The idea that the ethical values of professionals in finance have played a role in the global financial crisis is widespread. The crisis-of-ethics debate is important, concerning one of the main policy challenges of our times, but is based on popular lore and anecdotes rather than systematic evidence. We analyze the self-enhancement and self-transcendence values of PIFs vis-à-vis the general population and test for patterns of variation that are consistent with the idea of a crisis of values, meaning patterns of (...) variation that would implicate PIFs’ values in the GFC. Employing pre-crisis data allows for an unbiased assessment. Results reveal only minor differences in values between PIFs and the general population, too small to support the idea of a crisis of ethical values by objective standards. Extensive robustness checks confirm these findings, sometimes actually revealing values differences counter to the crisis of ethical values idea. We conclude that the financial system would not have fared better had we had a different breed of PIFs. Rather, situational forces can induce severe disregard for the welfare of others, also in people with ordinary, decent values. Hence, if anything, the GFC shows that the financial services industry has been providing an environment highly conducive to unethical behavior. The practical implication is that fixes to the financial system can only come from improved regulatory design. (shrink)

Recent history reveals a series of rogue traders, jeopardizing their employers’ assets and reputation. There have been instances of unauthorized acting in concert between traders, their supervisors and/or firms’ decision makers and executives, resulting in collusive rogue trading. We explore organizational misbehaviour theory and explain three major collusive rogue trading events at National Australia Bank, JPMorgan with its London Whale and the interest reference rate manipulation/LIBOR scandal through a descriptive model of organizational/structural, individual and group forces. Our model draws conclusions (...) on how banks can set up behavioural risk management and internal control frameworks to mitigate potential collusive rogue trading. (shrink)