Are Ethics for Suckers?
Lipman, Joanne, Newsweek
Byline: Joanne Lipman
When even Warren Buffett looks bad, the financial world is begging for a backlash.
If there's anything that Warren Buffett has prized more than his billions, it's his company's reputation. Which is why there was a collective gasp of betrayal when Buffett's onetime heir apparent, David Sokol, resigned in the aftermath of pocketing $3 million from trading in the stock of a chemical company Berkshire was acquiring. Buffett furiously spun the departure, insisting nothing "unlawful" transpired. In a Reuters survey of 23 top bankers, 21 said Sokol's trades looked ethically wrong to them, yet only one in five expected any insider-trading charges to be brought. The incident has raised the question, yet again, about what it takes to succeed in finance. Do bankers think of the law as something to be scoffed at and ethics as only for suckers? Increasingly, even veteran investors say the answer is an outraged "yes."
"What you're seeing on Wall Street is disgusting," says Vanguard Group founder John Bogle. "Not so many years ago there were some things one simply didn't do. Period. And that's evolved into moral relativism, into 'When everybody else is doing it, I can do it too.' I've only been in this business 60 years," adds Bogle, and it is "absolutely" worse now than before. He believes that "we have a societal problem, not just a Wall Street problem. But like other problems it gets magnified beyond belief on Wall Street, where the money is." Former Goldman Sachs chief John Whitehead also told NEWSWEEK that ethical standards have slipped, as did former PaineWebber CEO Donald Marron. "We're dealing with more difficult problems than ever before, and it's simply harder to maintain standards of ethics and doing business," says Whitehead, who ran Goldman until 1984. Both Whitehead and Marron say most players are honest. "The vast majority of business," says Marron, "is done at very high ethical standards."
And yet, if you wanted to design a psychology experiment to tempt otherwise honest people to cross an ethical line, it would be hard to beat Wall Street. …