Ethics in Finance Contemporary financial economist view ethics in the context of objective wealth maximization.……this view is considered as both illogical and ambiguous.
Illogical..Because it merely sanction unethical behaviorif such behavior can be shown to lead tomaterial gain.Ambiguous…Because throughout the 2000-year history ofmoral philosophy, ethics has generally beenviewed as a behavioral motivation, not as aconstraint.
If I hear of an employee loosing the company money, I’llbe understanding. However, if I hear of an employeelosing Salmon one shred of reputation, I’ll be ruthless.
• Ethics in corporate finance• Ethics in accounting• Ethics in stock market• Ethics in transactions• Ethics in financial services• Ethics in financial management………….
• TODAY is my last day at ______________. After almost 12 years at the firm — first as a summer intern while at Stanford, then in New York for 10 years, and now in London — I believe I have worked here long enough to understand the trajectory of its culture, its people
What is Goldman Sachs?• It is an American multinational bulge bracket investment banking and securities firm.• Goldman Sachs was founded in 1869 and is headquartered at 200 West Street in the Lower Manhattan area of New York City.• Chief Executive Officer: Lloyd C. Blankfein
Who is Greg Smith??• A Goldman Sachs Executive who resigned on March 14, 2012.• He was responsible for the U.S./Americas equity derivatives business in Europe.• He joined the firm in 2001.
Ethics in question…• Behind closed doors, it is a conversation that has been taking place with increasing urgency on Wall Street in recent years: Making money is good, but is making more money always better, even if it comes at the expense of clients?
Observations• It could reignite public suspicion that the culture of Wall Street has swung so sharply to the short- term side of the ledger that clients have not been coming in first, or even second, but dead last.• He warned, “People who care only about making money will not sustain
Ethical Alternative• Wall Street, of course, has always sought profits — but if greed were to be countenanced, it should be long- term greed, not short-term greed, in the words of Gus Levy, who led Goldman Sachs in the 1960s and ’70s.• With long-term greed, money is made
• A protest that begun in Sep 17, 2011.• It was initiated by the Canadian activist group Adbusters.• The main issues are social and economic inequality, greed, corruption and the undue influence of corporations on government—particularly from the financial services sector.• The slogan, We are the 99%, addresses the growing income inequality and wealth
• Transparency.• Extensive use of technology.• Decentralization of responsibilities.• Strong and unbiased regulators.• Clear objective of the organization.• Most importantly individual integrity.
In Q2, our revenue grew… on the back of a 4-per cent volume growth and rupeedepreciation against the US dollar… Webelieve these factors will also enhance annualmargin performance… I would like toemphasise that _________is leaving no stoneunturned in our efforts to create a soundfoundation for our future. …………..2008
The balance sheet carries as ofSeptember 30, 2008 inflated (non-existent) cash and bank balances…The gap in the balance sheet hasarisen purely on account ofinflated profits over a period oflast several years. ………..2009
The Balance Sheet carries as on September 30, 2008- Inflated cash and bank balances of Rs. 5,040 crore. An accrued interest of Rs. 376 crore, which is non-existent. An understated liability of Rs. 1,230 crore on account of funds arranged. An overstated debtor liability of Rs. 490 crore.
Aftermath• Satyams shares fell to 11.50 rupees on 10 January 2009, their lowest level since March 1998, compared to a high of 544 rupees in 2008.• PricewaterhouseCoopers….."inaccurate and unreliable“• Actual number of employees is only 40,000 and not 53,000, 20 crore every month for paying these 13,000 non-existent employees.
• On 13 April 2009, a 46% stake in Satyam was purchased by Mahindra & Mahindra owned company Tech Mahindra, as part of its diversification strategy. Effective July 2009, Satyam rebranded its services under the new Mahindra management as "Mahindra Satyam"
As a result of the scandal, under the directions ofthe new Mahindra management team, SatyamComputer Services restated its financial resultsfor the period 2002 to 2008. These restatedresults were published in September 2009.
Case Files• Enron Corporation was an American energy, commodities, and services company based in Houston, Texas.• At the end of 2001, it was revealed that its reported financial condition was sustained substantially by institutionalized, systematic, and creatively planned accounting fraud, known as the "Enron scandal".
Aftermath• Enron has since become a popular symbol of wilful corporate fraud and corruption.• The scandal also brought into question the accounting practices and activities of many corporations throughout the United States and was a factor in the creation of the Sarbanes–Oxley Act of 2002.