Ethics in Financial Services

• Published date: 01 March 1999
• Date: 01 March 1999
• Author: Robert Boyden Lamb
• DOI: http://doi.org/10.1111/0045-3609.00033

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Ethics in Financial Services

ROBERT BOYDEN LAMB

Ethics is a central, not a peripheral, issue in financial serv-

ices. “Your word is your bond” is a basis of trillions of dollars

of financial transactions each week before any written con-

tracts are exchanged. If any substantial portion of those verbal

deals was ethically or legally suspect, it would seriously damage

major financial markets.

However, financial institutions are vulnerable to many legal and

ethical abuses and very expensive forms of corruption. Many finan-

cial professionals face continual conflicts of interests. While pursu-

ing their individual wealth, such professionals must navigate

within a web of conflicting interests, duties and loyalties to their

firms, bosses, customers, exchanges, regulatory authorities and to

their families or friends.

Some experts argue that unethical practices are inevitable and

systemic in finance because, unlike other industries that provide

intrinsically useful goods and services, the single focus of most

financial deals is the maximization of money. As a result of this con-

tinual naked pursuit of money, financial service has been called “a

pollution intense environment” rife with negative externalities or

harmful side effects. Roy Smith and Ingo Walter in their book about

business ethics, “Street Smarts,” describe top executives in finan-

cial firms as “zoo keepers” because their employees and managers

are continually tempted to succumb to selfish unethical acts that

can harm their firms or customers.

Although the financial theory taught in business schools is “the

efficient market hypothesis,” in fact, a key goal of top professionals

© 1999 Center for Business Ethics at Bentley College. Published by Blackwell Publishers,

350 Main Street, Malden, MA 02148, USA, and 108 Cowley Road, Oxford OX4 1JF, UK.

Robert Boyden Lamb is a professor at the Stern School of Business, New York University.

Business and Society Review 104:1 13–17