Ethics is key for the wellbeing of an Economy. When “Ethical Values” disappear .. excesses boost GDP growth in the short term, but the loss of trust feeds uncertainty and leads finally to a reduced Potential Economic Growth. In an unhealthy economy “growth” becomes an aim in itself. Yet, no amount of rules or morality in itself can transform people into genuinely moral and caring beings
Business ethics has also a formal side to it. Christian Takushi is a member of the Swiss Financial Analysts Association (SFAA) and he adheres to the Best Practice Handbook. Christian is additionally a member of the CFA Institute in Switzerland and USA and CFA volunteer. As such he adheres to the Code of Ethics and the Standards of Professional Practice of the CFA Institute. These Codes of ethics demand that we put our clients’ interests first.
The term “ethics” is being increasingly used by regulators and corporations in a way that focuses on its outward and measurable properties only, divorcing it from its real purpose: how we treat others. The real test of ethics comes when we have to risk our bonuses, promotions or even careers in order to preserve our integrity and inner values. An amoral or immoral executive cannot be deemed ethical simply, because he is within the current law and compliance officers have no regulatory charges against him. Laws and regulations are by design conceived with loopholes. Excessive regulation and risk control only restrain the evil behavior of an unethical professional for some time, shifting misconduct to areas with loopholes. The path chosen by regulators and big banks are giving society an illusory sense of safety.
Business ethics is not just formal theory, it demands integrity too. What are we willing to pay for our integrity?
In early 2006 leading banks around the world became bullish on the Japanese stock market. The market had doubled in less than three years and all over Europe big fund-raising road shows were taking place. As one of the leading Asia specialists, Christian, was asked to give the key-note speech at a major event to kick-start a significant road-show. It was the greatest fund-raising opportunity for Japan in 16 years. After having suffered for 15 years almost all Japan experts were bullish on the market and on the road raising funds. Christian came under big pressure to go along. He was surprised by the extreme bullishness of all speakers that preceded him. That day he apologized to all other speakers and investors for ruining their party. He said “I personally believe Japan has not done its homework, this rally will falter. Rather than buying, I suggest you sell Japan. I’m sure you can buy back Japanese stocks significantly lower than today’s levels over the next 2-3 years”. Instead of raising hundreds of millions for his Japan and Asian funds, Christian shocked investors and ignited profit taking. Many bankers were angry at this. Some said: “you spoke against your own funds!” Other said: “are you mad – what if you are wrong? All big banks are bullish on Japan” Christian told them “we have a duty versus investors and customers to speak the truth. I’ve done my analysis and I will stick to it”. For some time he was very lonely indeed, but Japanese stocks did indeed collapse and sell off for years as he predicted. Christian has a record of doing his own analysis and standing by it, no matter how unwelcome it is. Sticking to one’s analysis and principles allows for a steeper learning curve, i.e. learning from one’s mistakes.
Speaking to students at the famous Rosey Institute (Rolle, Switzerland) in October 2014, Christian told them “you have to make up your mind now whether you’ll chose integrity or advancing your career at any cost. Once you are at university and in the marketplace, it is almost too late. The survival race will have begun”. In a way, the sense of uncertainty and crisis in the world economy since 1999 has increased the need for job safety and popularity, leaving integrity behind as a casualty. This means, you have to decide early on in life how you define your goals and what success means to you.
Pope Francis (of the Holy Sea) in a historical address to the U.S. Congress on 24 September 2015 put it wisely like this “Do unto others, as you would have them do to you. If you want security, give security to others, .. if you want opportunity, provide opportunity to others”. Thus, the aim of moral behavior is to put the well-being of other people and the weak first. The advancement of our interests will result naturally from that. As the bible says “Give, and it shall be given unto you”.
Did you know? John Adams, 2nd President of the USA and a Founding Father, in a public address to the US military on October 11, 1798: “Our Constitution was made only for a moral and religious people. It is wholly inadequate to the government of any other“. Many see Judeo-Christian moral values as a solution, but laws & morals have their shortcomings too.
