Ethics imperative in finance’s blind spot

During an interview in 2019, at an investment fund in Luxembourg, when I raised the idea of organizing a workshop on ethics that would not focus on financial products, I saw the surprise of my management contacts who wondered what the content of this workshop might be.

I use the blind spot as an image to demonstrate the extent to which imperative ethics lie in the zone inaccessible to the field of vision of finance. How is it that we’ve come to talk about imperative ethics in finance? We are dealing with an economic activity created with the aim of increasing capital and making a profit. This expression “imperative ethics” comes from the categorical imperatives of certain philosophers, which I will develop in this article. The word “imperative” may sound like an order, but it is sometimes necessary for an authority to give orders, and especially in finance, this is part of the vocabulary. What orders does ethics give?


The essence of ethics

To begin with, we’re going to take a look at the very essence of ethics. Ethos, from Greek, means habitat1)Roger -Pol Droit, L’éthique expliquée à tout le monde, éditions Seuil, 2009, for example the way an animal species inhabits the world. Bird ethos? Flying, singing, laying eggs…ethology would be formed on the same word to study the behaviors of animals in their natural environment. Ethos is that which relates to morals, good or bad. Ethos can also mean a person’s character. It’s the way people live, the customs they observe, the rules, their laws. Ethics also comes from the Latin ethikè ethikes theoria, behavioral contemplation, to designate knowledge about how to behave or about morals and the soul2)Jean Francois Daigne, Ethique financière, que sais-je, 1991. Ethics answer the question: how do I do it? What should I do?

As a matter of imperative, it’s important to consider what’s needed with a sense of urgency and necessity in today’s crisis situation. Finance is compared to the driver of a vehicle who needs to make a voluntary movement of the head to quickly and effectively check his blind spot before making a decision to carry out a maneuver.


From the outset, finance divorced from ethics

Finance, this profit-making activity, thus appeared technical and amoral. Jean Michel Poughon (2013)3)Chantal Cutajar, Jérôme Lassere Capdeville, Michel Storck, Finance et éthique, éditions Lamy, 2013 Professor of law at the University of Strasbourg, who wrote the introduction to the book “éthique et finance”, has stated that ethics and finance were initially considered antinomic. Jean Francois Mattéi (1941-2014 )4) Jean Francois Mattéi, Ethique et Economie, éditions Manucias, 2013 former Minister of Health had written “éthique et économie” and said that an economic system that governs exchanges between men is neither moral nor immoral . Indeed, what’s moral about fund-raising activities, for example? So finance also works under orders given by figures. It may or may not be effective, it may or may not be correct, and effectiveness is not a moral issue. We take orders, we carry them out, we have nothing to say. There’s nothing moral about mathematics, addition, subtraction or multiplying numbers.

The necessities of economic exchange are by nature indifferent to moral standards. Economics is a matter of constraint (with no choice of action, imposed from outside), whereas morality is a matter of obligation (dependent on a person’s will). For Jean François Mattéi, the crime of corruption, for example, is not strictly economic, but fundamentally legal, due to the violation of the law, or moral, due to the breach of duty. Morality plays a part in the good or bad use we make of finance. If this is finance and the ethos of finance then? Why are we constantly talking about ethical finance? and sustainable finance?

The ethos of finance as it presents itself: ethical finance

Originally, therefore, ethical issues were not part of finance’s field of vision. In Western societies, we have witnessed financial scandals, corruption, operating with criminal money (terrorism, pimping…), fraud and managerial excesses. We can add to this the societal problems of environmental degradation and health concerns arising from the financing of all kinds of projects without concern for their impact on mankind. It was then that civil society became aware of the excesses of finance, the economic and social inequalities and the problems affecting human beings, and mobilized in a variety of ways to demand that politicians legislate for more regulation in finance. This demand for external regulation has led to a change in corporate behavior. All these behaviors have been formalized in written ethical charters and corporate codes of conduct.

On the one hand, ethical finance was born to advocate and communicate ethical, sustainable investments for the ecology, green finance, solidarity finance, corporate social responsibility and socially responsible investments. Compliance was born to scrutinize the compliance of the origin of funds and the beneficiary of the funds. On the other hand, this outward shift in behavior didn’t necessarily mean the same thing for shareholders, who continued to reign supreme over their companies and to receive prodigious dividends. Executives continued to receive very high salaries, bonuses, golden parachutes and bonuses distributed to professionals who had achieved their objectives in developing the company.

