Mind the Gap: Virtue Ethics and the Financial Crisis

Midwest Studies in Philosophy 42 (1):174-190 (2018)
  Copy   BIBTEX

Abstract

The financial crisis has led to calls for increased regulation of the financial sector. In many respects this is uncontroversial because increased regulation should promote the behaviours we want to see, while limiting the behaviours we do not. This article takes issue with the idea that regulation, and guidelines, promote ethical behaviour in the way that we want them to. Firstly, judgement is often required to implement guidelines and regulations, which allows room for unethical behaviour. Secondly, we want financial professionals to behave ethically even when there are significant incentives not to; so, verifying compliance with regulations and guidelines when such incentives are absent isn’t a good gauge of the ethical status of financial professionals. The example of the valuation of the assets (Net Asset Value) of hedge funds illustrates these issues well. There are many rules governing how NAVs should be calculated, and while we can verify that a fund is abiding by the rules, the ability to manipulate the NAV remains. Furthermore, the incentive to do so is often only present during a crisis (usually to understate losses). Therefore, verifying compliance during ‘normal’ times is of little help in judging whether a manager will behave ethically when we most need him to. I first argue that the gap between compliance with regulations and ethical behaviour is best filled by the adoption of a virtue ethics approach, as discussed by Spalding & Oddo (2011), and Graafland & van de Ven (2011). I then discuss the implications of adopting such an approach for the financial industry’s codes of conduct, such as the CFA Institute’s ‘Code of Ethics and Standards of Professional Conduct’. Adopting a virtue ethics perspective would require a significant change in the emphasis of such codes.

Other Versions

No versions found

Links

PhilArchive



    Upload a copy of this work     Papers currently archived: 98,418

External links

Setup an account with your affiliations in order to access resources via your University's proxy server

Through your library

Similar books and articles

Ethics in regulation.Howard Davies - 2001 - Business Ethics, the Environment and Responsibility 10 (4):280–287.

Analytics

Added to PP
2018-08-25

Downloads
52 (#335,946)

6 months
6 (#732,743)

Historical graph of downloads
How can I increase my downloads?

Author's Profile

Catherine Greene
London School of Economics

Citations of this work

Add more citations

References found in this work

Virtue Ethics as a Resource in Business.Robert Audi - 2012 - Business Ethics Quarterly 22 (2):273-291.
The Virtue of Governance, the Governance of Virtue.Geoff Moore - 2012 - Business Ethics Quarterly 22 (2):293-318.
The Possibility of Virtue.Miguel Alzola - 2012 - Business Ethics Quarterly 22 (2):377-404.

View all 13 references / Add more references