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Can a Good Person be a Good Trader? An Ethical Defense of Financial Trading

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Abstract

In a 2015 article entitled “The Irrelevance of Ethics,” MacIntyre argues that acquiring the moral virtues would undermine someone’s capacity to be a good trader in the financial system and, conversely, that a proper training in the virtues of good trading directly militates against the acquisition of the moral virtues. In this paper, we reconsider MacIntyre’s rather damning indictment of financial trading, arguing that his negative assessment is overstated. The financial system is in fact more internally diverse and dynamic, and more reformable, than suggested by MacIntyre’s treatment. The challenge at the heart of MacIntyre’s claims can be crystallized in the question, “under which conditions, if any, can a person be an effective trader and simultaneously live a worthy human life?” We conclude that there are realistic possibilities of integrity and growth in moral virtue for those who work in the financial sector, at least for those operating in a work environment minimally permissive toward virtue, provided they possess characters of integrity and genuine aptitude for the skills and attitudes required in their professional tasks.
Vol.:(0123456789)
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Journal of Business Ethics
https://doi.org/10.1007/s10551-017-3756-3
ORIGINAL PAPER
Can aGood Person be aGood Trader? AnEthical Defense ofFinancial
Trading
MartaRocchi1 · DavidThunder2
Received: 26 June 2017 / Accepted: 30 November 2017
© The Author(s) 2017, corrected publication 2020
Abstract
In a 2015 article entitled “The Irrelevance of Ethics,” MacIntyre argues that acquiring the moral virtues would undermine
someone’s capacity to be a good trader in the financial system and, conversely, that a proper training in the virtues of good
trading directly militates against the acquisition of the moral virtues. In this paper, we reconsider MacIntyre’s rather damn-
ing indictment of financial trading, arguing that his negative assessment is overstated. The financial system is in fact more
internally diverse and dynamic, and more reformable, than suggested by MacIntyre’s treatment. The challenge at the heart
of MacIntyre’s claims can be crystallized in the question, “under which conditions, if any, can a person be an effective trader
and simultaneously live a worthy human life?” We conclude that there are realistic possibilities of integrity and growth in
moral virtue for those who work in the financial sector, at least for those operating in a work environment minimally permis-
sive toward virtue, provided they possess characters of integrity and genuine aptitude for the skills and attitudes required in
their professional tasks.
Keywords Finance ethics· Financial trading· MacIntyre· Virtue ethics· Integrity
Introduction
In a 2015 article entitled “The Irrelevance of Ethics,”1 Mac-
Intyre argues that acquiring the moral virtues would under-
mine someone’s capacity to be a good trader in the financial
system and, conversely, that a proper training in the virtues
of good trading directly militates against the acquisition of
the moral virtues. In dialogue with MacIntyre’s arguments,
this paper aims to explore the dynamic relationship of a
person with his/her work environment, taking on the ques-
tion of whether a person of integrity could work as a trader
without betraying his/her commitment to live a worthy life.
The central claim we wish to argue for, contra MacIntyre, is
that there exists a realistic possibility of integrity and growth
in moral virtue for those who work in the financial sector,
and specifically, in financial trading. In order to flesh out the
argument, we explore the place of financial trading within
the architecture of the financial sector and specify environ-
mental and agential conditions under which trading could be
reconciled with the pursuit of virtue.
Finance ethics literature predominantly assumes a very
narrow perspective on the acting person, in line with Kan-
tian morality at least as it is commonly understood. Ethics
is considered as a way of answering questions such as “is
it licit or illicit?” or “is it morally permissible?” The most
complete handbooks in the field of finance ethics are based
almost exclusively on compliance with and respect for legal
and moral norms (e.g., Boatright 2010, 2014). This way of
understanding ethical inquiry considers whether a single
action or action type is lawful or good, but fails to consider
the significance of the action as part of a larger life narra-
tive. By contrast, the question we intend to explore, namely
whether a good person can exercise the role of trader without
* Marta Rocchi
mrocchi@pusc.it
David Thunder
dthunder@unav.es
1 Markets, Culture andEthics Research Centre, Pontificia
Università della Santa Croce, via dei Farnesi, 83,
00186Rome, Italy
2 Institute forCulture andSociety – Religion andCivil Society
Project, Universidad de Navarra, Campus Universitario,
31009Pamplona, Navarra, Spain
1 This is the first chapter of Bielskis and Knight’s Virtue and Econ-
omy, an edited volume that interrogates the possibility of applying the
standards of virtue to current economic scenarios using a MacInty-
rean interpretive lens (Bielskis and Knight 2015).
