ABSTRACTMobilizing Foucault’s genealogy, this article investigates how an “ethics event”—the involvement by some sell-side financial analysts in the United States and United Kingdom across the past two decades in corporate governance—emerged. It is found that the complex relations formed between specific historical precedents, normative discourses, and fields of power rendered certain issues in financial markets morally problematic and constructed analysts’ corporate governance work as a potential solution. Contributing to research in finance ethics, this article develops a novel perspective to conceptualize (...) the rise of ethically relevant practices in financial markets, focusing on how ethical problems and their solutions are outcomes of discursive construction and power relations. This article also revises our understanding of the boundary between technical norms and moral norms in financial markets. When ethical crises occur, it is argued, transforming technical practices and revising the technical norms adopted by financial professionals has the potential to tackle ethical concerns. (shrink)

Business Ethics: A European Review, EarlyView.

Corporate governance and finance are dynamic academic fields that offer myriad opportunities for business ethics analysis. Within the corporate governance triad in recent years, shareholders have increased their power over boards of directors and executives through both regulation and movements to change corporate by-laws. The impact of board characteristics on firm performance has proven elusive, leading to questions concerning board processes and individual director beliefs and behaviors. At the same time, CEOs have lost considerable power, leaving many struggling to regain (...) their control and maintain their compensation levels, while others adopt a stewardship approach to their posts. In the field of finance, the recent financial debacle has led to a reexamination of financial regulation and of the fundamental nature and purpose of the industry. All of these issues provide business ethicists fodder for investigation and analysis. (shrink)

ABSTRACT:In this updated and revised version of his 2008 Society for Business Ethics presidential address, Richard Nielsen documents the characteristics and extent of the 2007–2009 economic crisis and analyzes how the ethics issues of the economic crisis are structurally related to a relatively new form of capitalism, high-leverage finance capitalism. Four types of high-leverage finance capitalism are considered: hedge funds; private equity-leveraged buyouts; high-leverage, subprime mortgage banking; and high-leverage banking. The structurally related problems with the four types of high-leverage finance (...) capitalism converged in something of a perfect economic storm. Explanations for the crisis are offered in the context of the type of the high-leverage finance capitalism system that permitted and facilitated the economic crisis. Ethics issues and potential reforms are considered that may be able to mitigate the destructive effects of what Schumpeter referred to as the “creative destructive” effects of evolutionary forms of capitalism while realizing the Aristotelian economic ideal of creating wealth in such a way as to make us better people and the world a better place. (shrink)

Fortis, the leading Benelux financial group, had been a success story of successive mergers of bank and insurance companies, with leadership in corporate social responsibility (CSR). One year after the acquisition of the major Dutch financial conglomerate ABN AMRO, the global financial crisis caused the collapse of the Fortis group. The purpose of this article is to use the case study of Fortis’s recent fall as a basis for reflective considerations on the financial crisis, from stakeholder and ethical perspectives. A (...) selected number of key events of the history of the dramatic crisis at Fortis will be analysed from different ethical frameworks. Special consideration will be given to fairness of communication, shareholder activism and conflicts of interests of CEO’s mergers opportunities. A confrontation between the CSR policy and the reality raises the fundamental questions why the powerful CSR guidelines and ethical principles did not help in the assessment of the risks. (shrink)

How ethical have recent banking practices been? We answer this question via an economic analysis. We assess the two dominant practices of the modern banking system – fractional reserves and maturity transformation – by gauging the respective rights of the relevant parties. By distinguishing the legal and economic differences between deposit and loan contracts, we determine that the practice of maturity transformation (in its various guises) is not only ethical but also serves a positive social function. The foundation of the (...) modern banking system – the holding of fractional reserves against deposits – is, however, problematic from economic, legal and ethical perspectives. Starting from a microanalysis of money's function, a reassessment of the current laws concerning the practice is encouraged, with the aim not only to rectify economic irregularities but also to realign depositors' rights with the obligations of the banking sector. (shrink)

How ethical have recent banking practices been? We answer this question via an economic analysis. We assess the two dominant practices of the modern banking system – fractional reserves and maturity transformation – by gauging the respective rights of the relevant parties. By distinguishing the legal and economic differences between deposit and loan contracts, we determine that the practice of maturity transformation (in its various guises) is not only ethical but also serves a positive social function. The foundation of the (...) modern banking system – the holding of fractional reserves against deposits – is, however, problematic from economic, legal and ethical perspectives. Starting from a microanalysis of money's function, a reassessment of the current laws concerning the practice is encouraged, with the aim not only to rectify economic irregularities but also to realign depositors' rights with the obligations of the banking sector. (shrink)