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2021 | Book

Plantation Adventure Case Study Read chapter Read first chapter

Ethics in Finance

Case Studies from a Woman’s Life on Wall Street

Author: Dr. Kara Tan Bhala

Publisher: Springer International Publishing

Part of: Springer Professional "Wirtschaft+Technik" , Springer Professional "Wirtschaft"

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About this book

This book comprises multiple finance and ethics case studies. The purpose of the book is twofold. First, the case studies teach readers how to evaluate and determine resolutions to ethical issues in finance. Second, the reader will enjoy a journey with the author, a woman, over her years working in finance, through the use of case studies.

These studies focus on ethical issues in finance which the author encountered over nearly a 30-year career in the industry. There are 10 case studies extracted from different sectors of finance. This broad range is a consequence of the author’s experience from almost all sides of the business: the buy side, the sell side, equity research in Asia, equity sales, mutual funds, hedge funds, the finance academy, and consulting.

Each case study has an engaging narrative describing the background, transactions, players, and ethical issues. The ethical issue is analyzed and resolved using the appropriate theories of moral philosophy. Descriptions and analyses are rigorous yet comprehensible, approachable, and entertaining.

Apart from ethics determinations, the material in the book covers and explains a variety of specific, and even complex, financial transactions. In every transaction there is an explanation of the roles of various players involved. In this way, readers will learn about the work of people in different positions in finance from investment bankers and equity traders to portfolio managers and equity analysts. Through these case studies, readers also will get an understanding of major financial transactions and activities such as IPOs, secondary offerings, equity trading, and equity valuations.

The book will appeal to practitioners, college and high school students, and lecturers who can use it to supplement courses in finance or business ethics.

Table of Contents

Frontmatter
Chapter 1. Plantation Adventure Case Study
Abstract
The story told here is of conflict of interest in equity research. When researching a company, an equity analyst may be swayed, in this case through perceived friendship, by the management of that company. An equity analyst has the obligation to give objective and honest recommendations to clients. I use virtue ethics to explain why we have this obligation and why it is important to act virtuously in circumstances similar to the one I experienced in my plantation adventure.
Kara Tan Bhala
Chapter 2. Bangkok Misadventure Case Study
Abstract
This case study teaches us to evaluate a questionable act using utilitarian and deontological frameworks of ethics analysis. The story is about an equity salesperson setting up a high revenue-generating client with a high-priced escort in Bangkok, at the request of the client. Is this act ethical? The case study goes through arguments debunking the Friedmanite profit maximization position, the free market contention, and the career suicide rationale.
Kara Tan Bhala
Chapter 3. Hong Kong Hike Case Study
Abstract
This case study concerns the practice of portfolio pumping. This trading form refers to quarter-end and/or year-end price manipulation on the part of fund managers via the excessive buying of securities they already own. I apply a Kantian deontological moral framework to assess the ethics of the act of portfolio pumping. The conduct is unethical because it violates a primary and near universal ethics principle: do not cheat.
Kara Tan Bhala
Chapter 4. Mutual Fund Fun Case Study
Abstract
This case study tells the story of time zone arbitraging of shares in a mutual fund. This form of trading is short term, usually within 24 or 48 hours, and takes advantage of price discrepancies that arise from a situation where primary markets for the underlying securities of a mutual fund are closed at the times the fund is traded. To evaluate the conduct of time zone arbitraging in mutual funds, we use two ethics tools: (1) the fiduciary principle and (2) the concepts of commutative and distributive justice.
Kara Tan Bhala
Chapter 5. High Finance Gender Inequity Case Study
Abstract
This case study is about gender discrimination on the job. The story is about how women were consistently and deliberately excluded from a high-level networking event. Discrimination in any of its forms (sex, race, religion, age) is unethical under every ethical system of thought out there today. Focusing on gender discrimination, I explain how this practice is unethical when evaluated through the lenses of (1) justice theory, (2) rights theory, (3) duty-based ethics, (4) natural law theory, (5) utilitarianism, and (6) feminist ethics.
Kara Tan Bhala
Chapter 6. Hedge Fund Edge Case Study
Abstract
The story in this chapter recounts the pressure hedge managers experience to exceed performance metrics using extraordinary means, in particular, insider trading. The case explains the work of hedge funds and the characteristics that make them distinctive from other asset managers. The ethics section discusses what actually constitutes insider trading and examines why the practice is not only illegal but also unethical. Issues of fairness and fiduciary duty are applicable. Further, a utilitarian analysis using behavioral finance assessments of insider trading throw doubt on whether benefits outweigh costs of this insider trading.
Kara Tan Bhala
Chapter 7. Hedge Fund Harassment Case Study
Abstract
The subject of this case study centers on abusive supervision. The story is told of a boss, an abusive supervisor, who practices power harassment over members of his staff. His abuse and mistreatment fall into three categories: verbal abuse (yelling and belittling subordinates), demanding staff perform tasks unrelated to their jobs, and engendering a hostile work environment. Abusive supervisory behavior is unethical because it causes harm to other human beings and wholly disregards their human dignity. In response to this maltreatment, begin the process of seeking a new job. While in that process, continue talking to colleagues and those empathetic to the situation. Also, stand up to the abusive boss when he acts up. If there are organizational procedures in place, lodge a complaint with the company about this abusive behavior.
Kara Tan Bhala
Chapter 8. Whistleblowing Consultant Case Study
Abstract
This case study is about whistleblowing in the context of a private corporation and relates the travails of a whistleblower. The case goes on to describe the different categories of whistleblowers. When confronted with misconduct in or faulty products from an organization, it would help if an employee has a process for assessing whether to whistle blow. This chapter provides an evaluative checklist that is a useful guide for those who need help deciding whether whistleblowing in their situation is morally permissible (you can blow the whistle) or required (you must blow the whistle).
Kara Tan Bhala
Chapter 9. Finance Academy Gender Inequity Case Study
Abstract
The story in this chapter tells of asymmetric power in a male only finance department of a business school. The power allows both overt discrimination and implicit bias to operate against women in curriculum decisions and development. This chapter showcases the non-tangible forces aligning against a woman in the academy: systemic gender discrimination, unspoken power differentials, capitalist profit priorities, and implicit bias. The analysis offers an original insight, that two female archetypes lurk in the collective male unconscious: the handmaiden and the cheerleader. One way to correct systemic gender discrimination is by ensuring the number of women in power positions reaches a critical mass, rather than just the one or two who become tokens in their work area.
Kara Tan Bhala
Chapter 10. Finance Academy Ideological Bias Case Study
Abstract
This chapter continues with the narrative of the previous case study. Another reason for the cancellation and rejection of my financial ethics courses is rooted in ideological bias. The prevailing Friedmanite and neo-liberal ideology in the finance department did not admit radically different systems of thought and therefore excluded non-conforming courses and thinkers. The case study applies a utilitarian analysis to find out if the act of excluding a person, through hiring and promotion practices, because of her ideological view is ethical. Requiring courses in behavioral finance and Islamic finance gives students who will be future finance practitioners, a more comprehensive view of existing finance theories that have fundamentally different assumptions.
Kara Tan Bhala
Backmatter
Metadata
Title
Ethics in Finance
Author
Dr. Kara Tan Bhala
Copyright Year
2021
Electronic ISBN
978-3-030-73754-2
Print ISBN
978-3-030-73753-5
DOI
https://doi.org/10.1007/978-3-030-73754-2