Thus, finance’s response to the development of ethical and responsible behavior has been to move closer to ethics, initially through solidarity solutions, in other words, ethical finance. Then, secondly, through technical solutions such as compliance, to protect ourselves from what might come from outside through money laundering. And finally, internally, the ethics charter and the whole fight against corruption, fraud and the implementation of behaviours intended to be responsible, loyal and honest. Let’s take the example of the code of ethics of the Luxembourg banking association, which states in its introduction: “Professionals shall act with loyalty, fairness and integrity in their relations with customers, other professionals in the financial sector, the markets and in their relations with the Company”..”. Then in section 1.4. Relations with society: Professionals strive for socially responsible behavior.1.4.1. They integrate social, environmental and ethical concerns into their policies, and adopt a humane and responsible approach, both internally and in their choice of external partners and service providers. This ethical charter tells us that the following values should permeate finance: loyalty, integrity and fairness. Why and how to be loyal?


The 4 orders of imperative ethics addressed to the orders of finance

We said that through its philosophers, ethics also gives orders just as much as finance. From medieval to contemporary philosophers, Kant’s categorical imperative seems to be the common thread running through the ethical thinking we have deemed relevant to finance. Categorical imperatives are :

  • Act as if the maxim of your action were to be established by your will as a universal law.

i.e. that you can at the same time want everyone to share the same maxim as you. The imperative “Thou shalt not kill thy neighbor” is such a maxim, but not “Thou shalt kill thy neighbor”. Indeed, I may want to kill, but I can’t want everyone to kill everyone else at the same time. Immanuel Kant (1724-1804)

  • Always act in such a way that you treat humanity in yourself and in others as an end, never simply as a means.
    Man as a person possesses a dignity that elevates him above all else. Pose the unconditional value of every person. Immanuel Kant (1724-1804)
  • These two formulas create a third, establishing man as the author of morality: “Morality is the idea of the will of every reasonable being conceived as the will that institutes universal legislation”. The will is in fact autonomous, giving itself its own law. We obey the moral law because we give that law to ourselves. . Immanuel Kant (1724-1804).
  • Include in your present choice as the object of your will the future integrity of man. Hans Jonas (1903-1993)

1- Imperative ethics radically give meaning to ethical charters, and vice versa.

We use Kant’s categorical imperatives and Hans Jonas’s theory to explain how they give meaning to the ethical charter (in the application of corporate values). For example, I am loyal to my employer. The term “Loyalty” includes the word “legal” (from lex – legis, Latin for law), referring to a character that is binding and non-negotiable, such as the law. In accordance with the law defined by the superior who gives or dictates his principles. In Hebrew, the word “loyalty” is related to the word “amen” meaning “so be it”, which is the key expression declared by those who subscribe to the principles of a superior. We talk about loyalty because there is a superior and an inferior. The notion of loyalty refers more to compliance with a contract, a contract of adhesion. And let’s not forget that a contract has the force of law, and a law is binding. It’s not easy to be and remain loyal. Why be loyal? According to Kant’s imperative, professionals are called upon to be loyal because their behavior should be a universal choice that applies to all, otherwise it is neither ethical nor loyal. If everyone in a company decided not to respect the terms of their contract, it would be a catastrophe. We are also called to loyalty because our superiors are not just a means to satisfy our interests, but the purpose of our actions is for the good of others in the company. Ethical charters must be respected to ensure that human beings are respected. In other words, I’m called to be loyal to others. Consequently, the meaning of the ethical charter for the financial professional is to enable him or her to see relationships with customers, other professionals in the financial sector, the markets and relations with the Company as an end and not simply as a means to “boost numbers” and obtain bonuses. What makes ethical charters meaningful is the knowledge that it is important to respect these tools within the company, acting as if our actions of loyalty, integrity and fairness were to be erected by our will into universal law. Whether or not we apply the principles, we are making a choice. Contrary to what we might think, we never act solely on our own behalf. We also decide indirectly for others, for everyone. Jean Paul Sartre (1905-1980) used to say that in our decisions, we are in fact making a choice for mankind, and ultimately for all humanity. The choices we make, the actions we take, commit others. Imperative ethics is the rule of action that tells us why we must apply the ethical charter. Loyalty and integrity (honesty, not corruption) in business means not using those who depend on our orders as means, but seeing them as the end of the good deed, acting for their good and not using them as an instrument. To consider them as an end is to make them exist, to give them a voice in decision-making. That management decisions, for example, are made in both directions, top-down and bottom-up. This starts with the construction of an ethical charter in both directions.

