Reprinted with permission of John C. BogleThe Wall Street Journal, April 21, 2009.

A Crisis of Ethic Proportions

John C. BogleFounder and former Chief Executive of the Vanguard Group of Mutual Funds

I recently received a letter from a Vanguard shareholder who described the global financial crisis as "acrisis of ethic proportions." Substituting "ethic" for "epic" is a fine turn of phrase, and it accurately places a heavyresponsibility for the meltdown on a broad deterioration in traditional ethical standards.

Commerce, business and finance have hardly been exempt from this trend. Relying on Adam Smith's"invisible hand," through which our self-interest advances the interests of society, we have depended on themarketplace and competition to create prosperity and well-being.

But self-interest got out of hand. It created a bottom-line society in which success is measured inmonetary terms. Dollars became the coin of the new realm. Unchecked market forces overwhelmed traditionalstandards of professional conduct, developed over centuries.

The result is a shift from moral absolutism to moral relativism. We've moved from a society in which"there are some things that one simply does not do" to one in which "if everyone else is doing it, I can too."Business ethics and professional standards were lost in the shuffle.

The driving force of any profession includes not only the special knowledge, skills and standards thatit demands, but the duty to serve responsibly, selflessly and wisely, and to establish an inherently ethicalrelationship between professionals and society. The old notion of trusting and being trusted -- which once wasnot only the accepted standard of business conduct but the key to success -- came to be seen as a quaint relicof an era long gone.

The proximate causes of the crisis are usually said to be easy credit, bankers' cavalier attitudes towardrisk, "securitization" (which severed the traditional link between borrower and lender), the extraordinaryleverage built into the financial system by complex derivatives, and the failure of our regulators to do their job.

But the larger cause was our failure to recognize the sea change in the nature of capitalism that wasoccurring right before our eyes. That change was the growth of giant business corporations and giant financialinstitutions controlled not by their owners in the "ownership society" of yore, but by agents of the owners,which created an "agency society."

The managers of our public corporations came to place their interests ahead of the interests of theircompany's owners. Our money manager agents -- who in the U.S. now hold 75% of all shares of publiccompanies -- blithely accepted the change. They fostered the crisis with superficial security analysis andresearch and by ignoring corporate governance issues. They also traded stocks at an unprecedented rate,

Reproduced and reprinted from Financial Analysts Journal , Vol. 55, No. 5,(Sep-Oct, 1998), pp. 80-74, with permission of the CFA Institute. All rights reserved.

Is Shareholder Wealth Maximization Immoral?

John Dobson California Polytechnic State U. San Luis Obispo

For those educated in modern business schools, the justification for decisions made by financialprofessionals in business organizations has been supplied by financial economic theory. Broadly, this theoryposits that the ultimate objective of a business organization is to maximize its market value (often referred toas maximizing shareholder wealth). This objective is, in turn, justified (in a theory often termed the invisiblehand) by the premise that such activity undertaken competitively, within the law, by individual firms will leadto maximal social welfare. This view of the ultimate aims of corporate activity has come under increasedscrutinyand, indeed, challengeby a growing body of thought that can be loosely labeled business ethicstheory. As business ethics theory filters in to the financial professional's milieuthrough, for example,corporate creedssome confusion is inevitable. This article clears the confusion by evaluating the objective ofshareholder wealth maximization as a moral justification for behavior in business.

In this article, I consider whether, in light of some 25 years of bona fide business ethics theory, backed by2,500 years of moral philosophy, a business professional who justifies decisions ultimately with a view to thebottom line is acting amorally, immorally, or morally. At first blush, this question might appear to be quitedifferent from the questions addressed in my previous articles, which were concerned primarily with theindividual and the development of certain character traits or virtues as a foundation for professional ethics.1

What I show here, however, is that the current debate about the ultimate objective of businessorganizationswhether the objective is share-holder wealth maximization or some other enddistills downto an examination of the character of those individuals who are the primary decision makers in the businessorganizations. The moral worth of the organization, therefore, is inseparable from the moral worth of thedecision makers in it.

Financial professionals may question the worth of any reflection on organizational objectives. After all, intheir M.B.A. coursesand, in particular, their finance coursesthey will have had drummed into them thatthe ultimate objective of all activity within the firm is the maximization of shareholder wealth. Nevertheless,they should be increasingly aware of growing dissent from, or at least equivocation on, that standard financedefinition of corporate objectives. At the educational level, one certainly does not have to look far to see aconflict in philosophies. Whereas texts in corporate finance invariably open with a statement to the effect thatmanagers' primary goal is stockholder wealth maximization, authors in the field of business ethics espouse viewssuch as

there is no justification for shareholders holding such an important position ... and having first priority

Reprinted with permissionOrganization Science, Vol. 15, No. 3, (May-Jun, 2004), pp. 350-363.

The Corporate Objective Revisited

Anant K. Sundaram and Andrew C. InkpenThunderbird School of Global Management and Nanyang Technological University

The stock market convulsions and corporate scandals of 2001 and 2002 have reignited debate on thepurposes of the corporation and, in particular, the goal of shareholder value maximization. We revisitthe debate, re-examine the traditional rationales, and develop a set of new arguments for why thepreferred objective function for the corporation must unambiguously continue to be the one that saysmaximize shareholder value. We trace the origins of the debates from the late nineteenth century,their implications for accepted law and practice of corporate governance in the United States, and theirreflection in shareholder versus stakeholder views in the organization studies literature andcontractarian versus communitarian views in the legal literature. We address in detail possiblecritiques of the shareholder value maximization view. Although we recognize certain boundaryconstraints to our arguments, we conclude that the issues raised by such critiques and constraints arenot unique to the shareholder value maximization view, but will exist even if the firm is managed onbehalf of nonshareowning stakeholders.

