{"id":667,"date":"2015-11-12T11:49:28","date_gmt":"2015-11-12T10:49:28","guid":{"rendered":"https:\/\/blog.iese.edu\/ethics\/?p=667"},"modified":"2015-11-12T11:52:07","modified_gmt":"2015-11-12T10:52:07","slug":"pinpointing-the-ethical-problems-in-finance","status":"publish","type":"post","link":"https:\/\/blog.iese.edu\/ethics\/2015\/11\/12\/pinpointing-the-ethical-problems-in-finance\/","title":{"rendered":"Pinpointing the Ethical Problems in Finance"},"content":{"rendered":"

The Seven Pillars Institute<\/strong> recently published an interview<\/a> with Joris Luyendijk<\/strong>, the author of the book Swimming With Sharks: My Journey into the World of the Bankers<\/a><\/em>. The author draws on 200 interviews with people from financial institutions in the city of London<\/strong>.<\/p>\n

\"London<\/a>
London bridge photo from hot air balloon. Source: Flickr\/Daniel Chapma<\/figcaption><\/figure>\n

I liked some of the ideas expressed in the interview:<\/p>\n

    \n
  • Bankers are not monsters\u2014they are human beings<\/strong>.<\/li>\n
  • Most care about ethics in their private lives, but leave that behind when they step into the bank<\/strong>. They think banks should make as much profit as possible within the law, since otherwise it would be immoral. Therefore, ethics is dictated by what the law says<\/strong>. If this is how bankers think, it’s no wonder they get such bad press.<\/li>\n
  • There are cartels that divide up the market and use part of their excess profits to maintain their privileges<\/strong>. If this is true, then competition policies should be reconsidered.<\/li>\n
  • Finance is an honorable activity<\/strong>; the problem is with the way it has grown, and the perverse incentives and conflicts of interest<\/strong> that have been created. This will not improve by itself, because no one is going to cut off the branch they are sitting on, as Luyendijk skillfully explains.<\/li>\n
  • The biggest issue, he says, are the perverse incentives<\/strong>. “If you are rewarded for undesirable behavior and punished for good behavior, then you can have all the ethics promises you want but people will act on those temptations.”<\/li>\n
  • For example, he suggests that bankers in line for a bonus should also be in line for a malus<\/strong>, with a large vested interest in their business (i.e., big reward for good results, and punishment for bad results), and feeling personal liability when things go wrong for them<\/strong>.<\/li>\n<\/ul>\n

    This is all very familiar, at least to those of us working in the field. We have to realize that there are problems related to ideas, institutions, behavior within organizations<\/strong> and, therefore, the rules of the game, such as incentives, and other factors that directly affect people<\/strong>.<\/p>\n

    In short, there are three areas to address<\/strong>:<\/p>\n

      \n
    1. What’s the deal with finance (and business), what’s it all about, how do you play…<\/strong><\/li>\n
    2. How should people behave in order to be good managers or employees, and why<\/strong>.<\/li>\n
    3. What should the rules, codes, cultures, structures, missions and behaviors be like so the company doesn’t turn into a snake pit<\/strong>.<\/li>\n<\/ol>\n","protected":false},"excerpt":{"rendered":"

      The Seven Pillars Institute recently published an interview with Joris Luyendijk, the author of the book Swimming With Sharks: My Journey into the World of the Bankers. The author draws on 200 interviews with people from financial institutions in the city of London. I liked some of the ideas expressed in the interview: Bankers are […]<\/p>\n","protected":false},"author":172,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[362,83364],"tags":[7967,91591,139],"coauthors":[],"class_list":["post-667","post","type-post","status-publish","format-standard","hentry","category-business-ethics","category-finance-ethics","tag-banking","tag-ethics","tag-finance","megacategoria-mc-business-ethics-and-corporate-social-responsibility"],"acf":[],"aioseo_notices":[],"aioseo_head":"\n\t\t\n\t\n\t\n\t\n\t\n\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t