Here We Go Again

May 6, 2010 at 2:34 pm Leave a comment

The man just doesn’t get it. It absolutely amazes me how someone who is so intelligent is such an ethical klutz. Lloyd Blankfein, Chairman and CEO of Goldman Sachs (I know, I know…Goldman again. I really want to blog about other important ethical issues but Goldman has become the flag bearer for everything that is wrong with the ‘free’ market system. Every day either Mr. Blankfein or one of his senior execs says something that is so mind boggling that I have to talk about it. So into the Goldman breech I go again) yesterday pledged to Goldman’s clients that his firm would be, I quote, “the leader in things (my italics) like ethics, in putting clients first”. This quote really highlights his misunderstanding of just what is ethics.

While some MBA schools will protest what I am about to say, for the most part, aspiring student executives, particularly in the financial services field, are first taught in most business schools that ethics is value-added or an add-on to what the firms do to make their money (in many business schools ethics is either an elective course – the future business exec doesn’t have to take it because as an elective it just isn’t that important ¬ or it is taught integrated into many courses as just another part of the course on finance or marketing or leveraging or whatever course is taught by instructors who themselves have had little or no formal training in ethical awareness and therefore, for most of them, do not really comprehend how dynamic and central ethics is to human behaviour). This credo of ethics as an add-on is then practised that way for many firms, particularly in the financial services industry, which further reinforces the idea that ethics is a thing that isn’t really central to the whole business process. If you think I’m just bitching with nothing to back up this last statement, just look at the actions of most of the investment firms and almost all of the mortgage firms in the run up to our most recent financial melt down. It was primarily greed at play in the fields of easy profit. Ethics, the how of doing business, and fiduciary responsibility which is a core reality of good business ethics, were simply ignored, seen as not central to the whole process of making money, and the consequences of that approach to business was, quite simply, catastrophic. Mr. Blankfein’s misunderstanding of ethics as a thing, as some thing that is added on to our behaviour from outside of us, as something that is dealt with as not really present until the outside world complains, is, sadly, emblematic of how much of the investment industry misunderstands ethics.

However, ethics is not a thing like a mortgage or a hedge fund. Mortgages, derivatives, income trusts and other created financial vehicles are things. One creates them, they have their time in the sun, and, once they cease to produce the desired profit level, they are dismantled and abandoned for some other human created investment package. Ethics, on the other hand, is not a human created package. Ethics is a human relational dynamic that has its own building blocks (values) and its own goal (trust or mistrust for the many practitioners of me-first economics). Ethics is not primarily concerned with profit for all those business types who see ethics as an add-on that is mainly concerned helping the business person look good while making big $$).

Ethics is present all the time, whether or not, you and I are aware of it – it is part of who we are as human beings. What Mr. Blankfein, by his classification of ethics as a thing, is demonstrating is a tragic and ultimately destructive (for him personally, his firm and all of those people adversely affected by his and his firm’s actions) misunderstanding of ethics. Like breathing, ethics is always present in our personal and corporate make-up. Like breathing, it disappears into the background for most of us because it is so much a part of what we do as human beings that we are often not aware of it until something outside of us shakes us into awareness. At that point, as Goldman and Mr. Blankfein are now experiencing, ignored ethics generally leads to really bad consequences.

Ethics is not an add-on, not value added, emphatically not a thing. It is central to almost everything we do as people as our internal dynamic that either creates trust or mistrust with others. Mr. Blankfein, you don’t just do ethics like you do lunch. Like physical fitness, ethical fitness must be constantly cultivated and actively and consciously incorporated into our dealings with other people. It takes time and effort to understand ethical dynamics and incorporate positive ethically influenced behaviour in a firm. In an industry which is almost completely short term focused on the profit margin for the next quarter, time is an enemy. But time is needed to understand and encourage ethical behaviour. If you don’t understand and approach ethical awareness in a respectful and effective manner, you get the mess in which you currently find yourself.

Entry filed under: banks, ethics, investments. Tags: .

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