Key words: shareholder value; stakeholder theory; corporate goal; corporate governance

Governing the corporation requires activity. All purposeful activity, in turn, requires goals. The corporationitself, as Talcott Parsons argues, is an entity whose . . . defining characteristic is the attainment of a specific goalor purpose (1960, p. 63). However, debates surrounding the appropriate corporate objective are far fromfinished. Scholars and courts have long argued over the purposes of the corporation, and still hold differingviews. In the field of finance, the logic of shareholder value maximization is accepted as being so obvious thattextbooks just assert it, rather than argue for it. Deviation from this objective is cast as an agency problemresulting from the separation of ownership and control, and failure to meet this goal is assumed to be correctedby corporate boards, shareholder voice, shareholder exit, and the market for corporate control.1 Managementand strategy scholars have, in recent years, leaned toward one of two overlapping perspectives that are at oddswith the finance view. One perspective is that governance should be understood using a stakeholder lens (e.g.,Freeman and McVea 2001). The other view is that rather than debating whether stakeholders or shareholdersmatter, corporations should juggle multiple goals (e.g., Quinn 1980, p. 7; Drucker 2001, pp. 1718). In the fieldsof law and ethics, the intellectual struggle between the stakeholder and the shareholder, contracts andcommunities, and public and private conceptions of the corporation have similarly been manifest in numerousdebates.2

Reprinted with permission of Michael C. Jensen.Business Ethics Quarterly, 2002, Vol. 12, No. 2, pp. 235-256.

Value Maximization, Stakeholder Theory,and the Corporate Function

Michael C. JensenHarvard University

In this article, I offer a proposal to clarify what I believe is the proper relation between valuemaximization and stakeholder theory, which I call enlightened value maximization. Enlightened valuemaximization utilizes much of the structure of stakeholder theory but accepts maximization of thelong-run value of the firm as the criterion for making the requisite tradeoffs among its stakeholders,and specifies long-term value maximization or value seeking as the firm's objective. This proposaltherefore solves the problems that arise from the multiple objectives that accompany traditionalstakeholder theory. I also discuss the Balanced Scorecard, which is the managerial equivalent ofstakeholder theory, explaining how this theory is flawed because it presents managers with a scorecardthat gives no scorethat is, no single-valued measure of how they have performed. Thus managersevaluated with such a system (which can easily have two dozen measures and provides no informationon the tradeoffs between them) have no way to make principled or purposeful decisions. The solutionis to define a true (single dimensional) score for measuring performance for the organization ordivision (and it must be consistent with the organization's strategy), and as long as their score isdefined properly, (and for lower levels in the organization it will generally not be value) this willenhance their contribution to the firm.

Proposition: "This house believes that change efforts should be guided by the sole purpose of increasing shareholder value."

Introduction

Lying behind the statement that I have been asked to address is a complex set of controversies on whicheconomists, management scholars, managers, policy makers, and special interest groups exhibit widedisagreement. Political, economic, social, evolutionary, and emotional forces play important roles in thisdisagreement as do ignorance, complexity, and conflicting self-interests. I shall discuss these below.

At the organizational level the issue is the following. Every organization attempting to accomplishsomething has to ask and answer the following question: What are we trying to accomplish? Or, put even more

Reprinted with permissionJournal of Applied Finance, Vol.18, No. 2 (Fall/Winter, 2008), pp. 62-66.

Shareholder Theory How Opponents andProponents Both Get It Wrong

Morris G. Danielson, Jean L. Heck and David R. ShafferSaint Josephs University, Saint Josephs University and Villanova University

Shareholder wealth maximization has long been accepted by financial economists as the appropriateobjective for financial decision-making. Recently, wealth maximization has been criticized by agrowing array of opponents for condoning the exploitation of employees, customers, and otherstakeholders, and encouraging short-term managerial thinking. Although these critics are misguided,proponents of shareholder theory have helped to create this confusion by exhorting managers tomaximize the firms current stock price. In a world with symmetrical information, efficient capitalmarkets, and no agency conflicts, the maximization of a firms current stock price and the maximizationof its intrinsic value (i.e., the present value of its long-term cash flows) are congruent goals. If theseconditions are not met, however, the incentive to increase a firms current stock price can distortoperating and investment decisions. When wealth maximization is properly defined as a long-termgoal, it is not as narrowly focused as critics believe. The main prescription of shareholdertheoryinvest in all positive net present value projectsbenefits not only shareholders, but also keystakeholders including employees and customers.

Shareholder theory defines the primary duty of a firms managers as the maximization of shareholder wealth(Berle and Means, 1932; Friedman, 1962). The theory enjoys widespread support in the academic financecommunity and is the fundamental building block of corporate financial theory. For example, the net presentvalue (NPV) rule in capital budgeting is a direct application of shareholder theory. If a firm invests in all positivenet present value (NPV) projects, the firm will maximize the value of the firms long-term cash flows and willtherefore maximize shareholder wealth. Much of the agency cost literature, following Jensen and Meckling(1976), is also an extension of shareholder theory.

However, shareholder theory is not universally accepted outside the field of financial economics. As earlyas 1932, critics of shareholder theory argued that the maximization of shareholder wealth is not an appropriategoal and that firms should consider the interests of other stakeholders when making business decisions (Dodd,1932). This idea was formalized into stakeholder theory by Freeman (1984). More recently, the shareholdermodel has been criticized for encouraging short-term managerial thinking and condoning unethical behavior.

Reprinted with permissionThe Wall Street Journal, March 29, 2006.

Bill Seeks to Ban Insider Tradingby Lawmakers and Their Aides

Brody Mullins

WASHINGTON -- Amid broad congressional concern about ethics scandals, some lawmakers are poised toexpand the battle for reform: They want to enact legislation that would prohibit members of Congress and theiraides from trading stocks based on nonpublic information gathered on Capitol Hill.

Two Democrat lawmakers plan to introduce today a bill that would block trading on such insideinformation. Current securities law and congressional ethics rules don't prohibit lawmakers or their staffmembers from buying and selling securities based on information learned in the halls of Congress.

It isn't clear yet what kind of support the bill will garner from Republicans. But its prospects areenhanced by the current charged environment in Congress; lawmakers from both parties in both houses haveplaced a high priority on passing ethics and lobbying-reform legislation. Such legislation would provide a vehicleto which proponents could attach a measure on stock trades.

In addition to banning trading on inside information, the proposal would require that lawmakers andtheir top aides disclose within 30 days any stock trades. Congressional rules now require lawmakers to disclosetheir trades once a year. The bill also would require that companies register with Congress if they sellinformation about congressional activity to Wall Street investors.

Unlike members of Congress, executive-branch employees already are banned from trading on insideinformation. Employees of several federal agencies are prohibited from investing in companies that havebusiness before them. In 1934, for example, Congress banned Federal Communications Commission employeesfrom owning stocks or bonds in telecommunications or broadcast companies.

