Cullen Roche of Pragmatic Capitalism and Modern Monetary Realism argues against Warren Mosler's claim that banking and finance serve public purpose, holding that the purpose of all firms is increasing shareholder value.
John G. Taft contests that view.
...the financial system has become disconnected from its larger social role and purpose, which is to serve as a means to greater ends, helping bridge the gap between the needs of savers (investors) and the needs of users of capital (businesses, governments, not-for-profit agencies) and efficiently allocating capital and promoting economic growth.
It has forgotten, as economist Robert Shiller writes in Finance and the Good Society, that "financing is really creating the architecture for reaching a goal. The goals served by finance originate with us. Finance is not about making money per se. It exists to support other goals — those of society."CFA Institute President John Rogers is concerned that the present state of the financial sector is affecting not only it but also society. Accordingly, he has suggested addressing the issue through a formal commitment to ethical behavior.
Restoring trust and confidence requires commitment to and investment in professional and business ethics. Much of the focus of the financial services industry leaders since 2008-2009 has been on responding to and working through regulatory reform, in the form of hundreds of new laws, thousands of new regulations and millions of pages of new rules. Clearly, that is not enough.
Under Rogers' leadership, the CFA Institute — the global association of investment professionals — is taking the lead in being "a bolder voice for professional ethics." The organization has developed an Asset Manager Code of Professional Conduct, which more than 700 firms have adopted. More recently, it published an Integrity List, "a collection of more than 50 tangible steps that investment professionals can take to restore public trust and confidence." The list includes "real world ideas" submitted by CFA charter holders. Here are a few examples:
• Commit to a gold standard code of ethics and professional conduct.This can be read both as an appeal to instituting higher standards voluntarily and also as an implicit warning to get ahead of the curve before lawmakers feel it necessary to intervene in the interest of society.
• Require training on ethical decision-making for yourself and your firm.
• Place the client's interests before your own.
• Name and shame unethical behavior.
• Strive for a conflict-free business model.
• Act with integrity 24/7 — not just at the office.
• Write articles and speak publicly about ethics.
Read it at Harvard Business Review | HBR Blog Network
How to Fix Financial Capitalism? Focus on Ethics
by John G. Taft