2 – imperative ethics guide the concrete application of the code of deontology
(code of professional practice).

Kant’s imperatives help determine the conditions for applying the code of ethics. It’s about doing a job with good will, pure will and out of duty, not in accordance with duty.

the good will: the purity of intentions. Kant starts with the concept of “good will”. Intelligence, courage, skill, desirable qualities and so on are not absolutely good things in themselves. They are good only when they find their impetus in the good will, i.e. the first and original will to do good for good’s sake, purity of intention. If this is not the case, intelligence, competence etc….can be quite destructive dispositions for those who wish to carry out a bad action. The value of competence depends on how it is used. How the financial professional uses his intelligence and skills. The same applies to happiness: it is not a good in itself, an end in itself, since it can be a source of corruption and greed. To obtain what someone thinks will make him happy, he is prepared to steal, for example. Kant says that everything depends on good will. What is good will? It’s not a will that achieves its goals, it’s a will whose intentions are pure. What is a pure will? A will that obeys the concept of duty. Good will, then, is acting out of duty. What is acting out of duty?

Kant distinguishes between “acting in accordance with duty” and “acting out of duty”. Thus, the financial advisor acts in accordance with his duty towards his clients when his motivations are those of interest according to his employment contract, for the good reputation of his company and not out of moral duty. This type of action falls into the category of legality, not morality. Morality refers to an action performed in the pursuit of one’s duty : “An action performed out of duty derives its moral value not from the goal (objectives) it is intended to achieve, but from the maxim according to which it is decided”. Moral duty is that which obeys the rule of universality, not interests or whims. So, for the financial advisor, acting out of duty means acting without being pushed, without any constraint weighing on our will, in complete autonomy, in pure obedience to a self-given order of reason. To act autonomously is to act freely. So to act out of duty is to act freely. It’s important to note that the finance professional, in addition to executing the rules of compliance, green finance etc., is endowed with morals and the values of doing good and being good. We used to think that working in finance was just a matter of applying the technique and speaking the language of the establishment. When it comes to a company’s reputation, it’s important to realize that it’s the financial professional who’s at the heart of the matter. This professional has values and skills. Thus, ethics is the way in which finance moves from know-how and knowledge to the values and know-how of the professional. Baruch Spinoza (1632-1677) said that ethics aims at the good life. It’s not just about “doing good”, it’s also about “being good”, in other words, being oneself. Imperative ethics means acting not only according to laws and regulations, but also according to what dwells in our soul, i.e. goodness, and therefore ethics. And some banking professionals, taking the example of Josette Amor of Finansol (2017)5)Pierre Rabhi &Juliette Duquesne, les excès de la finance, ou l’art de la prédation légalisée, j’ai lu, 2017 have evoked this dual personality that working in finance can provoke. The gap between technical know-how and the professional’s human and moral values. Thus, the technical ethics of finance seek to give a company a good reputation, good governance and an exemplary marketing policy in order to attract investors, but before the company it is the individual person and therefore the professional to whom the imperative ethics are addressed. The professional is an integral part of the institution. The professional is exposed to compliance risk, ethical risk and the abyss of his or her soul, according to the definition of ethics as “soul”. A professional’s performance depends as much on his skills as on his soul.

