The Psychology of Ethics in the Finance and Investment Industry

Introduction

Every day, we can read in the newspapers about violations of ethics and the law committed by professionals in the finance and investment industry. Similarly, almost every day, we can read statements by government officials and representatives of the financial industry about the danger of these violations to the reputation of the industry, appeals for better ethical behavior of the professionals active in this industry, and calls for stricter laws that, supposedly, will guarantee ethical conduct. One of the organizations enforcing ethical standards is CFA Institute. With members in more than 130 countries around the world, its mission explicitly defines the following goal: “to lead the investment profession globally by setting the highest standards of ethics, education, and professional excellence” (CFA Institute 2007). A key to accomplishing this mission is the enforcement of ethical conduct of members through the Professional Conduct Program. Every CFA Program candidate and member of CFA Institute must annually sign and always abide by the Code of Ethics and Standards of Professional Conduct (CFA Institute 2005). Laws and regulations are not enough, however, to maintain ethical standards in the behavior of investment professionals or to create a truly ethical culture in the industry. In addition, we need to direct our attention to psychology. Only if we learn about the psychological dynamics involved in ethical decision making will we understand why some finance and investment professionals behave highly ethically whereas others blatantly violate standards of ethical conduct and sometimes even break the law. Learning about the psychology of ethics will also give us the ability to manage ethical behavior more effectively. This ability applies to our own ethical conduct as well as to the conduct of others (Trevino and Nelson 2007)—that is, to the behavior of subordinates, colleagues, and supervisors. Moreover, understanding the psychology involved in ethics can form a basis for effectively influencing the organizations and the industry in which we work to promote fair and personally fulfilling professional environments.

Contents:


Chapter 1. Ethics in the Financial and Investment Industry
Chapter 2. Defining Ethics and What Is Ethical
Chapter 3. Psychological and Descriptive Understanding of Ethical Decision Making
Chapter 4. Individual Ethical Development
Chapter 5. Ethics-Related Individual Characteristics
Chapter 6. Implicit Individual Processes
Chapter 7. Social Influences on Ethics
Chapter 8. Groups and Ethics
Chapter 9. Power, Leadership, and Ethics
Chapter 10. Organizational Culture and Ethics
Chapter 11. Compensation and Reward Systems
Chapter 12. Ethics Training
Chapter 13. Conclusion

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04. February 2010 by Miguel Barbosa
Categories: Curated Readings, Finance & Investing | Leave a comment

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