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M.Rocchi, D.Thunder
1 3
betraying his/her commitment to live a worthy life, assumes
a first-person approach to ethics, which has as the ultimate
horizon for human actions the pursuit of a worthy human life
both as individuals (happiness/flourishing) and as part of a
community (common good).2
The application of a first-person approach to ethics to
the field of business and finance draws its chief inspiration
from the revival of virtue ethics that we have witnessed over
the past three decades (Ferrero and Sison 2014). Thanks to
Anscombe’s invitation to rediscover Aristotelian categories
of analysis for moral life (Anscombe 1958), and MacIntyre’s
translation of Aristotelian natural teleology into a language
understandable for contemporary philosophers and “plain
persons” (MacIntyre 2007 [1981], MacIntyre 2016), vir-
tue ethics has once again become an effective and credible
interlocutor in theoretical and applied ethical inquiry, after
lying dormant for much of the modern era. Virtue ethics
in business is already a well-developed field of research,3
while in the parallel field of finance ethics the research is
still in its early stages. Recently, there has been an upward
trend in the publications of work in the field of finance ethics
grounded in virtue ethics, especially by authors inspired by
MacIntyre’s seminal contributions in the field (Ferrero and
Sison 2017; Graafland and van de Ven 2011; Robson 2015;
van de Ven 2011; West 2016; Wyma 2015; less recent but
still significant is the contribution of Dobson 1997).
In this context, the question whether or not a good per-
son can be a good trader joins an ongoing dialogue with
MacIntyre’s work in the field of business ethics.4 The dis-
tinctive contribution of our paper is to make the case that
MacIntyre’s criticism of finance and trading, though valid
in certain contexts, is significantly overstated, making
sweeping generalizations that fail to do justice to the real
situation of many of those who work in financial institu-
tions. We agree with MacIntyre that financial institutions
can and often do damage people’s moral character and that
conventional forms of training for finance are all too often
at loggerheads with the virtues. Furthermore, we are just as
skeptical as MacIntyre that the whole financial system can
be brought into line with the requirements of a virtuous life.
Where we part ways with MacIntyre is in our view that the
fragility and manifest flaws of financial institutions do not
entail MacIntyre’s more ambitious claim that agents cannot
generally exercise the human virtues within them. On the
contrary, as we argue in this paper, there can be a form of
engagement with the financial sector—and financialtrading
specifically—that does not involve the abandonment of vir-
tue and that may even be an occasion for growth in personal
integrity and virtue. If this is so, then financial institutions
are not entirely irredeemable from an ethical perspective,
even if their wholesale reform is not likely to be achieved
anytime soon.
The argument will proceed in five stages: (1) to moti-
vate the argument, we open by describing the cases of two
well-known traders, which seem to epitomize all the features
of financial trading that MacIntyre condemns so roundly.
(2) We then offer a sympathetic restatement of MacIntyre’s
argument for the incompatibility of financial trading and
related activities5 with the living of a virtuous human life,
supplemented by our own consideration of specific aspects
of trading activity it is hard to imagine a virtuous agent
performing. (3) Thirdly, we develop a broader context for
our defense of the compatibility of trading with virtue, by
offering a broad characterization of financial trading and
its core purposes within the financial system. (4) Keeping
this framework in mind, we show, through a fine-grained
examination of the main dimensions of trading activity, that
MacIntyre’s moral indictment of financial trading is too
sweeping and general in scope to survive serious scrutiny
and (5) specify certain minimal and realistically attainable
agential and environmental conditions under which virtuous
financial trading should, in principle, be possible.
