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Ethical Considerations in Finance: Balancing Morality and Profitability in Modern Banking

This exploration by Dr. Ronald F. White delves into the ethical dimensions of finance, focusing on trust in financial institutions, individual and collective behaviors, and key moral principles such as justice and fairness. It contrasts stockholder theory with stakeholder theory, emphasizing the balance between regulatory oversight and market freedom. Key issues include mortgage fraud, insider trading, and the role of regulatory bodies like the SEC. By analyzing recent trends and classic dilemmas, the text offers insights into promoting ethical practices in banking and finance today.

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Ethical Considerations in Finance: Balancing Morality and Profitability in Modern Banking

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Presentation Transcript

  1. Ethics and Finance Ronald F. White, Ph.D. Professor of Philosophy College of Mount St. Joseph

  2. Introduction • Trust in Financial Institutions • Banking • Lending money • Mortgages • Credit cards • Financial Services • Securities • Stocks and bonds

  3. Basic Approaches • Stockholder Theory (Market-Based) • Less governmental regulation • Legality • Stakeholder Theory (Morality-Based) • More governmental regulation • Legality • Morality

  4. Moral Principles • Ethics • Individual behavior- • Bankers, financial advisors, accountants, • Systemic behavior • Instruments- Stocks and Bonds • Practices • Institutions- Banks, securities dealers and brokers, pension funds , accounting firms, mutual funds companies, insurance companies. • systems • Moral Principles • Justice-( Market Fairness) • Merit • Equal Information • Equal Freedom • Liberty- • Utility- • Categorical Imperative (Exploitation)

  5. Classic Issues • Individual and Collective Behavior • Deception (buyer and seller) • Fraud in the Inducement • Manipulation of Stock Prices • Conflict of Interest • agency • Churning • Insider Trading • Arguments in Favor • Arguments Against • Hostile Takeovers

  6. Recent Issues • Mortgage Fraud • Sub-prime loans • Payday Lenders • Credit Card Fees • Bank Bailouts • National Banks • Private Banks • Shareholder Activism • Sisters of Charity

  7. Fairness in Financial Markets • Information • Freedom • Competition • Equal Bargaining Power • Efficient Pricing

  8. Problems • Legality • National v. Global Legal and Moral Standards • Complexity • Monitoring and enforcement of standards • Effectiveness of governmental regulators • Securities and Exchange Commission • Federal Reserve • Federal Trade Commission • Effectiveness of Global Regulators • World Bank • Effectiveness of private regulators • Independent Auditors • Cost of monitoring and enforcement • Morality • National and Global Moral Standards

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