Ethics and Finance

he Psychology of Ethics in the Finance and

Investment Industry
Financial and investment professionals are mainly susceptible to ethical misconduct. But what
makes some obviously violate ethical standards and even violate the law while others behave
highly ethically? Besides in all the courses taught in the entire business program we are taught
that the objective of rationale individual is to maximize wealth. The psychology of ethics tries to
find out why and when does a person behave (un) ethical way, their motivation, influence and
social dynamic behind a certain active. It also tries to analyze individual cognitive and emotional
dynamics. This analysis will help figure out the most effective may an ethical code can be written
and implemented.

Approaches to Ethics
When people talk and write about ethics in the finance and investment industry, they approach
the topic in variety of ways and address different realms of ethics. Usually, their dealing with
ethics takes one of three main directions: (1) what investment professionals should do, (2) what
they actually do, or (3) how finance and investment professionals can be helped to get from what
they actually do to what they should do.

Normative Ethics
What should finance and investment professionals do? As the name implies, normative ethics
aims at establishing norms and guidelines for professionals regarding how they should behave.
This approach to ethics is inherent in, for example, the ethical theories of moral philosophy,
theology, and definitions of professional norms, standards, and acceptable behavior for a
professional field. Thus, a normative approach to ethics in finance and investments defines what
is ethical in this profession. It tells practitioners how investment professionals should act to be
ethical, which behavior should be considered ethical, and which behavior should not.

Descriptive Ethics
What do investment professionals actually do? Descriptive ethics aims at describing not how
people should behave but how they actually do behave. And descriptive ethics attempts to
explain and predict the unethical behavior of people in real-life situations (OFallon and
Butterfield 2005). Psychological research conducted in controlled laboratory studies and real
world settings of professional decision makers offers a systematic and comprehensive basis for
descriptive ethics in finance and investing. Only this psychological and descriptive approach
allows us to understand when and why people and organizations in the investment industry
engage in ethical behavior and when and why they do not.

Prescriptive Ethics
How can finance and investment professionals be helped to get from what they actually do to
what they should do? Based on descriptive insights about the factors influencing actual ethical
decision making, the Prescriptive approach to ethics aims at helping people and organizations
toward ethical decision making by giving advice about how to create environments that foster
ethical decisions and how to improve the ethical component of decisions. The two main
questions addressed by prescriptive ethics are the following: How can we create organizations
that foster ethical behavior? How can we train professionals to readily perceive the ethical
dimensions of their own behavior and to act ethically? Thus, prescriptive ethics suggests tools
that assist people in making the prescribed decisions. 4

Is it only finance/banking that has ethical problems?

What are the implications of a society in which traditional moral values of duty and obligation sit side
by side with socially legitimized self-interest? Drawing on insights from history, sociology and social
anthropology, this book traces the emergence of todays bimoral society and explores its implications
for the management and governance of b

Ethics is the ontological source of morals or vice versa need to check

Ethical practices instil a public trust in the fairness of financial markets and transactions, allowing them to fun
market participants and stakeholders and lead to increased investor confidence in global capital markets. The
profession as this subject presents a framework for ethical conduct in the investment profession by focusing o
discussing examples of the financial scandals that have shaken public confidence in the ethics of financial ma
institutions and in the personal conduct of finance professionals.
Learning Outcomes:

On successful completion of this subject, students should be able to:

apply major intellectual theories of ethics as a basis for the analysis and resolution
critically examine ethical standards and issues of questionable professional conduc
markets and financial services;
relate ethical principles to the financial theory of the firm including issues related
describe standards of professional conduct and recommend practices and procedur

ntroduction

The Islamic Finance and Ethics Society intends to investigate what solutions Islamic finance can provide to the social,
economic and environmental issues that have been created by the conventional financial system.

Archbishop of Canterbury Justin Welby joined a panel discussion on ethics and finance Oct. 8 at the
2014 Annual Meetings of the International Monetary Fund and World Bank Group in Washington.
Welby said human flourishing, not just the rate of return is the purpose of finance.
The archbishop joined Bank of England governor Mark Carney and IMF managing director Christine
Lagarde, among others, on the panel.