The World ofTraders
There is no shortage of real-world examples to support
MacIntyre’s thesis that under standard conditions, financial
operators face relentless and even irresistible pressures to
adopt vice-ridden attitudes and forms of conduct. Here, we
focus on two cases that seem especially representative of
the moral pitfalls of trading: the cases of Bruno Iksil and
Kweku Adoboli, respectively. The former became known as
the “London Whale,” while the latter was a rogue trader who
2 We take this distinction between first-person and third-person eth-
ics from the work of Abbà (1996): first-person ethics considers the
perspective of the acting person and answers the question: “what is
the best life to live?”; third-person ethics, by contrast, assumes the
perspective of an external observer and answers the question: “is it
permissible?”, “does it violate established norms?”
3 Sison etal. (2017) put together the most recent collection of articles
on virtue ethics in business and management.
4 According to a complete literature review on virtue ethics in busi-
ness and management (from 1980 to 2011), MacIntyre is the second
most cited source—after Aristotle—for virtues ethicists in business
ethics (Ferrero and Sison 2014). See Beadle (2017) for a literature
review on MacIntyre’s influence on business ethics.
5 Technically, many activities implicated in the financial market are
not “trading” as such. The financial market may be exploited through
fund management, the design of financial products, the marketing of
financial products, the provision of venture capital or ordinary capital,
risk management, and so forth. However, many of these activities are
structurally similar to trading insofar as they are intimately implicated
in the functioning of the financial market and tend to be competitive
in precisely the ways MacIntyre views as problematic.
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Can aGood Person be aGood Trader? AnEthical Defense ofFinancial Trading
1 3
caused the Swiss bank UBS to lose $ 2.3 billion. Both cases
were in the spotlight of financial news in 2012.
Bruno Iksil was a trader of JPMorgan Chase when on
May 10, 2012, the CEO Jamie Dimon announced in a press
conference that JPMorgan Chase had lost $ 2 billion in the
second trimester of 2012 because of unsuccessful aggres-
sive trading strategies.6 Dimon admitted that “errors, sloppi-
ness and bad judgment” were important contributory factors
(Dimon in Silver-Greenberg and Eavis 2012).
Iksil was trading Credit Default Swaps, under the supervi-
sion of his Chief Investment Officer, Ina Drew. In May 2012,
JP Morgan realized the positions open by Iksil were over-
sized (this is the reason for his nickname, “London Whale”),
and the losses which the investment bank incurred were huge
(while some hedge funds took advantage of the opportunity,
profiting from JPMorgan losses (see Ahmed 2012)). The
CIO Drew resigned, assuming personal responsibility for
the situation that led to the dramatic losses (Roose 2012).
Money is important to banks, of course, but in this particular
context JP Morgan’s problems were more related to reputa-
tion and investors’ trust than to profits as such. For one of
the biggest investment banks, such as JPMorgan Chase, $
2 billion can be recouped in a few semesters(in the first
trimester of 2012 JP Morgan reported net income of$ 5.4
billion—see JP Morgan Chase 2012); recovering reputation
and trust is much more difficult. For the purpose of this arti-
cle, the most interesting part of the story is that Bruno Iksil
suffered no consequences, as a trader, for what happened.
His CIO had authorized him; he had acted within the rel-
evant legal framework. This was part of his job as a trader.
Even during the investigations following the scandal, Iksil
was considered innocent.7 Recently, Iksil came back into the
spotlight because he wrote a public letter arguing that his
role in the JPMorgan Chase trading losses was overstated
(for a good explanation of the facts and for Iksil’s letter, see
Dakers 2016).
The story of Kweku Adoboli has an entirely different fla-
vor, because in 2012 Adoboli was directly accused of expos-
ing UBS to disproportionate risks, causing the bank to lose
$ 2.3 billion. In the case of Adoboli, the trial recognized
his full responsibility and condemned him to 7years in jail
(in the end, he only served three). Adoboli managed to hide
some off-the-books trades from his bosses, so his activity
was neither authorized nor monitored by the bank, which
was thus unwittingly damaged by its own trader’s activities
(see, for example, Schumpeter 2012).
