Tag Archives: ethics

Intervening: problems with values in finance

A few days ago, I attended a conference on the work of French sociologist Pierre Bordieu and its relevance for accounting. There were many things to take away but one of them was the fact that, in later life, Bordieu increasingly became an activist as well as an academic. In his 2003 work Firing Back: Against the Tyranny of the Market 2, he famously wrote:

“Those who have the good fortune to be able to devote their lives to the study of the social world cannot stand aside, neutral and indifferent, from the struggles in which the future of the world is at stake.”

He was specifically referring to sociologists, but I think the same is true of business educators and, most relevant to me, finance educators. Following the financial crisis, a writer in The Economist observed the following:

“Most of the people at the heart of the crisis— from Dick Fuld at Lehman Brothers to John Thain at Merrill Lynch to Andy Hornby at HBOS—had MBAs after their name . . . In recent years about 40% of the graduates of America’s best business schools ended up on Wall Street, where they assiduously applied the techniques that they had spent a small fortune learning. You cannot both claim that your mission is “to educate leaders who make a difference in the world”. . . and then wash your hands of your alumni when the difference they make is malign.” (Economist, September 24, 2009: on-line edition, quoted in Crossan et al, 2013)

Of course, business schools have always included at least some materials on ethics, and are even starting to consider character, as Crossan and her colleagues set out in their paper, but I do not think this goes far enough. There is a bigger issue that has bugged me more and more in my many years as a finance educator and I would express it like this:

The general assumption seems to be that finance is a technocratic, value-neutral discipline. It is taught the same way all over the world to people of widely different cultures and outlooks. Ethics in finance largely consist of reporting things correctly (sic), ensuring that controls are effective, rules are complied with and that managers discharge their responsibilities to their shareholders or stakeholders.

It does not take very much effort to deconstruct and undermine this view. Jacques Derrida argued that symbols (which include words and numbers) never have a fixed, neutral meaning. Meaning of symbols is always “deferred” into other symbols. In other words, meaning of any sort depends on a complex web of context. Financial numbers mean nothing in isolation, they can only be interpreted in a context, and that context will include values. It follows on from this that, like Bourdieu, Derrida insisted on an activist dimension to his project – “Deconstruction, I have insisted, is not neutral. It intervenes” (Positions).

To take one concrete example, the law in the UK requires directors to act in the best interests of shareholders, which is assumed to be maximising financial return. This is also the assumption behind corporate governance codes and the starting point for most financial analysis techniques. This point is further reinforced by the structure of an income statement, which culminates in the profit or loss attributable to shareholders, inherently conveying the idea that the only really important number is the return to providers of equity capital, as pointed out by Sikka (2015) and others.

It is clear that there is a value system hard-wired into the way we do finance and, to my mind, the best ever summary of that system was set out by the fictional financier Gordon Gekko in his famous speech from the 1987 film Wall Street. If by some chance you have never seen this speech, I highly recommend viewing it. It is an extraordinary piece of film:

Of course, it is obvious to us now that Gekko was spectacularly wrong in his prescription for the USA, and many of us would recoil from his description, but who can deny that his approach is the morality at work in our boardrooms and trading desks? If you have an hour available at some point, a contrary view can be found in this absorbing documentary where the entrepreneur Peter Jones interviews Mark & Mo Constantine, the owners of Lush, along with Chris Dawson, owner of discount store The Range.

Lush is a rare example of a business run to maximise social good rather just profit, although along the way the Constantines have created a spectacularly successful business too. They can do this because the business is privately owned – the reason Mark Constantine declares he would never sell the business is because a publicly-owned company could not operate like this. If he sold the company, it would be absorbed by the dominant paradigm and its values would not last long.

So if we are not happy with Mr Gekko’s approach, are there some alternative approaches which can inform our finance education and practice? I think there are, and will aim to explore these in my next blog post.

References:
Crossan, M., Mazutis, D., Seijts, G. & Gandz, J., “Developing Leadership Character in Business Programs”, Academy of Management Learning & Education, 2013, 12 (2), 285–305. http://dx.doi.org/10.5465/amle.2011.0024A
Sikka, P. (2015) “The hand of accounting and accountancy firms in deepening income and wealth inequalities and the economic crisis: Some evidence”, Critical Perspectives on Accounting, 30, 46–62. http://dx.doi.org/10.1016/j.cpa.2013.02.003

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Professional values: the painful truth (H808 A7.1)

I will keep the story brief to avoid offending too many people. But I remember the situation vividly. As a trainee accountant, I was attending an internal training course and I questioned whether a certain course of action being discussed was really ethical. It wasn’t anything terrible, but genuinely I felt there was an issue to consider. The instructor (who happened to be a partner in the firm) simply stared at me. This had obviously never occurred to him. For the rest of the course this was a bit of a standing joke. Later on, the same partner was telling a story of some slightly aggressive commercial practice. He then looked at me and said, with heavy sarcasm, “Sorry, that wouldn’t be ethical, would it?”

