We've lost our moral compass
A new study on Wall Street points to deeply-ingrained governance issues that undermine the pursuit of truly sustainable business.
Over the past several years, legal settlements for unethical, fraudulent or criminal activity by the world's largest financial services firms have exceeded $100 billion.
Since the end of 2010, the six major Wall Street banks — JP Morgan, Bank of America, Citigroup, Wells Fargo, Goldman Sachs and Morgan Stanley — have paid the majority of those fines.
Virtually all the large firms said that if there was bad behavior, it is behind them. But a recent report (PDF download) by the University of Notre Dame and law firm Labaton Sucharow casts major doubt on that tidy narrative.
The report, summarized by Andrew Ross Sorkin in The New York Times, focused on financial professionals’ views of their own industry and suggests that many lessons of the 2008 financial crisis still haven’t been learned. That $100 billion in fines, it seems, was not enough to deter continued bad behaviors.
Overall, the study found that 10 percent of individuals claiming to earn over $500,000 a year said they had directly felt pressure “to compromise ethical standards or violate the law.”
Nearly half said law enforcement and regulatory authorities in their country are ineffective “in detecting, investigating and prosecuting securities violations.” About a third of those same individuals said that they “have witnessed or have firsthand knowledge of wrongdoing in the workplace,” and they “believe compensation structures or bonus plans in place at their company could incentivize employees to compromise ethics or violate the law.”
But what can the rest of learn from Wall Street's corporate governance failings?
Placed in a broader context, the study also illuminates a much deeper systemic failures. Simply put, we've lost our moral compass when it comes to business as usual — from social and economic impacts to environmental degradation and an unbridled pursuit of growth in the face of ever-more-daunting climate risks.
The crisis is evident in the “legal” avoidance of paying corporate taxes by transferring international profits to low taxing countries. It’s evident in our callous disregard for the disgraceful and growing economic gap between the richest of the rich and virtually everyone else.
On a human level, how can we, the world’s wealthiest country, allow almost 2 million children to be homeless and one out of every six Americans to rely on food stamps because our minimum wage ensures that low-income families are stuck in a cycle of poverty?
Taking stock of social responsibility
When it comes to the recent study focused on the financial sector, the lack of sentiment on social responsibility is glaring.
“Nearly one in five respondents feel financial service professionals must sometimes engage in unethical or illegal activity to be successful in the current financial environment,” according to one finding.
On virtually every question, those in Britain seem to indicate that ethics problems could be even more widespread there.
“Respondents from the U.K. are either more willing to commit a crime they could get away with — or are more frank about it,” the report’s authors wrote.
Many of those asked said they worried that “their employer would likely retaliate if they reported wrongdoing in the workplace.”
In an indication of the moral beliefs at work in the industry, Sorkin reported, “many respondents said they would use non-public information to make a guaranteed $10 million, if there were no chance of getting arrested
for insider trading.”
Candid responses like these show us that it’s well past time for a new conversation — a conversation that challenges all those who care about sustainability, global climate change, poverty and peace to discuss why we as a nation have lost our moral compass. And what we’re going to do about it.