Even though Stewardship Codes are relatively new, they might have monumental impacts on the financial system. They, however, should be built under the light of ethics in order to reach their potential of disseminating the good.
Currently, the International Corporate Governance Network (ICGN) is calling its members to comment on the IGCN Global Stewardship Code. Delphi, through our Managing Director, just submitted its own contributions.
We believe that ethics has been taken for granted in many fields because most people feel (or force themselves to believe) that they are good –even when they break the rules. How so? They sugar-coat their misdoings and try to justify their actions with phrases like ‘I was asked to do that’ or ‘it was my job to do so’ or, ‘if I hadn’t done that I would be unemployed by now’ or, ‘I needed to achieve my goals, no matter what’.
And, if we extrapolate these behaviors and justifications, and land them on the investment field, we may tell that a vicious cycle of misdoings was born in our financial system as soon as people began to forgive themselves when breaking the rules.
But, this cycle needs to be changed immediately…
It is of upmost importance that we have a correct set of values that both guide our decision-making processes and channel our actions aligned with a clear use of language.
Hence, we suggested that people behind the construction of any stewardship code should be knowledgeable of ethics in order to be able to evidence its intimate relation with an investor's job. This would allow ethics to be interwoven with the current principles that the ICGN recommends as the basic pillars for good stewardship.
A good stewardship code should push for reason and honesty in institutional investors’ behavior (see Vaca, 2015) and should underline that it is other people’s money that investors are dealing with. These kind of reminders –as evidenced by Ariely– would echo and lead to the reduction of misbehavior, misdealing and cheating in the system.
A stewardship code that is divorced from ethics could have monumental impacts indeed –but for the worse. Because, if institutional investors continue to justify what they call ‘minor’ misdoings, and these actions continue to be multiplied, these investors could be putting our whole system at risk.
Ethics shall therefore be interwoven in the construction of stewardship codes because it is a way to give back to economics the branch that it left behind: the normative side of how things ought to be.
