Business Corruption in Spain: Causes and Consequences

Business Ethics and Corruption in Spain

Introduction

This study analyzes business corruption in Spain, focusing on its origins and development. This report highlights two key dimensions: the causes and the effects of business corruption within the country.

Causes of Business Corruption

The primary cause of business corruption stemmed from exploiting the pre-crisis situation. The price of housing was well above its real value, a direct consequence of the inmobiliaria bubble. Furthermore, banks were granting high-risk mortgages without sufficient endorsement, famously known as subprime mortgages. While the risk of non-payment for these loans was exceptionally high, the profitability banks obtained was equally significant.

Another ethically incorrect behavior involved the case of the black cards. These were corporate credit cards used by advisors and executives of Caja Madrid and Bankia to spend client money on personal whims. A major issue was that these executives were not paying taxes on these personal expenses.

These actions are considered ethically incorrect because they prioritized the personal well-being of a few individuals over the interests of the company and its stakeholders.

Effects of Corruption

Economic Impact

Economically, bank instability emerged due to the high number of non-payments on subprime mortgages granted to citizens for housing purchases. This led to a bankruptcy of the banking system. The Spanish government had to intervene, rescuing certain banks to prevent a severe collapse of the national economy.

Many builders found themselves with a large surplus of properties that no longer had buyers. With no demand, house prices plummeted sharply, leading many builders directly into bankruptcy.

Social Impact

Socially, significant distrust was generated towards banking institutions, particularly when depositing savings in banks affected by the black cards scandal. Furthermore, the widespread non-payments of high-risk mortgages resulted in a substantial number of home repossessions, impacting many families.

Conclusion

This study has illustrated the main causes of business corruption in Spain and its negative economic and social effects. A potential future line of research could explore the cultural problems within Spanish society that contributed to the pre-crisis environment.