The two Democrats who wrote the bill say they were motivated by the trading activity of a former topaide to Rep. Tom DeLay, the onetime Republican majority leader in the House. The aide, Tony Rudy, boughtand sold hundreds of stocks from his computer in the U.S. Capitol in 1999 and 2000, according to financial-disclosure forms and other DeLay aides.

Neither Mr. Rudy nor his lawyer returned calls seeking comment. It is impossible to tell from thedisclosure forms whether Mr. Rudy traded stocks based on information he gathered while working as deputychief of staff and general counsel to Mr. DeLay, then the No. 3 Republican in the House.

Rep. Louise Slaughter, the New York Democrat who wrote the bill, said: "Top leadership aides knowwhat is happening before anyone else. The potential for abuse there is incredible."

Rep. Brian Baird of Washington, the bill's co-sponsor, said there are "hundreds of billions of dollars onthe line on congressional activity. If there is a way to make a profit on that, somebody has probably already

Reprinted with permissionColumbia Law Review, Vol. 99, (Oct, 1999), pp. 1491-1550.

Our DysfunctionalInsider Trading Regime

Saikrishna PrakasUniversity of San Diego

The misappropriation theory was and is an essential part of the Securities and Exchange Commission's(the "SEC" or the "Commission") longstanding crusade to curb the supposedly unfair exploitation ofmaterial, non-public information. ... Done properly, disclosure of an intent or plan to trade while usingmaterial, non-public information averts 10b-5 liability because the candid insider trader deceives noone. ... According to the Court, classical insider trading liability arises because insiders "have anobligation to place the shareholder's welfare before their own" such that it would be unfair to allow"a corporate insider to take advantage" of material, non-public information without disclosure. ...Although shareholders understandably might believe that insider trading is utterly forbidden by thelaw and presumably would not be aware of the contractual provision authorizing insider trading, theshareholder's mistake of law and ignorance would not transform the insider's authorized trades intoacts of deception. ... Any regulation that requires a deception for liability, however, can never reachCandid Insider Trading. ... If the misappropriation theory is consistent with the statute and regulation,because the transaction and the deception coincide, any securities trade that simultaneously triggersa deception should result in liability. ... This non-material, insider trading would in turn be a subsetof "non- material misappropriation theory liability." ...

INTRODUCTION

Following United States v. O'Hagan's n1 belated ratification of the mis appropriation theory there weremany hosannas and hallelujahs to be heard in the halls of the legal academy. The misappropriation theory wasand is an essential part of the Securities and Exchange Commission's (the "SEC" or the "Commission")longstanding crusade to curb the supposedly unfair exploitation of material, non-public information. The theoryfinds section 10(b) n2 and Rule 10b-5 n3 liability whenever a securities trader uses material, non-publicinformation for securities trading in a manner that deceives the source of the information. Inside academia, theSupreme Court's expansive construction of section 10(b) and Rule 10b-5 was praised for making our federalinsider trading n4 regime more coherent and stable. n5

Notwithstanding the praise, O'Hagan underscores the astonishingly dysfunctional nature of the current

Reprinted with permissionJournal of Business Ethics, Vol. 17, No. 1 (Jan, 1998), pp. 67-75.

Where Should the Line Be Drawnon Insider Trading Ethics?

Yulong Ma and Huey-Lian SunAlabama A&M University and Morgan State University

Finance ethics have drawn increasing attention from both government regulators and academicresearchers. This paper addresses the issue of insider trading ethics. Previous studies on insider tradingethics have failed to provide convincing arguments and consistent results. In particular, the argumentsagainst insider trading are based primarily on moral and philosophical grounds and lack empiricalrigor. This study intends to establish and examine the relationship between the ethical issue and eco-nomic issue of insider trading. It is argued that the ethics of insider trading is in essence an economicrather than a moral issue. It is so far not clear to what extent insider trading may increase or decreaseshareholders wealth. Until then, care must be taken to avoid over-regulating insider trading.

1. Introduction

Is insider trading unethical? Is insider trading illegal? The answers depend on how we define insider tradingand how we interpret the issue. Although the ethical issue in finance has received increasing attention fromacademic researchers, government agencies and business communities, it is still neither well researched norunderstood. The growing importance of ethics in finance has undoubtedly been recognized by people from alldisciplines. Even among academic researchers, however, there is still no consensus on what kinds of conductshould be regarded as unethical.

Opponents of insider trading seem simply to believe that insider trading is inherently immoral. Forexample, Werhane (1989) argues that insider trading, both in its present illegal form and as a legalized marketmechanism, undermines the efficient and proper functioning of a free market. Proponents, on the other hand,assert that insider trading is a viable and efficient economic means and can be used to serve the best interestsof shareholders and the economy at large. Manne (1966), for example, contends that insider trading providesa powerful incentive for creativity and is the only appropriate way to compensate entrepreneurial activity. Morerecently, Martin and Peterson (1991) have raised the question of whether the prohibition of insider trading isitself unethical. They argue that insiders who are also shareholders have the same rights as ordinary shareholdersto trade based on their information and judgment. Thus, expropriating value from insiders by prohibiting insidertrading is both senseless and immoral.

The conflict between these positions is due to the confusion over the definition of insider trading and over

Reproduced and reprinted from Financial Analysts Journal , Vol. 45, No. 6(Nov-Dec, 1989), pp. 12-15, with permission of the CFA Institute. All rights reserved.

Reflections on Insider Trading

Michael S. RozeffState University of New York at Buffalo

There is no consensus on the issue of insider trading among lawyers and economists. Even among SupremeCourt justices, opinions on insider trading vary widely. Justice Blackmun sees it as inherently unfair. Otherjustices are concerned only if it involves traditional concepts of fraud or deceit. Still others believe that insidertrading is wrong when it involves the misappropriation or theft of information. Among economists, positive andnegative views are on record. The SEC is the regulatory body most willing to restrict insider trading, to widenits definition from corporate insiders to anyone who possesses material nonpublic information, and to promotean egalitarian concept of information dispersal.

How Significant Is Insider Trading?

Studies suggests that insider trading is not significant. Finnertys study of all NYSE insider trades found atotal of 31,089 for the years 1969 to 1972about one trade per company per month.1 Seyhun analyzed insidertransactions in 790 large NYSE firms for the seven years ending in 1981 and found a total of 59,000, or about8400 per year.2 Seyhuns 59,000 trades average 11 per company per year or, again, about one per company permonth.

But how big were these trades? They aggregated $11.1 billion, or about $20,000 per trade. Consider thata stock like Champion International trades 250,000 shares in a day at a price near $40 a share, or a value of $10million. The amount of insider trading by corporation insiders is apparently trivial relative to the total value oftrading.

