An excellent article recently published in the New York Times outlined alarming news. Specifically, the law firm of Labaton Sucharow sent a questionnaire to 250 Wall Street industry insiders from dozens of financial companies. Respondents included traders, portfolio managers, investment bankers, hedge fund professionals, financial analysts, and investment advisers among others. While not claiming scientific survey status, the questionnaire results are telling. Highlights include:
- 24% of respondents would engage in insider trading to make $10 million if they could get away with it.
- 38% of those with less than 10 years’ experience would commit insider trading for $10 million if they wouldn’t be caught.
- 15% doubted that their leadership, upon learning of a top performer’s crime, would report it to the authorities.
The article also references several studies to offer a potential explanation as to what led to these sobering results. According to one controversial study titled “Economics Education and Greed” published in 2011 by professors at Harvard and Northwestern, an education in economics surprisingly may be making the problem worse. “The results show that economics education is consistently associated with positive attitudes towards greed,” the authors wrote.
In order to reverse this trend of Wall Street community members seemingly more willing to engage in unethical behavior, Chiefs at all levels must be ready, willing, and able to step up! While the New York Times article references the whistleblower fund of taxpayer money set up to encourage reporting of known violations, I propose another way.
I believe Chiefs inside Wall Street institutions can wield sledgehammers, so to speak, and solve a lot of these issues from the inside. The large majority of Wall Street Chiefs are hard-working, ethical, and trustworthy individuals who need to increase their focus on eliminating this blemish on their collective reputation. They must demonstrate consistent actions to ensure that a culture of ethical behavior is the most visible attribute in an organization.
In addition to good hiring and strong internal audit practices, robust training programs and constant reinforcement can help companies of all sizes support good choices. From a cost/benefit perspective, focusing on ethical behavior may be the only area where it makes sense to “kill a flea with a sledgehammer.”
I believe regulation is necessary because with the amount of money involved, human beings are open to human frailties, but it’s time for Wall Street Chiefs at all levels to step up to self-policing. Bring out the sledgehammers.