Building a framework based on cultural diversity
To address ethics and integrity there is need to place the notions within their cultural context of societies and nation-states. While the global financial sector is often perceived as a homogeneous world, its activities take place in national financial centers and jurisdictions that are affected by differing cultures. Our intent here is to set forth a framework that can serve as a reference for research on ethics and integrity, which in turn will frame the research of the Work Committees and their Taskforces into business standards and practices related to specific issues addressed within the context of corporate financial governance and market integrity.
The proposed core framework definitions requiring significant elaboration are the following:
Culture is a system of values and norms shared amongst a group of people that, when taken together, constitute a design for living.
Values are abstract ideas forming the keystone or backbone of a culture. They pertain to what is right, good and desirable and make up the set of premises on how things ought to be. Such abstract ideas concern in particular the notions of individual freedom, justice, truth, honesty, loyalty, social or collective responsibility, the respective roles of man and woman, love, sex and marriage among others. They typically have emotional significance (e.g. “die or be free”) and are embodied in political and economic systems like the free-market or competitive-market economy paradigms. The two paradigms in question divide in particular Anglo-Saxon thinking in America and the UK from that of continental Europeans in the search for policy solutions to financial behavior and systemic risk. Religion where practiced can be a source of fundamental values.
Norms are social rules and guidelines that prescribe the appropriate social behavior. As per Charles W. Hill (International Business, McGraw-Hill/ Irwin, 5th edition, 2005), they can be categorized as folkways and mores.
Folkways are typically routine conventions of every day life with little moral significance, like the appropriate dress code for the office, good social manners and neighborly behavior. Mores are on the other hand central to the functioning of society and social life. Their violation usually can have serious consequences of retribution. Certain mores, like breaking agreements (contracts), theft, adultery or incest, murder and fraud, are typically sanctioned by law. Mores vary across societies, meaning that certain actions are acceptable in one society, but forbidden in others, like bribery and other corrupt practices or the rules of sharia in Islamic countries, which for instance forbid interest on financial transactions and alcohol consumption or impose on women life within the household only or severe dress codes.
Society is a group of people sharing a common set of values and norms. It is constituted hence by a particular culture based on its own set of well-defined values and norms.
The nation-state is a political creation and construct. It may be constituted by one or more societies or cultural groups with minor and major variations in the values and norms that define each of them.
Ethics and integrity constitute critical components of professional excellence that involves not only qualifications and competence but also customer trust and confidence. It falls into the notion of corporate social responsibility and of that of the social responsibility of the individual professional exercising his activities within an organization or outside it as an independent or self-employed person. Without trust and confidence, business cannot happen and lead to economic growth and progress that ultimately benefit all. That realization was made as far back as by Adam Smith, the founder of classical economics.
The present financial crisis is due to no small degree to a failure in ethics and integrity that are the products of culture as embodied in its values and norms. To address ethics and integrity requires therefore addressing culture. In this context, the global financial sector can be perceived as a set of societies in which groups of people sharing common sets of values and norms diverge in the respect and imposition of ethical business practices ground in the application of the principles of integrity, namely fairness, transparency, responsibility and accountability.
The research, and resulting reports and their recommendations, of the Work Committees through the work of their Taskforces on specific issues should address worldwide in regard to national financial centers and jurisdictions (i.e. countries and wider jurisdictions like the EU) the cultures and their contexts of ethics and integrity in regard to professional excellence.