I was shocked because, as a slightly naïve twenty-something, I had actually bought into the idea that the professional ethics talked about by chartered accountants actually meant something. It seemed I was in quite a small minority.

Of course, the conversation might have been different if it had taken place post-Enron. The corruption at Enron and Arthur Andersen, resulting in the abrupt collapse of both, is rightly seared on the collective memory of accountants. The events provided a brutal and very necessary demonstration to the profession of why ethics matter. Professionals, by definition, occupy a position of trust. Those who deal with them must believe that they are acting honestly and fairly. That is one of the reasons why professionals tend to command higher pay than non-professionals. But if there are no ethics, the trust will disappear. So will the professionalism, the pay, and sometimes the organisation. The temptation is always there to cut corners, make a fast buck, and we need something terrible to scare people away from this. Andersen’s fate was that terrible thing, but I am sure we will need another one before long.

I should add that my experience with that employer was not unusual. Bizarrely enough, the only place I have ever worked where anyone discussed ethics with a straight face was an investment bank. But that’s another (long) story and may belong to another post…

Nowadays I teach professional ethics, among other things, and as you may gather I get quite passionate about them. I am quite proud that my Institute sets out its professional principles very clearly – integrity, objectivity, professional competence and due care, confidentiality, professional behaviour. These seem to cover the key points. Not all chartered accountants measure up to these standards, but the aspiration is clear, and there is a disciplinary process to deal with members who break the rules in a particularly obvious or flagrant way.

So I am a bit of an outsider when it comes to the stated ethics and values of Learning Technologists and higher education generally, and have been slightly surprised by, as I see it, the sheer lack of ambition I have found. CMALT, the closest thing to a professional qualification in learning technology, seems to carry very few ethical obligations beyond phrases such as “understanding and engaging with legislation, policies and standards” or “A commitment to communicate and disseminate effective practice.” Unless I have missed it, there is no disciplinary body or procedure to deal with lapses.

CMALT has an affiliation to the Higher Education Academy, who do spell out a clear statement of professional values, summarising these as:

V1 Respect individual learners and diverse learning communities

V2 Promote participation in higher education and equality of opportunity for learners

V3 Use evidence-informed approaches and the outcomes from research, scholarship and continuing professional development

V4 Acknowledge the wider context in which higher education operates recognising the implications for professional practice

These seem worthy enough, but a little vague and not particularly demanding. There is no explicit recognition of respect for colleagues, for example, or using knowledge for the benefit of others. And, being slightly mischievous about it, isn’t a commitment to “promote participation in higher education” just a little self-serving? Maybe higher education isn’t right for some people. Might there be an ethical obligation to discourage someone from entering higher education under certain circumstances, however unusual?

The principle that most appeals to me is the use of evidence-informed approaches. This represents the best values of academics, which all of us could learn from. We all need to be willing to engage with evidence, even when it contradicts previously-held beliefs, or our own interests. An example of this is the debate ongoing over whether learning technology is really a good thing anyway, or is it an expensive distraction, as was powerfully argued in an article from the ETD website I came across recently. For those, like me, who believe in the power of educational technology to be a force for good, such articles are challenging. They should not be ignored but considered and responded to, which I hope to do in a future blog post.

Enough analysis. Our OU assignment is to produce a statement of our “professional values”, which seems to be a way of sorting out what is really important to us in our working life. For me, the most important professional value is honesty, which sits behind all the others, and which leads to trust. Being honest with others – colleagues, clients, students – means telling them the truth, even when it is uncomfortable. Clearly, this needs to be tempered with tact and with obligations of confidentiality. But, as one of my favourite journalists Lucy Kellaway observed in her latest column, we tend to suffer from too little honesty rather than too much. And being really honest with yourself is tougher still – most of us, in truth, know right from wrong if we will make ourselves face up to it. Honesty of this sort is not a standard I would ever claim to have met. But I think it is a worthy aspiration

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