"The values that guide finance professionals and the core role played by trust in
the modern finance industry have been the dominant themes of the best papers
submitted for the Robin Cosgrove Prize since it was launched in 2006. Inviting
young people to submit innovative ideas to advance ethical approaches to the
world of finance in its many manifestations has stimulated a global debate on
the role of ethics and integrity in finance."
BusinessEducation
Regulators
Policy Makers
Corporate Governance

OVERVIEW
The overarching focus will be the contours of the future financial system.
Global financial markets and the provision of financial services have
already been deeply impacted by the crisis and are expected to further be
affected by enhancements of micro- and macro-prudential policy
frameworks and tools and by the anticipated evolution of monetary
policies in the post-crisis new normal. Within this broad canvas, a number
of specific themes will be explored: (i) will these forces result in a more
fragmented global financial system; (ii) will banks permanently cede
space to non-banks and shadow banks; (iii) how will technological
enhancements impact financial inclusion, particularly access to provision
of the fundamental financial services of payments, credit and insurance;
and (iv) what can be done to enhance integrity and corporate governance
in the financial industry.
Session 1: Especially in the wake of the crisis, we are witnessing a
depletion of trust and a loss of faith in markets with evident implications
for financial stability, economic growth, and social cohesion. As a result,
economists and policymakers are increasingly coming to the view that
economic concerns cannot be divorced from ethical concerns. This
seminar would facilitate a discussion of these issues, bringing together
leading policymakers and other thinkers on the topic from a broad range
of fields including the financial sector, academia and religion. The
discussion would reflect upon the continued tendency of the financial
sector to prize short-term personal gain over longer-term social purpose; it
will also explore implications of the idea that financial markets (and
capitalism in general) are only sustainable if there is trust in the system,
which in turn requires minimal standards of ethics and integrity.
Ethics of Execuitve remuneration

Ethical banks including Triodos Bank and the Co-operative bank in the UK, RSF Social Finance in the
USA, GLS Bank in Germany, the Alternative Bank in Switzerland, the Banco Popolare Etica in Italy
and the Citizens Bank in Canada. These banks invest socially and ethically. The Banca Etica in Italy,
for example, is based on the following set of principles: access to finance, in all its forms, is a human
right; ethically oriented finance is aware of non economic consequences of economic actions;
efficiency and soberness are components of ethical responsibility; profit produced by the ownership
and exchange of money must come from activities oriented towards common well-being and shall
have to be equally distributed among all subjects which contribute to its realisation; maximum
transparency of all operations is one of the main conditions of all ethical finance activities; the active
involvement of shareholders and savers in the company's decision making process must be
encouraged; each organisation which accepts and adheres to the principles of ethical finance
undertakes to inspire its entire activity to such principles.

We stand at a critical moment in Earth's history, a time when humanity must

choose
its future. As the world becomes increasingly interdependent and fragile, the
future
at once holds great peril and great promise. To move forward we must recognize
that in the midst of a magnificent diversity of cultures and life forms we are one
human family and one Earth community with a common destiny. We must join
together to bring forth a sustainable global society founded on respect for
nature,
universal human rights, economic justice, and a culture of peace. Towards this
end,
it is imperative that we, the peoples of Earth, declare our responsibility to one
another, to the greater community of life, and to future generations.
^From the Preamble to the Earth Charter
The big picture view
Efficiency versus resiliency
NPV versus RANPV

http://www.greeneconomycoalition.org/big-picture/big-picture-%E2%80%93overview
I
n the wake of the crisis, we are witnessing a depletion of trust and a loss of faith
in

marketswith evident implications for financial stability, economic growth, and

social
cohesion. As a result, economists and policymakers are increasingly coming to
the view that
economic concerns cannot be divorced from ethical concerns. This seminar
would facilitate a
discussion of these issues, bringing together leading policymakers and other
thinkers on the
topic from a broad range of fields including the financial sector, academia, and
religion. The
discussion will reflect upon the continued tendency of the financial sector to
prize short-term
personal gain over longer-term social purpose; it will also explore implications of
the idea that
financial markets (and capitalism in general) are only sustainable if there is trust
in the system,
which in turn requires minimal standards of ethics and integrity.

Wonderful
https://www.imf.org/external/np/speeches/2014/052714.htm

short termism
http://www.globethics.net/documents/4289936/13403236/GE_Global_6_final_1_w
eb.pdf/106c34b4-03d7-4433-88ae-a4d6a4545712