Thursday, July 18, 2013

The Amoral World of Wall Street Confirmed

The Amoral World of Wall Street Confirmed

A survey released yesterday by Lubaton Sucarow, a law firm, comes to the conclusion that, “Wall Street’s future leaders–the young professionals who will one day assume control of the trillions of dollars that the industry manages—have lost their moral compass, accept corporate wrongdoing as a necessary evil and fear reporting this misconduct.”[1] The survey also tells us that:

  • ·      52% of them felt it was likely that their competitors have engaged in unethical or illegal activity to gain an edge in the market; 24% felt employees at their own company likely have engaged in misconduct to get ahead.
  • ·      23% of respondents indicated that they had observed or had firsthand knowledge of wrongdoing in the workplace.
  • ·      29% of respondents believed that financial services professionals may need to engage in unethical or illegal activity in order to be successful.
  • ·      26% of the respondents believed the compensation plans or bonus structures in place at their companies encourage employees to compromise ethical standards or violate the law.
  • ·      24% of respondents likely would engage in insider trading to make $10 million if they could get away with it.  The figure is 38% for individuals with 10 years or less in the industry.
  • ·      28% of respondents felt that the financial services industry does not put the interests of clients first.

Despite all these troubling results, the survey’s authors try to find a glimmer of hope because the respondents expressed a “heightened confidence in the regulatory authorities that oversee the financial marketplace.”

Boston Business (1999)

You shouldn’t be shocked by these results.  As I’ve written over the better part of a year, it takes an amoral framework to succeed in this business because it’s about nothing other than making money.  Despite all sorts of statements from Wall Street about its critical value to our economy, Wall Street doesn’t serve any higher purpose than facilitating the creation of wealth, especially for its insiders.  As a result, you ought to expect that ethics play little, if any, role for many of its participants.  If Wall Street can find some way to make money, they’ll discover a way to bend the law (or get the regulators to change the law) in order to achieve their purpose.  Ethics seldom figures into the calculus.

The survey was intended to gauge the status of Wall Street ethics after the credit crisis.  How can anyone be surprised that Wall Street’s ethical standards haven’t improved?  No major figure responsible for the credit crisis has been indicted.  Dodd-Frank, the major financial reform of our generation, is a set of laudable principles that were watered down by Congress and then drilled full of loopholes by the regulators.  In short, there was absolutely no reason for Wall Street to have seriously re-examined it culture, let along change it. 

The so-called glimmer of hope, cited by the report, is preposterous.  Although the SEC and its kindred agencies will churn out thousands of pages of regulations, the major players on Wall Street know that the SEC is on a three foot leash, and they’re standing four feet away.  Unless you are the rare mid-level marketer like Fabrice Tourre, the Goldman Sachs employee who said too much in his emails, you haven’t got much to worry about.  Mr. Tourre is on trial at the moment. So while the regulators may have been give a louder bark and even sharper teeth, they don’t have the wherewithal to use them.  In fact, Wall Street is spending millions of dollars on Congressional and Presidential campaigns and employing the best lobbyists on K Street to make sure that the leash is always too short.

We had an opportunity in 2008-2009 to make some changes in Wall Street’s behavior.  Now we can only wait for the next ethical lapse to push us to the economic precipice.  I’m betting we’ll let Wall Street get away with it again.


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