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We discussed in the chapter on social wealth how finance can contribute to the common good. Finance fulfills a critical role in our economy, whether by facilitating savings for retirement, enabling seamless payments for the purchase of goods and services, or offering insurance against the financial risk of an early death, to name a few of its basic services. By and large, the primary purpose of finance is to help customers achieve their goals.
Virtue for finance professionals is not only defined by how they serve customers and whether they act responsibly toward other stakeholders. It is also defined by how they treat colleagues and the extent to which they influence them to act virtuously. A finance professional could perform admirably with respect to the first two pillars of this book’s framework – be a great fiduciary to her clients and manage to generate social value in the process – and yet be a tyrant at work, manipulate and abuse colleagues, prevent them from developing professionally, discriminate against any subset, and generally create a miserable work environment.
A traditional perspective on the responsibility of finance professionals would hold that being a diligent fiduciary fulfills all of one’s professional and moral obligations since those are inherently intertwined. The industrious practice of a profession, trade, or art embodies moral behavior. Consequently, for a finance professional, as for any type of professional service provider, being a good fiduciary is the fulfillment of professional responsibility. However, I will contend that being a good fiduciary doesn’t automatically lead one to contribute to society. It simply entails faithfully delivering on the set of responsibilities entrusted by a client. The underlying financial activity matters because it can have a positive or negative impact on other people, independent of its impact on the client.
Working at a successful hedge fund bestows upon members of the team not only attractive compensation but often a stream of perks from brokers eager to sway trading business their way: dinners in high-end restaurants, open bar tabs, and the occasional round of golf or outing at sought-after sporting events. Not so at Watermark Group, a long-standing Princeton-based hedge fund. When an investment analyst broke an internal rule against broker favors by accepting US Open tickets from Lehman Brothers, co-founder Andy Okun insisted that the analyst pay back not simply the ticket’s face value, but its (much greater) scalp value. It took months of prodding for Lehman to cash the check.1
A recurring concern for my first-year undergraduate students contemplating a career in finance is that they will turn into hypocrites: spend several years in college being exhorted to act in the service of humanity, perhaps studying great thinkers, absorbing humanistic values, and devising solutions for a better society, and, as soon as they leave their idealized intellectual community, become cogs in a gigantic machine optimized to generate short-term profits.
Since the Global Financial Crisis, a surge of interest in the use of finance as a tool to address social and economic problems suggests the potential for a generational shift in how the finance industry operates and is perceived. J. C. de Swaan seeks to channel the forces of well-intentioned finance professionals to improve finance from within and help restore its focus on serving society. Drawing from inspiring individuals in the field, de Swaan proposes a framework for pursuing a viable career in finance while benefiting society and upholding humanistic values. In doing so, he challenges traditional concepts of success in the industry. This will also engage readers outside of finance who are concerned about the industry's impact on society.
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