3-Ethical imperative imposes Man in finance

For Kant, man is considered the author of morality. Between, on the one hand, directors’ bonuses and tempting dividends sent to shareholders and, on the other, massive job cuts for employees and families left to fend for themselves, what are we to do with humanity? concern for others? In the hurricane of endless enrichment, imperative ethics are essential, as they raise questions about Man (with a capital H) and morality. We believe that finance needs people and other people in order to develop. As long as it appeals to man (the author of morality, according to Kant), it is obliged to take account of Man in his humanity. Who is the other man in front of me with whom I’m going to work, establish a contract, do business, negotiate?. How do I treat it? Hans Jonas (1903-1993)6)Hans Jonas, The Responsibility Principle, An Ethics for Technological Civilization, Champ Essais, 1979 was truly concerned with future generations. This vision, like Kant’s on categorical imperatives, is in line with the theory of Emmanuel Levinas (1906-1995), who insisted on concern for the other. Hans’ responsibility could be likened to the institutional responsibility of Paul Ricoeur (1913-2005), whose ethical vision also emphasizes the other and institutions: a good life, with and for others, in just institutions. We can therefore understand that the ethical aim of a financial institution is to live a good life with and for others. Let finance be fair, good with and for others. The concern of the social sciences: whether finance in the 21st century develops man or develops finance (financialization) in the service of Man7)André Lacroix and Allison Marchildon, Quelle éthique pour la finance?, Presse de l’Université du Québec, 2013. Ethical and responsible behavior is that of the human imperative, responsibility in relation to the treatment of the human being, man considered in all his dimension and richness. Finally, for Kant, man is characterized by an “unsociable sociability”, which means that he cannot live without his fellow human beings, but always tends to abuse his freedom in relation to them. So we need a master, whom we could call ethics, to force him to realize his moral potential and emerge from animality to become a person.

4- Hans Jonas’ imperative of responsibility

In his essay, Hans Jonas develops the principle of responsibility for technological and digital civilization. This principle is based on valuing existence. In other words, being is preferable to nothingness, which is why it is necessary for humanity to be and to endure, rather than to disappear. Hans Jonas’ thesis is that we have a duty towards future generations, and that what is good for ourselves is not necessarily good for others. The new responsibility he refers to is non-reciprocal. It obliges me to a future that doesn’t exist and to which I wouldn’t hold myself accountable. Hans Jonas constructs his principle of responsibility as a complement to Kant’s principle. Kant’s moral imperative was: “Act in such a way that the maxim of your action can be universalized”.


Conclusion.8)Representation of the financial environment and its various interactions, including the place of imperative ethics and morality

Finance today needs imperative ethics. Finance is built on risk, it has led to major economic and social inequalities, and it is the field of many ever-growing innovations. Financial markets can be mirages, leading to projects without responsibility. Finance needs imperative ethics to set limits and a framework for enrichment on the markets, to recall human origins, to foster concern for others and the sharing of wealth, the question of otherness. Ethics in finance, in the blind spot of finance, are all those human and moral values taught by social thought, and which raise questions that are not or no longer discussed in finance, or that are increasingly being discussed again (apart from investments in financial products). They constitute the blind spot, because we don’t see them, but they do exist, and like a blind spot, they can prevent a road accident, a crash, the death of finance if it doesn’t take them into account in order to move forward, to move into a higher gear. The ethical imperative is finance overtaken by man.

So Man is not a means, but a goal, an end, and Man cares about others, and Man thinks about the universal. And without people, finance can only go so far. For Kant, man is considered the author of morality. Financialization is all about profit. Only as long as it is exercised by men in contact with other men, as long as we consider ourselves to be human beings, yes we can do good in finance for ourselves, for others, for the city, in just institutions and we will only be fulfilling ourselves as human beings and therefore we will only be fulfilling ourselves and making ourselves happy.

1 Roger -Pol Droit, L’éthique expliquée à tout le monde, éditions Seuil, 2009
2 Jean Francois Daigne, Ethique financière, que sais-je, 1991
3 Chantal Cutajar, Jérôme Lassere Capdeville, Michel Storck, Finance et éthique, éditions Lamy, 2013
4 Jean Francois Mattéi, Ethique et Economie, éditions Manucias, 2013
5 Pierre Rabhi &Juliette Duquesne, les excès de la finance, ou l’art de la prédation légalisée, j’ai lu, 2017
6 Hans Jonas, The Responsibility Principle, An Ethics for Technological Civilization, Champ Essais, 1979
7 André Lacroix and Allison Marchildon, Quelle éthique pour la finance?, Presse de l’Université du Québec, 2013
8 Representation of the financial environment and its various interactions, including the place of imperative ethics and morality

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