«Global TrusT and EThics in FinancE Innovative Ideas from the Robin Cosgrove Prize Carol Cosgrove-Sacks / Paul H. Dembinski Editors Trust and Ethics in ...»
The recent protests against capitalism and inequality in New York, London and elsewhere have underlined the public dissatisfaction with the response to the financial crisis. We have learned from experience that it is not possible to regulate people into good behaviour. In that sense, the Robin Cosgrove essays are an alternative agenda. If they help persuade their readers that trust matters and that the workplace is not morally neutral territory where it is acceptable to shed personal morality as they walk through the company’s doors, they will have achieved something of real value.
THE EVOLUTION AND GLOBAL ROLE OFTHE ROBIN COSGROVE PRIZE, 2006-2013
Financial innovation and the prize Innovative ideas are the lifeblood of the financial sector. They have fuelled the exceptional growth of the financial sector during the last twenty years. Financial innovation generated an extraordinary variety of new financial products – exchange trade funds (ETFs), credit default swap transactions (CDSs), collateralised debt obligations (CDOs) to name but a few – that have driven rapid acceleration in the value of financial markets and generated vast profits for both financial enterprises and for individual investors. During this same period, the Grameen Bank, generally regarded as the originator of microfinance innovations at the service of the poor, became an independent bank in 1983 and since then there has been a worldwide proliferation of financial enterprises and not-for-profit organisations that have focused on innovative ways of placing finance at the service of goals other than profit. The fact that the finance bubble burst in 2008 engendering widespread collapse in financial markets and an ensuing economic crisis in many countries does not mean that innovation in finance of itself is good or bad – so much depends on the way it is managed and on the codes of behaviour that guide individuals and the organisations within which they work.
The values that guide finance professionals and the core role played by trust in the modern finance industry have proved to be dominant themes of the best papers submitted for the Ethics in Finance Robin 20 Trust and Ethics in Finance Cosgrove Prize since it was launched in 2006. Inviting young people to submit innovative ideas to advance ethical approaches to the world of finance in all its many manifestations has stimulated a global debate on the role of ethics and integrity in finance. It is important to note that that the prize was first launched before the topic of ethics in finance became fashionable. It is not a reactive exercise to the current crisis. The aim is to prompt a shift in thinking throughout the world of finance – the fresh ideas submitted for the prize have global relevance. Since launching, the prize awards celebrate outstanding young people thinking and writing about ethics in finance.
Many of the authors of the papers submitted would agree with Adair Turner, chairman of the UK Financial Services Authority (FSA), who recently argued that the global financial regulatory system in total has failed to address fundamental problems.1 Since the launch of the Robin Cosgrove Prize, what is known as Basel III has been agreed, requiring that the core part of the capital reserves of banks should consist mainly of common shares of the bank and its retained earnings. These requirements have been reflected in the EU’s Capital Requirement Directive, with more emphasis on risk assessment systems. It is noteworthy that the best papers submitted for the prize in 2007 remain highly relevant, addressing issues like these and indicating that the problems are far from solved in the interim.
The evolution of the prize Why did we launch the Robin Cosgrove Prize? Robin loved life as a young investment banker working in Tokyo and London. He was passionate about success and about integrity. He believed that banks and the finance sector in general bring benefits to people and to commerce.
He travelled widely throughout the world. His experiences convinced him that the finance sector should serve the common good as well as making profits. He was concerned that complicated financial products would blur ethical and practical considerations.
For him, trust was the essence of good banking. But he feared that many young finance professionals were losing touch with the fundamentals. He hoped to promote better understanding of the critical importance of trust, ethics and personal and corporate integrity in all aspects of finance. Sadly, at much too young an age, he lost his life in an accident on Mont Blanc.
The mission of the prize is to stimulate innovative ideas for promoting ethics and integrity in the finance sector. The prize reaches out to young people familiar with banking, finance and investment, with special attention to emerging markets, to attract innovative ideas. The aim is to strengthen the sustainability of ethics in banking and finance and to reinforce its implementation throughout the world.
Based at l’Observatoire de la Finance in Geneva, Switzerland, and with substantial support from finance sector enterprises in London and Madrid, the prize has evolved into a globally relevant tool to encourage young people under 35 to reflect on trust, integrity and ethics in finance.
The prize website – www.robincosgroveprize.org – has reached thousands of readers and generally features in the top ten results for searches on the internet for “ethics in finance”.
From the start, the prize was intended to be comprehensive in its coverage of finance, interpreting it in the widest possible terms to include financial markets, financial services, financial management, finance theory, market regulation, due diligence, reputational risk, insider trading, derivative contracts, hedge funds, mutual and pension funds, insurance, socially responsible investing, microfinance, micro-credit and solidarity financing, risk management accounting and compliance.
