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«Global TrusT and EThics in FinancE Innovative Ideas from the Robin Cosgrove Prize Carol Cosgrove-Sacks / Paul H. Dembinski Editors Trust and Ethics in ...»

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11. The Reconciliation of Finance and Ethics: Integrating the Interior and Exterior Dimensions of Reality is by Faly Ranaivoson, who won 2nd prize in the global competition in 2011. He is from Madagascar and works as a Research Consultant in the finance sector in Geneva.

12. Financial Derivatives and Responsibility – How to Deal Ethically with Financial Risk is by Simone Heinemann, who won the 3rd prize in the global competition in 2011. A German, she is developing a PhD dissertation at the Ruhr University Bochum on financial derivatives and the ethical problems arising from systemic risk.

13. Internationalism, Institutions and Individuals: Systemic Changes for a Systemic Ethical Crisis is by Geoffrey See, ex aequo winner of the global prize in 2009. A Singaporean, he is a University Fellow at Yale University, USA, and Executive Director, Choson Exchange, China.

14. Accountability and the Second Line of Defence by Immaculate Dadiso Motsi-Omoijiada was well-evaluated in the global competition in 2011. She is Zimbabwean and is studying for her PhD at HEI, Geneva.

15. Redefining Capitalism: An Ethical Rating and its Contribution to Development by Jaime Pozuelo-Monfort was well-evaluated in the global competition in 2007. He is Spanish, currently studying for a Masters in Law at Georgetown University, Washington, DC, and a regular contributor to the Huffington Post.

16. When Small Companies Dabble in Disinformation by Saif Ullah was also well-evaluated in the global competition in 2007. A Pakistani, he was at the time a PhD student in the University of Alberta, Canada.

28 Trust and Ethics in Finance Part IV brings together papers with the theme Ethics in Finance – Solidarity and Sustainability. The authors view ethics in finance in the context primarily of solidarity, micro-finance and micro-credit, social responsibility and sustainable environmental investment practices.

Awareness of ethics in finance frequently seems to start from considerations of corporate social responsibility and socially responsible investment, as well as concerns for environmentally sustainable projects.

There is a vast range of SRI funds and schemes. There is a broad-based concern to include social and environmental risks in credit risk assessment systems.4 Whilst advancing awareness of the relevance of nonfinancial goals for the common good, the chapters here demonstrate also the need to go beyond these approaches and link them directly to ethics as a framework for behaviour.

17. Solidarity Finance and the Democratisation of Money is by Nicolás Meyer, winner of the regional prize in 2011. An Argentinian, he is Director of Nuestras Huellas, a not-for-profit organisation in Tigre, Buenos Aires.

18. Ethics vs. Finance? An Analysis of the Origins, Problems And Future Perspectives of this Relationship is by Bruno Federico Fernández, ex aequo winner of 3rd prize in the global competition and of 2nd prize in the regional Ibero-American competition in 2011.

He is an Argentinian economist, working in the Central Office of Public Funds in the Economic Ministry, Tucumán State, Argentina.

19. In Search of Honesty and Altruism by Raina Abdul Rahim Mousa was specially commended in the global competition in 2007 and awarded a special prize from Raiffeisen Bank, Geneva. She is Egyptian and at the time was a PhD student in the department of accounting and finance, Birmingham Business School, University of Birmingham, UK.

Pentzlin, Daniel (ed), Seven Steps to make Banks Sustainable in 2011, BankTrack, Friends of the Earth Europe, et al, Berlin, 2011, p. 8 Evolution and Global Role of the Prize 29

20. Microfinance: Getting Money to the Poor or Making Money out of the Poor? by Joy Mueni Maina Kiiru was well-evaluated for the 2007 global Ethics in Finance Robin Cosgrove Prize. She is Kenyan and at the time was an Assistant Lecturer at the School of Economics, University of Nairobi.

21. The South and Carbon Dioxide: Every Cloud has a Silver Lining, written jointly by Jem Bendell and Inderpreet Chawla, was wellevaluated in the global competition in 2007. Jem, who is British, is Director of Lifeworth Consulting, Geneva, Switzerland. Inderpreet, who is Indian, is a Project Manager with the United Nations Environment Programme Finance Initiative in India.

22. Investing as if People and Planet Mattered by Pernille Jessen was well-evaluated in the global competition in 2009. She is Danish and works as a post-doctoral Researcher, Institute of Economy, Aarhus University.

