Perhaps I’m a bit naive, but in my years in the finance business I met very few people who struck me as unethical. Selfish, blinkered, dull and sometimes even quite stupid, yes, but seldom really bad. Perhaps they were good at covering it up. For it seems clear from the events of the mid-2000s that in the finance industry as a whole there is a need for a more ethical approach to business. The question is, how to bring this about?
Understandably people expect finance teachers to play their role. But is it possible to make people behave better? I see three possible approaches.
First, try to avoid recruiting people who are less ethical to start with. Second, teach courses in how to behave ethically. And third, explore business situations of real ambiguity to sensitise people about the situations where they need to be more conscious of an ethical choice.
1. Recruit more ethical people
This is an unstated but real goal of the MFin. But it’s very hard to tell whether we succeed. My interviewing colleagues and I don’t have any ability to look into a person’s soul (well, I don’t anyway – perhaps colleagues have better vision than I do). Overt evidence of ethically dubious behaviour or attitudes would certainly jeopardise a person’s place on the MFin but nobody is daft enough to signal such behaviour. A real crook would probably be able to fake it.
2. Teach better behaviour
We make an attempt at this by inviting the CFA to teach a session on ethics in finance at the beginning of the year. It’s an essential component of the CFA curriculum and something that the CFA feels strongly about, so they are the right people to teach it. I don’t know how much difference it makes to future behaviour. We know that some famous US business schools have been teaching ethics in business for decades but some of their alumni have been locked up for major law breaking. Plenty of others have not been convicted of any crime but have behaved in ways that do not reflect well on their alma maters.
3. Sensitise students to the issues
What we haven’t tried, but I think might be useful, is to look at business dilemmas of the type that require some sort of ethical thought process and which are not easy or obvious. I came across a book that could serve as reference. It’s by John Plender and Avinash Persaud, called “All you need to know about ethics and finance.” You can read a bit more about it here.
Supporting a good initiative: the Cosgrove Prize
Meanwhile I’m happy to publicise a very constructive attempt to get people aged 35 or less to think about ethics and finance, which is the Robin Cosgrove Prize. Founded in memory of a young investment banker who died in an accident, it’s an annual prize awarded for “creative, unpublished papers setting out innovative ideas for promoting ethics in finance.” It aims to encourage:
- Awareness of the fundamental role of ethics in the world of finance;
- Precise identification of ethical issues in financial activities and institutions, in both the public and private sectors
- Proposals for implementation of initiatives and projects concerning teaching and regulating for ethics in finance.
The closing date for the 2012-13 prize is 31 May 2013.