22 Trust and Ethics in Finance Similarly, no specific definitions were proposed for ethics, leaving it to the young people competing for the prize to define from their individual perspectives how they saw such concepts as accountability, responsibility, integrity, trust, and a wide variety of approaches to what have sometimes been interpreted as ethical and occasionally moral or religious codes for behaviour.
The first global competition was launched in Geneva in 2006, financed by Robin’s family and friends and by RAB Capital of London, inviting papers written in English or French with innovative ideas for ethics in finance. Prizes were awarded in 2007. An essential foundation for the success of the competition was the creation of an international jury [see Appendix I] comprising respected academics and practitioners from across the world with a wide variety of professional experience, some of whom had known Robin.
The second global competition and the first regional Ibero-American competition (supported by MAPFRE of Madrid) were launched in 2008, with the awards in 2009. English and French continued as the languages for the global prize, while papers written in Portuguese or Spanish were invited for the regional prize. A second jury was of necessity created, with respected academics and professionals able to judge the entries in the relevant languages for the Ibero-American prize [see Appendix II].
In 2010, the third global competition was launched in London (at Barclays Bank global headquarters) and the second Ibero-American competition was launched in Madrid and in Buenos Aires, Argentina (sponsored by MAPFRE), and the awards were given at a ceremony hosted by the State of Geneva, Switzerland, in November 2011.
The fourth global competition and the third regional Ibero-American competition will be launched in June 2012, and the award ceremony is foreseen for the third quarter of 2013. (As of writing, the precise locations of the launches and the dates have yet to be confirmed).
Evolution and Global Role of the Prize 23 Throughout the period since the prize was established, the juries have agreed that the central theme – Innovative Ideas for Ethics in Finance – remains highly relevant. The numbers of candidates for the prizes have risen steadily. The very best papers from the regional prize have been translated into English or French for subsequent evaluation by the international Jury, and the final seven or eight best papers approved for publication in the journal of L’Observatoire de la Finance, Finance & the Common Good/Bien Commun.
The diversity of submissions in terms of topics and of the authors’ nationality and their professional roles has varied very widely. Consistently since 2006, some 40 per cent of candidates have been female.
In 2011, the global prize, with papers submitted either in English or in French, attracted interest from candidates from the following 48 countries: Albania, Argentina, Australia, Austria, Bangladesh, Belgium, Benin, Brazil, Cambodia, Cameroon, Canada, Chad, China, Columbia, Czech Republic, Denmark, France, Germany, Greece, Guatemala, Iceland, India, Ireland, Italy, Kenya, Lithuania, Macedonia, Madagascar, Malaysia, Morocco, New Zealand, Niger, Nigeria, Pakistan, Peru, Philippines, Poland, Romania, Senegal, Singapore, South Africa, Spain, Sri Lanka, Switzerland, United Kingdom, Unites States of America, Vietnam and Zimbabwe.
The Ibero-American prize, with papers submitted either in Portuguese or Spanish, attracted interest in 2011 from candidates in Argentina, Bolivia, Brazil, Colombia, Dominican Republic, Haiti, Mexico, Panama, Peru, Uruguay, Venezuela, and from Portugal and Spain.
About this book
The twenty-three best papers submitted for the various competitions for the Robin Cosgrove Prize between 2006 and 2011 offer a fresh and stimulating range of perspectives on why ethics is considered to be important both in terms of personal conduct of finance professionals and 24 Trust and Ethics in Finance the operation of financial markets and institutions. Robust ethical standards are critically important for the success of the finance sector. Doing the right thing because it is the right thing to do may seem simple, but in complex financial transactions, all too often considerations of ethics and integrity may be squeezed. Ethics and integrity are the two pillars of trust – and without trust, no financial organisation can command confidence.
By publishing the collected best papers submitted for the prize to date, the book aims to
• advance the vision of ethics in finance
• stimulate a global debate among young people regarding ethical standards in finance
• promote the prize as an agent for change, going beyond compliance to promoting real value.
Of the twenty-three papers selected for publication by the prize juries over the course of the prize to date, seven are from 2006-7, eight from 2008-9 and eight from 2010-11. They came from twenty-five authors – two papers had combined authorship. The authors came from a wide variety of countries: Argentina, Australia, Brazil, Canada, Denmark, Egypt, France, Germany, Ghana, India, Kenya, Madagascar, Mexico, Pakistan, Poland, Singapore, Spain, United Kingdom, Uruguay, the USA, and Zimbabwe. They really are from all six continents!