The significance of insider trading can also be measured by the number of enforcement actions against it.In 1980, Michael Dooley stated that the SEC had brought only 37 cases against insider trading in the years 1966to 1980, most involving market professionals, not corporate insiders.3 Most of these cases were settled withminor penalties. Kenneth Scott, surveying SEC actions since its inception found 106 trading episodes involvingallegations of nondisclosure trading by defendants.4 But the trend in SEC actions is up. Commissioner Coxreported 54 civil actions and six administrative proceedings in 1986. Still, those who have looked into this aspectof insider trading are telling us that there are very few actions against it. Might we say that where theres nosmoke, theres no fire?

In short, the amount of insider trading is in fact trivial. The laws against it have not been very stiff, untilrecently. Enforcement actions against it are few. The penalties against it have not been severe. These facts tendto make one conclude that insider trading is a non-problem, not in the same league as other social issues and

Reproduced and reprinted from Financial Analysts Journal , Vol. 49, No. 6(Nov-Dec, 1993), pp. 21-28, with permission of the CFA Institute. All rights reserved.

Ethics, Fairness and Efficiencyin Financial Markets

Hersh Shefrin and Meir Statman University of Santa Clara

Do prohibitions against insider trading hamper economic efficiency or promote fairness? Financial marketregulations are the outcome of a continuous tug-of-war between concern for economic efficiency and concernfor fairness. This is demonstrated by the histories of six major regulations and the forces that have affectedchanges in the tradeoff over time. People often disagree about the relative weights that should be assigned toefficiency and fairness. They also disagree on the relative ranking off fairness rights. For example, prohibitinginsider trading violates the right to engage freely in trade. Permitting legalized insider trading violates the rightto equal information. Which right ranks higher?

When laymen read newspaper accounts of insider trading, they think about ethics. When financialeconomists read about insider trading, they think about efficiency. The difference in perspectives usuallytranslates into different prescriptions for public policy. What many financial economists seem to overlook is thatthe regulation of financial markets is shaped by considerations that go beyond efficiency or self-interest. Theseconsiderations include concern for ethics or fairness. This article seeks to bridge the gap between the twoperspectives as they meet in the arena of public policy. The regulation of financial markets in the United Statescannot be understood without an appreciation of the continuous debate that has shaped it. Regulations are theoutcome of a tug-of-war between efficiency and fairness, in which relative strength continually shifts from sideto side. This article describes the world of regulations as it is. Of course, not everyone agrees that the worldshould be as it is. Some people feel that too much emphasis is placed on fairness to the detriment of efficiency,while others feel that too little emphasis is placed on fairness and still others that some aspects of fairness areover-emphasized at the expense of other aspects of fairness. We seek to illuminate the process by which abalance between fairness and efficiency is struck by the citizenry through the legislative process. The shapingof regulation is hardly confined to the history books. Serious debate is taking place today about stock marketvolatility, junk bonds and insider trading, and further debate is certain to continue.

FAIRNESS AND EFFICIENCY

What is fairness? One definition would hold that, in a fair market, all parties have equal access toinformation relevant to asset valuation, but are entitled to nothing more. This mandatory disclosure definition

Reprinted with permissionFinancial Times, London, February 25, 2010.

It is Time to Treat Wall Street Like Main Street

George Akerlof and Rachel Kranton Nobel Laureate, University of California, Berkeley and Duke University.

Thirty years ago, when we were still using typewriters and fewer than 25 per cent of households investedin the stock market, economists conjectured that employees would work harder and make better decisions undera "pay-for-performance" system. This theory became popular in boardrooms - especially since it was aninfluential argument for increasing the pay of the chief executive and top officers. Bonuses tied to performancebecame standard practice in US companies and on Wall Street in particular.

But economics has not stood still, and we now know there are at least four reasons why bonuses and pay-for-performance are a risky business. First, it can be hard to see whether employees make the right decisions;superiors do not hold the same information, and the results of decisions play out years later. Second,performance pay will attract exactly those who are willing to take on more risk. People interested in high butsteady income will choose other careers. Third, to get their pay, employees may manipulate the system, againstthe interests of those who set up the incentives: like teachers who are threatened with losing their jobs and teachto the test. Finally, and most perniciously, performance pay can crowd out intrinsic rewards, as when children,having received gold stars for drawing pictures, later draw less than before in their own time. Why drawwithout getting paid?

But if monetary incentives do not work, what does? Identity economics - a new way of thinking aboutmotivation - gives an answer. In organisations that work well, employees identify with their work and theirorganisations. People want to do a good job because they think they should and because it is the right thing todo. In organisations that function effectively, the goals of the workers and of the organisation are aligned. Thereis little conflict of interest and little need for performance pay.

Identity economics also tells us why the public, in America and elsewhere, are so angry about the bonuseson Wall Street. Most of us just get up in the morning and do our jobs - jobs that for the most part are neitherglamorous nor well paid. We take pride in jobs well done, and we celebrate people such as Sully Sullenbergerwho, after ditching his plane in the Hudson River, checked the cabin twice for remaining passengers beforebeing the last to evacuate. As he explained: "I was just doing my job." (A month later, his pay was cut by 40 percent and his pension was terminated.) The New York City firefighters on September 11 and the troops whostormed Omaha Beach just did their jobs. Most people's work is not as dramatic and involves less risk, but theseare role models we admire. Why then, we ask, do traders and bankers need outsize bonuses and performancepay to get them to do their jobs?

High salaries attract and keep talented, hard-working people, with specialised skills. But fair compensationshould not be confused with outsize bonuses. In identity economics, performance pay demonstrates bad faith.

Reprinted with permissionJournal of Business Ethics, Vol. 48 (2003), pp. 381-391.

An Ethical Perspective on CEO Compensation

Mel PereBattelle Memorial Institute

The controversial issue of whether Chief Executive Officer (CEO) compensation is excessive orappropriate is examined in terms of two competing claims: that CEOs are overpaid for the value theyprovide to an enterprise, and that CEO compensation is inherently equitable. Various arguments andperspectives on both sides of the issue are assessed. Little evidence supports the claim that CEOperformance justifies very high compensation. Further, the complex interactive alliance betweenboards of directors and CEOs compromises rational decision-making about CEO compensation, withthe Enron affair offered as an illustration of what can go wrong when dishonest CEO actions combinewith lax board oversight. Recommendations for restoring trust in the system include continuingcurrent regulatory actions, using different metrics for determining CEO compensation, making boardmember-CEO relationships transparent to all company stakeholders, and several more radical ideasfor change. Stakeholders must resist being distracted by other social, economic, or political issues frompursuing serious, lasting reform.