23. Virtuous Enterprises: The Place of Christian Ethics by Jan Thomas Otte was well-evaluated in the global competition in 2009. He is German and works as a financial journalist in Germany.


Trust and Ethics in Finance brings together the fresh and innovative observations of the best candidates in the first three series of the Robin Cosgrove Prize. The chapters provide interesting insights into how ethical behaviour may be encouraged and how this represents positive benefits not just for the individual but for the overall good of enterprises and of society. Business managers and human resource development professionals in the finance sector can profit from these insights, understanding the motivations for young people working with them to make a difference and to do well by doing good.

The innovative ideas contributed by the prize winners have broad relevance for the finance sector across the world. The themes addressed 30 Trust and Ethics in Finance in 2007 still have a freshness that has stood the test of time and the problems identified in the various chapters continue to confront the finance sector. New rules and tougher regulation coming from the Basel III agreement, for example, may strengthen the macro-management of finance but are unlikely to solve the ongoing systemic crisis unless more innovative and more ethical approaches become the norm.

In mid-2012, planning the launch of new global and regional competitions in the Ethics in Finance Robin Cosgrove Prize, one may reflect on the extraordinary talent revealed in these chapters. The commitment of young finance professionals and advanced students to look beyond compliance and to consider best practice for promoting trust, integrity and ethics in their work demonstrates vibrant concern across the world for these fundamental themes.



Paul H. Dembinski1

There are those who would claim that the main reason for the financial crisis, and its impact on the economy, is failure to act ethically. In other words, all we need to do is put ethics back into the economy, make capitalism more moral, and hey presto, the world will be restored to health and insulated forever from economic crisis and upheaval. Yet once we move beyond this widespread piece of wishful thinking and start trying to define what ethics in the economy actually means, the consensus melts away.

The economy: An elusive notion

Before discussing the relationship between ethics and the economy, we must first look at the many different definitions of “economics” and “the economy”.

These terms have their etymological roots in the ancient Greek word oikos, which can be translated as “household”. Thus, in the writings of Aristotle, oikonomia means the organisation, the “law” – and by extension the wise management – of the household. It is thus an activity that takes place in an enclosed space where, under the watchful eye of the head of the household (the classic pater – or mater – familias), people The author is grateful to Roland Burrus, Etienne Perrot and Domingo Suranyes for their comments on preliminary versions of this text.

32 Trust and Ethics in Finance work together to produce goods that they directly or indirectly consume.

Hence there is no direct analogy with the present, for a Greek household is not the same thing as a business or a modern national economy. Today’s businesses produce to sell their products in a market. In the ancient Greek world, on the other hand, the wise manager sought to keep his household independent and self-sufficient; trade with the outside world was at most a stopgap measure, to be avoided if at all possible.

Management of resources was merely one aspect of the authority of the pater familias, who assigned tasks and functions to members of the household. This is quite different from present-day economies, made up of independent players that are free to make their own choices. Some writers, such as Pierre Calame, use the term oeconomy to refer to the whole planet, viewing the pursuit of organisation and wise management in terms of global governance.2 The role of the economy within society is so extensive – and hence obvious – that few writers see any need to define it. Those that do are divided into three main groups. According to the first group, the followers of Paul Samuelson (author of the seminal reference work Economics: an Introductory Analysis, 1948), the economy is concerned with how three kinds of decisions are made: decisions about production (how to produce?), consumption (what to produce?) and distribution (for whom to produce?). For others, like Lionel Robbins (An Essay on the Nature and Significance of Economic Science, 1932), the economy (like management) is concerned with all the knowledge and practices that ensure optimum use of limited resources in order to satisfy a maximum of needs, which by definition are unlimited. Finally, for anthropologists such as Maurice Godelier (Rationality and Irrationality in Economics, 1972, first published in French as Rationalité et irrationalité en économie), the economy stands for all of society’s relationships with its mate

–  –  –

rial environment, particularly those that help satisfy its material needs.

For anthropologists, and thinkers who see social relations as an organic whole, the economy is therefore embedded in, or indeed inextricably fused with, society.3 This variety of definitions raises a question that, although crucial, is nowadays seldom asked: to what extent is the economy a separate entity? In the eighteenth century, with the work of Adam Smith (part of the intellectual legacy of the Reformation), the economy came to be acknowledged as a specific, autonomous area of human life. Ever since then it has been a separate feature of Western society (especially the English-speaking countries), divided off from both politics (the free market!) and morality. Given that self-interest and reason are seen as the triggers for economic activity, it could be said that arithmetic has made conscience redundant and has hence to some extent taken the place of morality, perhaps even ethics.