The book is organised in four parts. Part I introduces the Robin Cosgrove Prize and its global reach to young finance professionals across the world. The current introduction explains the origins and evolution of the prize and the contents of the book. The second, by Professor Paul H. Dembinski of the University of Fribourg and l’Observatoire de la Finance of Geneva, reflects on the debate regarding ethics in finance and the current financial and economic crisis in Europe. The third, exploring the synergies between the prize and Globethics.net, is written by Dr Christoph Stückelberger, its founder and Executive Director.
Evolution and Global Role of the Prize 25 Part II has the general title Ethics in Finance – Beyond Compliance.
Here, the papers presented for the prize are organised as distinct chapters. These nine chapters examine systemic issues. In many of these papers, trust is a core theme. Many of the young authors would agree with Beth Krasna, Director of the Thinking Ethics project, who wrote “Perhaps the most important future challenge… is the breakdown of trusttrust in organisations, trust between organisations and the individuals within them, trust in sources of information, and trust in political and financial institutions”.2 Trust and the value systems guiding finance professionals were a major trend of the papers that won the prize in 2007, 2009 and 2011.
1. Ethics: A Diet for Highly Leveraged Financial Markets is by Jakub Kuriata, winner of the global prize in 2011. He is Polish and a Credit Risk Analyst at BNP Paribas, London.
2. Ethical Cash Management? A Possible Solution is by Leire SanJose, winner of the regional Ibero-American prize in 2009. She is Spanish and Assistant-Professor and Research Fellow in Ethics in Finance, University of the Basque Country, Bilbao, Spain.
3. Ethics and Order in the Disorderly World of Finance is by Elise Pellerin and Marie Casimiro, joint winners of the global prize in 2009.
They are French: Elise is an Ethics Analyst working in Paris, and Marie is the Ethics Officer, CNP Assurances, Paris.
4. Ethics or Bust: Beyond Compliance and Good Marketing is by Clare Payne, winner of the global prize in 2007. An Australian, she was at the time Assistant Director of the Integrity Office of Macquarie Bank, Australia, and has gone on to be a Consulting Fellow on Ethics in Banking and Finance at the St James Ethics Centre, Sydney, Australia.
Krasna, Beth, Thinking Ethics: How Ethical Values and Standards are Changing, Philias Foundation, London: Profile Books, 2005, p. 126.
26 Trust and Ethics in Finance
5. Ethics: The Key to Credibility is by Felippe Araujo, who won 2nd prize in the Ibero-American competition in 2009. A Brazilian, he was a finance professional working in Tokyo and is currently at Nomura Bank in Brasilia, Brazil.
6. Emotions, Personal Ethics and Professional Life: The Lost Link is by Meredith Benton, who won 2nd prize in the global competition in
2009. An American, she was a student at INSEAD and is currently Senior Director of Partnerships, AMTRACK.
7. The Financial Sector and the Behaviour of People: What to Do? is by Carlos Eduardo Estapé Viana, ex aequo winner of the 2nd prize in the regional Ibero-American competition in 2011. An Uruguayan, he is a Public Accountant in Montevideo.
8. Decision: The Space between the Code of Ethics and Ethical Behaviour is by Carmen Lucia Carmona Paredes, ex aequo winner of the 2nd prize in the regional Ibero-American competiton in 2011. A Mexican, she is working as a finance sector consultant in London.
9. Ethics: An Essential Prerequisite of the Financial System by David Sifah was specially commended in the global competition in 2009. A Ghanaian, he works as a Retail Banker at Barclays Bank, Accra.
Part III entitled Ethics in Finance-Standards and Values collects the papers that focused more clearly on factors affecting the behaviour of finance professionals. The challenges of making finance more ethical are well analysed by Paul H. Dembinski, Director of the Observatoire de la Finance and co-president of the prize jury. An “approach to the issue of financial ethics – or rather ethics in finance – [that] involves finding methods and regulations that will make financial transactions more ‘ethical’”3 fails to deliver changes in behaviour. The authors and topics in Part III are diverse, facilitating a fresh appraisal by these young people of the guiding principles that in their views have most relevance.
Dembinski, Paul H., Finance: Servant or Deceiver? London: Palgrave/Macmillan, 2009, p.159.
Evolution and Global Role of the Prize 27
10. Social Impact Ratings: How to Make Responsible Investment Appealing is by Jonathan M. Wisebrod, ex aequo winner 2007 of the global prize in 2007. A Canadian, he is a Director of Villari Asset Management, Singapore.