KEY WORDS: Board of Directors, business ethics, CEO compensation, compensation, compensation committees, excessive compensation, overpaid CEOs, stock options

Introduction

One of the most notorious chief executive officers (CEOs) of recent times, Al Dunlap, articulated an attitudetoward CEO compensation that perfectly captured the essence of this issue over the past decade. Writing in hisautobiography, he claimed:

The best bargain is an expensive CEO. . . . You cannot overpay a good CEO and you cant underpaya bad one. The bargain CEO is one who is unbelievably well compensated because hes creating wealthfor the shareholders. If his compensation is not tied to the shareholders returns, everyones playinga fools game (Dunlap and Andelman, 1997, p. 177). That deceptively simple panacea lies at the heartof the long-standing controversy about CEO compensation. Hiring the best CEO money can buy, andtying CEO compensation to company performance, seems logical and pragmatic. After all, oneprominent school of thought holds that a CEOs role is to continually improve the financial health ofthe firm.

Reprinted with permissionBusiness Ethics Quarterly, Vol. 15, No. 2, pp. 257-281.

Do CEOs Get Paid Too Much?

Jeffrey Moriarty

In 2003, CEOs of the 365 largest U.S. corporations were paid on average $8 million, 301 times as muchas factory workers. This paper asks whether CEOs get paid too much. Appealing to widely recognizedmoral values, I distinguish three views of justice in wages: the agreement view, the desert view, andthe utility view. I argue that, no matter which view is correct, CEOs get paid too much. I conclude byoffering two ways CEO pay might be reduced.

America's corporate executives get paid huge sums of money. Business Week estimates that, in 2003, CEOsof the 365 largest U.S. corporations were paid on average $8 million, 301 times as much as factory workers(Lavelle 2004).1 CEOs' pay packages, including salary, bonus, and restricted stock and stock option grants,increased by 340 percent from 1991 to 2001, while workers' paychecks increased by only 36 percent (Byrne2002). What, if anything, is wrong with this?

Although it has received a great deal of attention in management and economics journals and in the popularpress, the topic of executive compensation has been virtually ignored by philosophers. It should not be. Moraltheorists of all stripes have a stake in the debate. Egalitarians should be concerned by the size of the disparitybetween CEO and worker pay. Libertarians should wonder whether owners freely agree to pay their CEOs $8million per year.

This paper attempts to advance the philosophical discussion of executive compensation. I will focus on thepay of CEOs, but many of my arguments apply, other things equal, to the pay of other top executives.Organizational theorists and economists tend to be more interested in what the determinants of CEO pay arethan in what they should be. The normative insights they have offered are at best pieces of a larger puzzle. Whatis needed, I suggest, is an ethical framework for thinking about justice in pay. After elaborating this framework,I will argue that CEOs get paid too much.

This conclusion will be unsurprising to many laypersonsperhaps to many philosophers as well. It seemsto be a minority position among CEOs and economists (Lazear 1995; Murphy 1986; Rosen 1986), however, andfor this reason it is worth defending. Moreover, agreement that CEOs get paid too much may concealdisagreement about why they do. What I have to say about the "why" question is relevant to theories of justicein wages in general.

Reprinted with permissionOrganization Science, Vol. 15, No. 6 (Nov-Dec, 2004), pp. 657-670.

Culture and CEO Compensation

Henry L. Tosi and Thomas GreckhamerUniversity of Florida

The theory and research on chief executive officer (CEO) compensation tends to be dominated byassumptions and values reflective of those dominant in the national culture of the United States, wheremost of this work is done. This suggests that an underlying theme focuses on how CEO compensationis related to instrumental choices made in a competitive, capitalist culture. This study seeks to expandthe understanding of CEO compensation by examining it in the context of other cultures, based on thepremise that national culture plays a significant part in the nature of compensation strategies. Werelate cultural dimensions (uncertainty avoidance, power distance, individualism, and masculinity-femininity) developed by Hofstede (Hofstede 1980a, 2001) to several dimensions of CEOcompensation. These dimensions are total CEO pay, the proportion of variable pay to totalcompensation, and the ratio of CEO pay to the lowest level employees. The main findings of our paperare (1) all of the different dimensions of CEO pay were related to power distance, leading us to inferthat CEO pay in a culture is most reflective of the strength of the power structure in a society, and (2)total compensation and the ratio of variable pay to total pay are related to individualism. We concludethat cultural dimensions can contribute to understanding cross-national CEO compensation. Theimplication of this conclusion is that there are different ways that CEO compensation fits into thecognitive schema of various cultures and, furthermore, that these cognitive schema vary acrosssocieties that affect the nature of the cultural matrix into which [money] is incorporated (Bloch andParry 1989, p. 1). Moreover, our results imply that particular forms of CEO compensation do not meanthe same thing in different cultures, but rather carry different symbolic connotations depending onthe values dominant in a society. Thus, not only does the compensation structure of a firm within aculture have a symbolic meaning within organizations (e.g., Trice and Beyer 1993), but it can also beseen as an expression of deeper social values (Hofstede et al. 1990) that may differ across countries.

Key words: culture; CEO compensation; Hofstede

CEO and executive compensation originates in the United States and focuses on two general questions (seeTosi et al. 2000 for an extensive inventory of this research). The first question is, How do economic theoriesexplain CEO compensation? Most of this work is based on theories of agency, human capital, or tournaments

Reprinted with permissionFinancial Times, London, February 23, 2010

The Purpose of Business is to Win RespectMichael Skapinker

Within days of my starting this column on business and society in September 2007, customers were queuingoutside Northern Rock to withdraw their savings. This was not cause and effect, I hope.

That fateful autumn has led many to rethink the relationship between business and society. Judging byreaders' e-mails, there is a deep unease about the way companies have been run and the role they play incommunities.

Many readers have asked why banks wandered so far from their mission of taking in savings and makingloans. They have pointed to the chief executives who reaped huge personal rewards by agreeing to the takeoverof their companies. They have asked why maximising shareholder returns became a near-sacred goal whenshareholders' transience and lack of involvement made the idea that they were the company's stewards absurd.

