Can Complex Firms Be Ethical: an Argument for Simplicity of Financial Institution
5th edition (2014/2015)
Culture / Regulation
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Between 2009 and 2013, some of the world’s largest banks were fined nearly £150 billion, with the totals into 2015 set to take this amount to over £200 billion (Sterngold, 2014). Regulators in the United States and United Kingdom especially have fo-cused on the culture within firms and imposed heavy fines for ins-tances of misconduct. A recurring question, however, is whether or not the various methods of regulatory scrutiny and punishment are really improving ethics within the finan-cial industry. If not, is the current strategy appropriate, or even sustai-nable and what are the possible al-ternatives? As the global economic recovery begins to strengthen, finan-cial firms will look to improve their balance sheets while complying with increasingly stringent regulations. The focus of these regulations ap-pears to be reactive punishment of firms’ misdeeds, rather than making substantive strides to improve ethics.
The regulators’ apparent priority, illustrated by the current Conduct regime, is flawed in that it views “ethics” as either motives-based or consequence-based, without ade-quately factoring in firms’ structural complexity. In other words, regu-lators seem to judge a firm’s ethics by its ability to conform to vaguely defined standards of corporate res-ponsibility or by the outcomes of its actions.