Christian thinks John Adams was saying that no amount of regulation can compensate for lack of ethical values based on faith in God. Laws do change, can often be circumvented and are expensive to enforce. Ethical values are good for mutual trust and economic growth – at personal, social, national and international level. But although universities teach ethics and firms spend much money in training, some of the most qualified people with ethics-related certifications keep behaving unethically. Even so-called religious people. That is because ethical & moral rules don’t change people – they can only help “contain” evil conduct and abuse for some time. Many leaders in the financial industry are mixing up rule compliance with ethical behavior (integrity). A highly unethical executive can be perfectly rule-compliant. Rather than attracting true leaders to top management and inducing a renewal, top executives have responded with more rules, tests and compliance to the growing scandals.
In fact the great increase of internal police (controllers, compliance, risk-officers, and controllers of controllers), staff warnings, internal courses and certifications at many companies and financial institutions only shows the broken state of morality at those institutions. If their staff and executives were so moral and correct, they wouldn’t need these armies of controllers and image campaigns. But why are those campaigns focusing on “the client is king” failing to fix the system? What I’m about to say is not popular: Bankers and corporate leaders are not the real culprits, they merely reflect the state of society. A flawed society will have a flawed financial system. Indeed, I’ve heard clients demand from a banker to do certain things despite the banker’s unease, otherwise they’d move to a bank that would do it. If the risky trade worked, they celebrated, but when they suffered losses, they rushed to sue the bank. The singling out of the financial industry and excessively remunerated CEO’s have distracted us all from the real problem: greed and lack of morality are systemic and advancing all fronts.
A tough question
If seminars and exams cannot change the heart of an amoral person, what does* ? How can financial and multinational firms attract ethical and socially responsible professionals to their ranks and top management ? And do those firms have an interest in attracting them if they would stop profitable practices that are not ethical? Takushi believes it is possible. As Professor Robert Jenkins of the London Business School teaches – moving from maximizing profits in the short term to the long term allows firms to put customers’ interests first. Additionally responsible mature leaders would consider all stakeholders and unleash passion and creativity across all corporate layers and reestablish trust & respect – boosting profits and value for all stake-holders over the medium to long term.
As the respected bible teacher Derek Prince taught decades ago, highly trained immoral professionals can end up puffed-up and harm society.
Harvesting what we’ve sown
In the one-sided pursuit of “material wealth” and “our own rights”, both highly self-centered capitalism and democracy are advancing their own demise. While capitalism has been kind of “hijacked” by large large shareholders, democracy has been “hijacked” by big businesses and the older generation (a self-serving majority). Using the path of what is “currently legal and accepted”, leaders and older citizens alike are protecting their own interests and pensions. But they have abandoned along the way the interests of a younger generation and the middle class. A kind of collective suicide, because it is probably people in the middle class, the only ones really paying their fair share of taxes. Healthy economic concepts have been taken to a dogmatic extreme void of wisdom to advance an unbalanced capitalism: shareholder value, cost-competitiveness, 2% target for consumer inflation etc., with few questioning them.
When our society is ageing fast (older people dominating popular vote) and our system is impoverishing millions, we need to show healthy restrain and foresight in order to preserve our democracy and capitalism. Democracy and capitalism are not advancing the interests of all stakeholders, and will therefore implode in years to come. Our generation will harvest and see the fruits of what it has sown. Nothing against self-interest and the advancing of our rights, but pervasive extremes at the expense of others are not stable equilibriums.
* The Takushi’s approach is practical and effective. Serving others is in our own interest. It is better to encourage business people to do good, rather than pointing them to their shortcomings. Having walked with many business professionals through their challenges and applying lessons from 30 years of listening to people (at school, university, church and the workplace) they choose grace over judgement. Listening to business people without judging them is something most of them have never experienced. Once a senior banker told Christian “I’ve spoken now for two hours of all the wicked things we’ve done to make money off customers, and you are not upset?” When this banker felt accepted and loved despite of what he had done, he was deeply touched. Guilt lost power over him and he received something he can now give to others – beginning a personal journey into freedom. Today, like a growing number of professionals, he is helping others and has an “inner desire” to serve his clients. Being honest and upright is only genuine if it is an effortless by-product of a transformed heart, not the result of an effort under pressure or fear. Such behavior can exhaust people and make them angry and judgmental. Forcing people to do what is right for fear of punishment is not society’s best.
I believe that the most effectively taught ethics is the one we convey to our children. Trying to teach ethics to a highly intelligent amoral or immoral professional, can in many instances give him more tools to circumvent the system.