Underlying these anxieties is a broader question: what is business actually for?To some, the answer is easy: to make a profit. Profits are certainly essential. Without them, businesses

cannot survive. Making money is also part of the pleasure of business. There is a buzz that comes with closinga deal and a sense of achievement in beating last year's numbers. Money matters to individuals too. You can buythings with money: houses, holidays, financial security.

But money can't, as we know, buy you love. Richard Layard and other researchers have also insisted it can'tbuy you happiness. Lord Layard argues that while being poor makes you unhappy, once you have a reasonableamount of money, having more makes you no happier.

We can go further. The more people earn, they more they seem to want, particularly when others earnmore than they do. Hence the frenzied increase in top executive pay and bank bonuses.

So what is the purpose of business if not the making of money? Peter Drucker, the great managementwriter, said it was to serve customers.

This is true too. Without satisfied customers, companies cannot survive either. But even that is not enough.Heroin dealers give customers what they want. So do workshops that turn replica guns into real ones and sellthem to street gangs. These are effective businesses, in their own way, but not ones you would want yourchildren joining.

Abraham Maslow, the American psychologist, set out a hierarchy of five needs. At the bottom was whatwe needed to survive - oxygen, food and water. Above that was the need to be safe. Once we had those, wecould turn to the need for love, affection and a feeling of belonging. After that, we could go for esteem andrespect. At the top of the hierarchy was self-actualisation, or self-fulfilment.

Where does business fit in? Many people are too busy scrambling for those first two needs - food and safety- to worry about the rest. Feeding the family and keeping a shelter over their heads is enough.

Reprinted with permissionJournal of Business Ethics, Vol. 58, (Spring, 2005), pp. 79-100.

Tone at the Top:An Ethics Code for Directors?

Mark S. Schwartz, Thomas W. Dunfee and Michael J. KlineYork University, University of Pennsylvania and Fox Rothschild LLP

Recent corporate scandals have focused the attention of a broad set of constituencies on reformingcorporate governance. Boards of directors play a leading role in corporate governance and anysignificant reforms must encompass their role. To date, most reform proposals have targeted the legal,rather than the ethical obligations of directors. Legal reforms without proper attention to ethicalobligations will likely prove ineffectual. The ethical role of directors is critical. Directors have overallresponsibility for the ethics and compliance programs of the corporation. The tone at the top that theyset by example and action is central to the overall ethical environment of their firms. This role isreinforced by their legal responsibilities to provide oversight of the financial performance of the firm.Underlying this analysis is the critical assumption that ethical behavior, especially on the part ofcorporate leaders, leads to the best longterm interests of the corporation. We describe key componentsof a framework for a code of ethics for corporate boards and individual directors. The proposed codeframework is based on six universal core ethical values: (1) honesty; (2) integrity; (3) loyalty; (4)responsibility; (5) fairness; and (6) citizenship. The paper concludes by suggesting critical issues thatneed to be dealt with in firm-based codes of ethics for directors.

KEY WORDS: Boards of directors, ethics, law, codes, corporate governance

Introduction: where were the directors?1

The number and extent of recent corporate scandals (e.g., Enron and their auditor Arthur Andersen,WorldCom, Tyco International, Global Crossing, Adelphia, Fannie Mae, HealthSouth, and the New York StockExchange, with the number growing steadily), have provoked interest in corporate governance on the part ofthe media, shareholders, legislators, regulators, creditors, mutual funds and pension funds. . . .(T)oday,[directors] are under the microscope as everyone from bondholders to the smallest retail investor looks to boardsof directors to restore confidence in a shaken market (Gray, 2003, p. 59). The growing interest and concernis not surprising, given the significant financial and social harm these scandals have caused society.

Reproduced and reprinted from Financial Analysts Journal , Vol. 59, No. 6,(Nov-Dec, 2003), pp. 29-34, with permission of the CFA Institute. All rights reserved.

Why Ethics Codes Dont Work

John DobsonCalifornia Polytechnic State U. San Luis Obispo

The recent stock market downturn brought to light various legal and ethical transgressions committedduring the euphoria of the 1990s market boom. Government and judicial authorities are investigating thebehavior of investment bankers, securities analysts, and other individuals engaged in the finance industry. TheNew York State Attorney General's Office, U.S. SEC, U.S. Justice Department, and a Congressional subcommitteeon capital markets have each initiated investigations focusing primarily on the existence and extent of conflictsof interest faced by finance professionals (such as analysts, brokers, and underwriters). Although many specificissues are being addressed in these investigations, two broad questions are attracting the most attention: Howdo underwriters of IPOs make share allocation decisions? And why do financial analysts so rarely issue sellrecommendations?

In addition to these institutional investigations, individual investors are seeking restitution through the law.A typical example is the suit brought by Debasis Kanjilal, an individual investor with a brokerage account atMerrill Lynch & Company: During 2000, Kanjilal's account dropped from a market value of $1.2 million to about$95,000. His assertion is that Merrill Lynch's brokerage arm was urging him to buy stocksInfoSpace and JDSUniphase Corporationthat Merrill Lynch's consulting arm had a vested interest in supporting. To back up hisaccusation of conflict of interest, Kanjilal notes that during the time he was being urged to buy, the CEOs of bothInfoSpace and JDS were heavy sellers. A spokes-person for Merrill Lynch has countered that Kanjilal was anexperienced investor who made his own investment decisions.

Several other individual investors have brought class action suits against major investment banks.Underwriters at Morgan Stanley, for example, are accused of soliciting and receiving commissions from certaininvestors in return for larger portions of IPOs than legally allowed. They are also accused of reaching pre-offeragreements with some wealthy customers to allocate IPO shares preferentially to these customers. The suitalleges that, as a sweetener, Morgan Stanley guaranteed these customers the opportunity to buy additional sharesin the aftermarket at predetermined preferential prices. This practice is known as spinning.

All this attention being paid to the finance profession is not flattering. Although some of the allegations mayprove unfounded, the evidence already brought to light is sufficient cause for concern. The behavior of somefinance professionals, whether acting as individuals or under the auspices of an organization, appears to havefallen well short of what would generally be regarded as professional conduct.

Ironically, at the same time, ethical guidelines and codes of conduct have never been more wide-spread inthe financial services industry. Professional certifications, such as the Chartered Financial Analyst (CFA) and

Reprinted with permissionBusiness Ethics Quarterly, Vol. 11, No. 1 (2001), pp. 73-87.

