Politicians and the media have soundly, and often usually aggressively, questioned ethical business standards and practices in the global financial sector, national financial centers and jurisdictions. The G20 in the lead, supported by international bodies like the OECD and others, has strongly expressed the will to change drastically the global financial sector through enforced rules, regulations and oversight in order to modify financial behavior and end systemic risk. There has been much public outrage, especially focused on apparently excessive compensation amongst banks and other financial services.
What we all are missing are facts, rather than the continuous outflow of innuendos, unsubstantiated attacks and emotional outbreaks.
The CFA Institute has come to the rescue, at least partially for the moment! Its Centre for Market Integrity has so far issued for 2009 its Financial Market Integrity Index Surveys for six countries or jurisdictions, namely: the United States, Canada, the United Kingdom, Switzerland, Japan, and Hong Kong (http://www.cfapubs.org/loi/ccb). The surveys are based on responses from investment professionals inside and outside the financial market of each country or jurisdiction in question.
On the rating scale applied of one (not ethical at all) to five (very ethical) for ethical behavior of market participants and the effectiveness of market systems in ensuring market integrity, countries at best scored around or close to the minimum of 3 in the three range for “somewhat ethical”, with the United States however perceived well within the two range of “slightly ethical”.
In other words, not withstanding the US scores that indicate that the United States is soundly “slightly ethical” in regard to ethical behavior in the market and effectiveness of its market system for market integrity, the scores would infer on average that financial centers and jurisdictions around the world would be located on the border line of all being between “slightly ethical” and “somewhat ethical”. These results again are based on investment professionals operating in the global financial sector.
The results of the CFA Institute Survey firmly indicate that banks and other financial services worldwide are in very strong need of improving their ethical business practices based on the principles of integrity (i.e. fairness, transparency, responsibility and accountability). The results further indicate that the regulatory and oversight environment is lacking in providing a market system fully conducive to market integrity.
There is no doubt that the CFA Institute survey results should be a serious wake-up call to banks and other financial services worldwide. Trust and confidence of investors, shareholders and other stakeholders have already suffered enough.
Business can no longer be as usual. And it is now up to the banks and other financial services to act and work together on comprehensive and wide-ranging ethical business standards and practices supporting corporate financial governance and market integrity.
What do you think?
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