The debate on the technical as well as ethical independence of the economy is by no means over – nor, of course, is the debate on the role of ethics within it. Three theories can be mentioned at this point: those of Luhmann, Walzer and Dembinski. According to Niklas Luhmann, a German sociologist and philosopher who died in 1998 and whose works belong to the functionalist school, social systems evolve towards higher levels of complexity by spontaneously developing specialised ad-hoc subsystems. These respond to new challenges, applying their own specific logic and rules of operation. As Luhmann saw it, contemporary society is a set of functionally specialised subsystems, including the economic and financial subsystems. The heteronomy of the specific logics of the various subsystems that coexist within a wider overall system is not a problem, said Luhmann, for each is confined to its own area and hence does not threaten the coherence of the whole, which is maintained Servet, Jean-Michel, Le grand renversement: de la crise au renouveau solidaire, Paris: Desclée de Brouwer, 2010 and – the classic work of its kind – Polanyi, Karl, The Great Transformation, New York: Rinehart, 1944.

34 Trust and Ethics in Finance by complementarity of functions.4 The system thus has an innate tendency towards optimisation that prevents clashes – and potential violence – between the various logics. It is kept in stable equilibrium by a mysterious, and perhaps naïve, law of functional complementarity.

Michael Walzer’s work on spheres of justice analyses society as a set of spheres of activity, each governed by a different principle of justice.

To Walzer, like Luhmann, coherence between the various principles is not a crucial issue, for each sphere is largely independent in determining how it produces justice. However, Walzer focuses on the importance of politics, whose job it is to ensure that the various logics do not clash, and hence that the spheres remain (peacefully) separate.5 Paul H. Dembinski’s analysis of social systems revolves around the notion that each system’s survival depends on maintaining a minimum degree of coherence between the various logics operating within it. This is achieved when a given principle of organisation (or logic) succeeds in dominating all the components or spheres in the system.

However, in any social system – even one that is seemingly in equilibrium – there are clashes between rival principles of organisation that constantly challenge the dominant one. Thus, says Dembinski, one can never be sure that the system will remain coherent or stable.

The past half-century has seen the rapid rise, and nowadays the virtual hegemony, of the efficiency ethos. This allows every player to pursue the desired results by whatever means seem most efficient, however exploitative they may be. In daily life, the principles of organisation derived from today’s efficiency ethos inspire and justify individual behaviour, which shapes institutions and the associated rationalisations, which in turn confirm the original principles. This process yields a theory of Ossipow, William “Deux pistes pour penser les relations entre éthique et finance”, in: Finance & the Common Good/Bien Commun, No. 36, 2010, pp. 125-35.

Walzer, Michael, Spheres of justice: a defense of pluralism and equality, New York: Basic Books, 1984.

Ethics and the Economy 35 systemic transformation in which present-day financialisation is merely one episode.6 The debate on the structure of contemporary social systems, and the economy’s place within them, illuminates and explains the wide range of differing views on the relationship between ethics and the economy.

For those who see the various spheres or subsystems as separate, each one has its own specific ethics. Accordingly, once the validity or usefulness to society of a given subsystem is accepted, the only ethical issue for the players within it is how to make it work smoothly. Ethics is thus endogenous to each subsystem or sphere. That is why so many authors refer to the ethics of business. The sole criterion of what is good and what is bad is whether or not it helps the system to function properly. In this view of ethics, any system that works is ethical.

Those who see the social system as a coherent whole governed by a single dominant logic reject this. To them, ethics is exogenous to the various subsystems. There are two versions of this theory. The first is a Marxist view in which each social system (or, as Marx put it, social formation) develops its own specific ethics whose purpose is to keep the system going. Ethics is thus endogenous to each social formation, but not to the subsystems or spheres within it. One can thus speak of the ethics of capitalism. The other view, found mainly but not only among religious believers, is that the source of ethics lies outside all social systems and organisations, which are simply frameworks within which people constantly pursue a good life. People are therefore called upon to express this transcendence in their actions. Rather than the ethics of business, this group of thinkers focuses on ethics in business. A scarcely perceptible semantic difference thus conceals an irreconcilable difference in views on the origins and purpose of ethics.

Dembinski, Paul H., Finance: Servant or Deceiver?, Basingstoke and New York: Palgrave Macmillan, 2009; first published in French as Finance servante ou finance trompeuse? Paris: Desclée de Brouwer, 2008.

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