The Ethics of Governance

Josef Wieland

This article addresses the issue of whether and to what extent moral values can be attributed tocollective actors. The paper starts from the premise that business ethics as the ethics of an organizationis to be distinguished from the virtues of its members. This point is elaborated in both economic- andorganization-theoretic terms within the framework of the New Economics of Organization The resultis the development of a concept of governance ethics. The ethics of governance is about theincorporation of moral conditions and requirements in the management, governance, and controlstructures of a firm. This is the contextual precondition for the long lasting and beneficial effects ofthe virtues of individuals within the organizations.

Introduction: Organization and Ethics

In this paper I want to pursue two questions. The first of these is as follows: what is the subject and scopeof business ethics?1 The second question is this: in what way does it make sense to talk about the ethics of thefirm-as-an-organization?

The topic of this essaythe Ethics of Governancealready implies a connection between corporategovernance and business ethics; that is, between the management, governance, and control regimes of a firmand its ethics as an organization. In practice these are interrelated: codes of ethics, ethics management systems,and corporate ethics programs can be understood as governance structures by which firms control, protect, anddevelop the integrity of their transactions.

The theoretical investigation and integration of these ethical systems has hitherto been developed only toa limited extent and has been confined to individual aspects, as far as I can see. There are reasons for this. Thetheoretical explanation and integration of codes of ethics, ethics management systems, and other organizationalmeasures for the implementation of moral claims in organizational contexts requires a conceptual distinctionbetween the moral values of an individual person (value ethics), the values of an individual person in a givenfunction or role (management ethics), and the moral values of an organization (governance ethics). Thisdistinction would provide the basis for a better understanding of the trade-offs, conflicts, and dilemmascontained in those distinct levels of business ethics.

In the following discussion I would like to focus my own investigation on just one of the aspects

Reprinted with permissionFinancial Times, London, January 3, 2010

Schools Learning from Financial Crisisand Switch Tracks

Rebecca Knight

Business schools have been battered by criticism for the role they played in the global financial meltdown.Some charge that the values imparted in MBA programmes maximising shareholder value and personal

gain, for instance put too much emphasis on making money and too little on social considerations Others saybusiness schools do not properly train students to understand the limitations of the financial models used in theclassroom. Still others claim that business schools have done nothing to foster accountability in students.

Deans are taking note. On campuses throughout the US and Europe, schools are making adjustments bothlarge and small to their curriculums, from tweaking their course content to introducing new classes andseminars and even new degrees, in an effort to convey the lessons of the economic crisis to their students.

Every business school is thinking: what can we learn from this? says John Fernandes, president and chiefexecutive of the Association to Advance Collegiate Schools of Business, the US-based accreditation body.

Schools are putting together courses on the history of financial crises and revamping their classes on ethics.Some schools have even started new degree programmes.Insead, for instance, is launching a new joint degree with various public policy schools. The degree will

enable its students to obtain a joint MBA/MPA in two years. Although the idea to offer this kind of degree hadbeen in the works for a while, the crisis accelerated the schools plans, according to Jake Cohen, dean of theMBA programme at Insead.

The legacy of this economic crisis is that the public and private sectors will be much more closely tied andbusiness schools must prepare students for this economic reality, says Prof Cohen.

This crisis has bridged the two sectors, he says. I dont see it as a fad. This will be with us for a while. Itsvery important for MBA students to understand the public sector, to understand how government creates lawsand how that impacts the ability of companies to do well, or not to do well.

Harvard Business School has added new courses about the financial crisis. The lesson coming out of thiscrisis is that we and by we I mean companies, policymakers, regulators underestimated the level of systemicrisk, says Jay Light, the outgoing dean of the school.

We also gave too little thought to how things could go wrong.In September, HBS introduced several new elective courses, including managing the modern financial

firm and the evolution of the US financial system, aimed at giving second-year students a deeperunderstanding of risk management in the financial markets. The school also added new material about the

Reproduced and reprinted from Financial Analysts Journal , Vol. 61, No. 3,(May-Jun, 2005), pp. 45-58, with permission of the CFA Institute. All rights reserved.

Ethics and Investment Management:True Reform

Marianne M. JenningsArizona State University

In the era of Enron, WorldCom, and the rest, the lapses were great, the conflicts many, andthe cost, in terms of investor trust, nearly unspeakable. More than the reforms we have seenis needed: True reform must come from leaders with a strong moral compass.

These are introspective times for those involved in the financial markets. Some feel a sense of renewal viareform. Others, who have come to the realization that Frank Quattrone, late Silicon Valley guru of Credit SuisseFirst Boston, will do about one month in prison for each word that he wrote in a hasty e-mail to his employees,feel fear, particularly of New York Attorney General Eliot Spitzer and e-mail.1 Others wonder if we really "getit." That is, after all that we have witnessed, been involved with, and, sadly, in some cases, sanctioned, are wereally renewed and reformed, or have we simply taken our lashes and moved on to find other circuitous waysto do what we were doing before?

The answer to the question of true reform requires exploration of three areas: (1) the crises that led to thecurrent market and regulatory reforms, (2) the reforms themselves, and (3) what will bring about true reform.

Crises That Led to Reforms

Taking stock of the types of conduct that led to indictments, reforms, settlements, and fines yields twogroups of observations: (1) The practices and conduct of analysts that were sanctioned and reformed were notclose calls. (2) We were engaged in repetitive behavior; we've been down this road before.

Not Close Calls. One of the common defenses offered by those accused of ethical or legal lapses is, "It's agray area," "The law is unclear," "Interpretations vary," or "It depends." These are the phrases of the gray areaand a seeming justification or explanation for conduct that is questioned. The notion of whether gray areas existis a discussion for another time, however, because the crises that led to questions about analysts and reforms inthe investment field were not gray areas. Indeed, the various forms of conduct were not even close calls. No onewithin the field looks at Jack Grubman (late of Salomon Smith Barney), the fee structures, the compensation

Reprinted with permissionUniversity of Chicago Law Review, 76, No. 1 (Winter, 2009), pp.112-134.

