, such as exclusive access to new products or company events:  Stakeholders affected: Bloggers, Consumers  Impact: Bloggers benefit significantly from this option as they receive exclusive experiences and benefits that maintain authenticity while offering alternative forms of compensation to bloggers. Consumers could reap greater benefits from more genuine reviews as non-monetary incentives can motivate bloggers without jeopardizing the integrity of their assessments. 4. Option 4: Develop a transparent policy regarding blogger compensation and disclose it publicly:  Stakeholders affected: Consumers, Bloggers  Impact: Consumers stand to gain from increased transparency and full disclosure when making purchasing decisions based on blogger reviews, while bloggers benefit as the policy provides fair compensation and fosters trust with their audience. It also meets ethical considerations while creating an influencer marketing environment with more transparency. Each option introduces its own set of consequences for various stakeholders, and Whitlock must carefully weigh these impacts when making his decision. He should carefully

18 consider any long-term ramifications on Carolina Pad's relationship with bloggers, consumer trust levels, and ethical standing. This process necessitates striking a delicate balance between marketing goals and the well-being of stakeholders, underscoring how intricate ethical decision- making in modern business practice truly can be. Question 4 Utilitarianism: Maximizing Overall Happiness Utilitarianism as an ethical reasoning method emphasizes maximizing overall happiness or pleasure, so in terms of Carolina Pad and Blogger's case Whitlock should choose an option that leads to maximum overall satisfaction among bloggers, consumers, and the company itself. Maintaining the status quo through non-monetary compensation could increase blogger satisfaction as some may appreciate receiving products they value. However, this might not lead to optimal happiness as some bloggers might find this insufficient. Whitlock believes in offering unique experiences as they align perfectly with utilitarianism. By giving bloggers personalized experiences related to his products, he hopes to increase blogger satisfaction and generate authentic and positive reviews, leading consumers to benefit from more informed and honest assessments that increase overall happiness and satisfaction levels. While this option might incur additional expenses, its potential increase could outweigh these expenses in time. Rights: Respecting Freedom of Expression The rights-based approach entails respecting the individual's rights involved. Bloggers have the freedom of speech without undue interference; however, incentivizing positive reviews represents a challenge to this ethical principle. Whitlock should prioritize options that protect bloggers' autonomy to remain true to his rights-based approach and not impinge on bloggers' freedom of speech. In keeping with a rights-based framework. Offering unique experiences is

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19 key in upholding bloggers' rights as it gives them opportunities to form true opinions from personal experience, while transparency promotes honesty and openness when communicating with a company both options that reflect freedom of speech rights. Justice: Emphasizing Fairness Whitlock should pursue the justice-based method in order to promote fair and equal treatment among bloggers while assuring consumers are not misled by biased or fraudulent reviews. Maintaining the status quo may seem fair to bloggers who appreciate receiving products; however, this might not meet all financial needs of all bloggers equally resulting in disparities among them. Promoting transparency would better ensure justice is served. Whitlock can create an ethical, fair, and transparent system by disclosing compensation details and outlining clear guidelines, thus informing bloggers of all terms while consumers make well- informed decisions based on impartial data. By following this path to justice she ensures fair treatment among bloggers as she promotes equal treatment among them all. Virtue: Focusing on Moral Character Virtue ethics focuses on moral character development. Whitlock should consider options aligned with virtues like integrity, honesty, and transparency when selecting ethical options for Whitlock to consider. Incentivizing positive reviews may raise issues regarding integrity and honesty of bloggers' reviews, potentially harming their moral character. Offering unique experiences and providing transparency are more in keeping with virtue ethics. By sharing their unique experiences, bloggers have the chance to showcase authenticity and integrity in their reviews. Furthermore, maintaining transparency demonstrates honesty and integrity for an organization contributing towards building positive moral character within itself as well as cultivating virtues that contribute towards long-term ethical behavior.

20 Employing these four ethical reasoning methods provides Whitlock with a comprehensive framework to navigate Carolina Pad and Blogger's case successfully. A balanced approach that prioritizes overall happiness while respecting rights, emphasizing fairness, and cultivating virtue will produce more ethically sustainable resolutions. Providing unique experiences while guaranteeing transparency are among the ethical choices that follow these principles. Question 5 At Carolina Pad and Bloggers case, I believe Whitlock should establish and implement an open policy concerning blogger compensation that is communicated publicly. This approach to transparency rests upon an expansive ethical framework that takes into account consumer rights, fairness, virtue ethics, and utilitarian principles. Transparency should always serve the consumers first and foremost. Carolina Pad's disclosure policy allows consumers to make well- informed choices in an increasingly informational and authentic market, providing transparency that allows consumers to critically review product reviews based on impartial, unbiased data (Cox et al., 2017). Transparency aligns with Carolina Pad's ethical approach centered around rights-based ethics by protecting consumers against being deceived or duped by undisclosed compensation agreements. By acknowledging blogger reviews' influence of compensation payments on consumer rights and creating trust within its brand. Establishing a transparent policy contributes to principles of justice and fairness. Transparency ensures a level playing field for bloggers; eliminating potential disparities in compensation ensures each is treated equitably - reflecting justice-based ethics by not unduly influencing bloggers through undisclosed compensation or misleading consumers with misleading advertisements or sales pitches. By adopting such practices, Whitlock displays their

21 dedication to fairness, ethical business practices, and equal treatment strengthening both their brand reputation as well as developing stronger partnerships with bloggers who value integrity in partnership relationships. Additionally, virtue ethics promote the cultivation of positive character traits such as honesty and integrity; choosing transparency fits perfectly into this paradigm, reflecting an emphasis on openness and truthfulness in business transactions (Cox et al., 2017). Whitlock demonstrated his virtuous ethics by choosing transparency-ensuring, encouraging a culture of honesty within his company while at the same time encouraging moral character among bloggers he worked with. Transparent communications also act as a proactive measure to build an idealistic organizational culture as such they could appreciate working for an organization that valued integrity thus forging mutually beneficial working relationships all around. Utilitarianism, which seeks to maximize overall happiness, supports transparency. Whitlock ensures he maintains consumer trust through open disclosure about compensation packages provided to bloggers so their information will be more likely trusted by consumers. Maintaining consumer trust is vital to Carolina Pad's continued success and must always come before profits or growth goals. At a time when authenticity is highly prized, taking an open approach can separate companies from competitors while building loyal customer bases. A utilitarian perspective aligns itself with this idea by emphasizing trustful consumers as an outcome for happiness in general.

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22 References Clemon, D. (2023). Who Was to Blame for the Subprime Crisis? Investopedia. https://www.investopedia.com/articles/07/subprime-blame.asp Cox, S., Brooks, B. W., Anderson, S. C., & Frederick, J. N. (2017). Carolina Pad and the Bloggers . Hbsp.harvard.edu. https://hbsp.harvard.edu/product/NA0133-HCB-ENG Hemraj, M. B. (2015). Theories, Rating Failure and the Subprime Mortgage Crisis. Springer EBooks , 11–70. https://doi.org/10.1007/978-3-319-17927-8_2

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Moody and the Bloggers cases (1)

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