The Regulation of Sovereign Wealth Funds:The Virtues of Going Slow

Richard A. Epstein and Amanda M. RoseUniversity of Chicago and Vanderbilt University

Any symposium on private-equity firms and the going private phenomenon would be incompletewithout discussion of Sovereign Wealth Funds (SWFs). These government owned investment vehicleshave and will continue to play an important role in the going private phenomenon. SWFs have notonly helped fuel that phenomenon through their participation as limited partners in private-equityfunds and hedge funds, but their massive capital infusions into ailing financial institutions and private-equity firms in the wake of the subprime mortgage crisis may, in a very real sense, save it. It is nothyperbolic to suggest that the future of private equityincluding the going private phenomenonandthe future of SWFs are inescapably intertwined. Misguided regulation of the latter will, quiteforeseeably, operate to the detriment of the former. And the scope of potential mischief is broad. SWFs have existed for decades, but today they face heightened scrutiny due to their recent rapidgrowth and a concomitant shift in their investment strategy from primarily conservative debtinstruments to higher risk/reward equity investments. This shift in strategy has stoked fears in theUnited States and Europe that these fundswhich find home primarily in the Middle East andAsiawill use their economic clout to pursue political goals. This type of rhetoric has led some to callfor increased regulation of SWFs. In this Article we argue against imposing any additional burdens on investments by SWFs in theUnited States, at least at present. In our view, at this point a policy of watchful waiting is preferableto any immediate effort to impose special restrictions on SWFs. On the one hand, the nightmarescenarios painted by SWF critics often involve activities that would be caught by existing laws, eitheras they relate to national security or to various forms of business regulation under the securities andantitrust laws. On the other hand, we do not possess perfect foresight and cannot say that everypossible permutation of SWF investment should escape a regulatory response in the future. What wedo know, however, says that the burden of proof lies on those who think that further prophylacticregulation is in order at this juncture. To date, SWFs have acted as model investors, and the risk thatthey may act strategically in the future is significantly mitigated by existing safeguards. A far greaterdanger to Americas economy and security inheres in taking unnecessary action that would encourageSWFs to redirect their investments elsewhere, or to harbor resentment toward the United States thatcould express itself in a wide range of hostile actions.

Reprinted with permissionJournal of Business Ethics, Vol. 13, No. 3, (Mar, 1994), pp. 197-204.

Financial Derivative Instrumentsand Social Ethics

J. Patrick Raines and Charles G. LeathersUniversity of Richmond and University of Alabama

Recent finance literature attributes the development of derivative instruments (interest rate futuresand stock index futures) to technological advances and improved mathematical models for predictingoption prices. The role of social ethics in the acceptance of financial derivatives is explored. Therelationship between utilitarian ethical principles and the demise of turn-of-the-century bucket shopsis contrasted with modern tolerance of financial derivatives based upon libertarian ethical precepts.A change in social ethics appears to have facilitated the growth in trading in modern financialderivatives. The more tolerant attitude toward financial derivatives reflects the extent of change insociety's ethical perspective on the relationship between speculative financial trading and gambling.

I. INTRODUCTION

One of the most important recent developments in financial markets has been the rise of financialderivative instruments from a secondary role to a position of dominance (Konishi and Dattatreya, 1991).Financial derivatives are contracts whose values are dependent upon the values of the underlying financial assetswhich trade separately. Prominent examples include futures contracts on the 30-year Treasury bond and stockindex futures and options. Often referred to as 'synthetic securities,' modern financial derivatives have takenincreasingly sophisticated forms and carry such exotic labels as swaptions, collars, caps, and circuses.

In finance literature, the rapid growth of trading in derivative instruments is largely attributed to (1)technological advances in communications and data processing, and (2) the use of sophisticated mathematicsin financial theory to determine prices for financial options (Torres, 1991). But from a behavioral perspective,the prominent role of modern financial derivatives reflects changes in social ethics. In the late 1800's and early1900's, social reformers vigorously lobbied for legislation limiting or prohibiting the relatively unsophisticatedderivative instruments of that era. By the ethical precepts then in vogue, speculative trading in commoditiesfutures and options and transactions at bucket shops (mock brokerage houses) were construed as forms ofgambling. In this paper, we note that if those ethical precepts still prevailed today, modern financial derivativeswould be subject to a similar indictment.

Reprinted with permissionFinancial Times, London, December 24, p. 8.

Of Greed and Creed

Patrick Jenkins

To the majestic clang of its bells, hundreds of sober-suited people scurried through the portals of St Paul'sCathedral last week to take part in a carol service, hear the familiar story of Jesus's birth and generally get intothe Christmas spirit.

Yet this was no ordinary festive occasion. Instead, assembled beneath the dome of Christopher Wren's Cityof London masterpiece was a private congregation made up of staff from Lloyds Banking Group. They were thereto sing their hearts out after a year in which their employer veered from rescuer (of the rival HBOS) to rescued(by the state, after the take-over beset it with troubles).

Nor was it an isolated event. Vicars in the capital's financial district have been reporting steadily swellingnumbers of worshippers for months now - anecdotal proof, seemingly, that some of the bankers who contributedto the crisis of the past two years are seeking salvation or at least an understanding of their place in the world.

"Most people want to do a good job," says the Rev Oliver Ross, dean of the City of London and vicar at StOlave's, one of the capital's few remaining mediaeval churches. "The church is growing. There is an increaseddesire among a lot of City workers to look at the ethics of what they do. People want to talk about it, to questionit."

Some of those questions are purely personal - with hundreds of thousands already made redundant overthe past two years, how secure is anyone's job and will praying help to keep it? Other questions are moreprofound - why did financial capitalism become synonymous with crazy risk-taking, with the passing off of toxicinvestments to unwitting counterparties and the earning of multi-million pound bonuses, regardless of merit?

Amid all the doubt, one thing is clear: the fragility of financial capitalism, and the moral bankruptcy ofsome of it, have been exposed. It is striking that even big-name bankers have been looking back at the crisisthrough a religious prism. Stephen Green, chairman of HSBC and an ordained Church of England minister, hassaid there was no consideration of the "rightness of what was done". He has charted the history of global financeand offered up a new moral code for bankers everywhere in an ambitious book, Good Value.

Ken Costa, chairman of Lazard International and of Alpha International, an interdenominationalprogramme aimed at introducing non-churchgoers to Christianity, has said that "capitalism slipped its moralmoorings". Even Lloyd Blankfein, chairman of Goldman Sachs, famed for its Wall Street aggression, feltcompelled to describe himself as a banker "doing God's work".

So what was really wrong with the morals of the financial sector? Ask the public and the most commonanswer is likely to be: bankers' bonuses. Though Mr Green heads one of the world's biggest banks - and one of