These and similar cases have been in the spotlight of
media and public opinion, even if the specific details of each
situation are often unfamiliar to the general public. The fact
that they are generally associated with the financial sector
helps explain why financial activity has met with so much
public opprobrium and distrust, while the vast quantities of
money involved naturally raise suspicions about the legality
and morality of the actions undertaken by traders.
The question is, are the cases of Iksis or Adoboli para-
digmatic of financial activity—do they represent a sys-
temic problem in the financial industry, an illustration of
the dilemma of creeping vice and complicity that inevitably
confronts all financial operators sooner or later, a warning to
“get out while you still can”? Or are they better understood
as exemplary tales of how not to engage in financial activity,
a salutary warning to virtuous traders to “stay on the straight
and narrow” and bravely resist the temptation to stray into
vice and corruption? We believe that Iksis, Adoboli, and
comparable characters8 are not exemplary of the responsible
or successful financial trader, even if their behaviors turn out
to be statistically frequent in the financial sector, and even if
their personalities and strategic choices tend to yield higher
levels of income and prestige in financial circles. But before
we explain why, it is worth rehearsing the reasons for Mac-
Intyre’s insistence that financial trading cannot be exercised
successfully by a virtuous person.
Financial Trading: ATraining inVice?
In “The Irrelevance of Ethics,” MacIntyre (2015) defends
several distinct claims, two of which we find particularly
problematic and worthy of careful scrutiny: (1) educating
someone according to the standard of the virtues will seri-
ously jeopardize her chances of succeeding as a financial
trader, and (2) the ethics of virtue and the way we think
about money have been disconnected in the course of history
to the point that ethics is nowadays irrelevant to economic
rationality. These two claims, taken together, constitute a
formidable challenge to the very intelligibility of the cat-
egory of the “virtuous trader,” at least under conditions pre-
vailing in the current financial system.
The most significant aspect of MacIntyre’s argument for
the ethics of financial trading is the propositionthat finan-
cial trading, of its very nature, demands the achievement of
certain capacities and ends (a) pursued independently from
6 At the end of the investigations, it turned out that the losses came to
approximately $ 6.2 billion.
7 For the purpose of this article, we are not entering into more details
about the subsequent investigations and the fines imposed upon
JPMorgan Chase by different authorities/regulators, and the class
action undertaken by JPMorgan Chase investors.
8 We would here refer the reader to some of the protagonists of the
interviews collected in Swimming with Sharks (Luyendijk 2015), a
book that explores the personal and professional situation of people
working in London’s financial district.
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M.Rocchi, D.Thunder
1 3
their contribution to a virtuous life and (b) carrying strong
tendencies toward the moral corruption of the agent.
To understand why MacIntyre views financial trading and
associated activities as inherently corrupting, let us briefly
review the four features MacIntyre (2015) identifies as con-
stitutive of moral character and compare them with the dis-
positions he views as characteristic of successful financial
operators. The first feature of moral character he points to is
an adequate and realistic self-knowledge and confidence in
one’s own worth and abilities. MacIntyre bases the identi-
fication of this first feature on Winnicot’s studies about the
behavior of mothers and its decisive influence upon chil-
dren’s character (Winnicot 1964, 1971). One who develops
this virtue has a balanced and realistic self-concept. There
is little or no room for this virtue in the financial sector,
according to MacIntyre, since the mark of the successful
financial operator, especially in financial trading, isto be
excessively self-confident, that is, to harbor an exagger-
ated perception of his or her own strengths and potential for
achievement.
The second feature of the virtuous person identified by
MacIntyre is courage, defined as a happy mean between
temerity and cowardice. In the decision-making process, the
correct evaluation of the consequences of one’s actions and
perseverance in following the good even in adverse situa-
tions are what constitute the virtue of courage. According to
MacIntyre, the financial operatordoes not consistently dis-
play the virtue of courage because he relies on mathematical
formulas rather than sound judgment, rendering him “unable
to distinguish adequately between rashness, cowardice and
courage” (MacIntyre 2015, p. 11).
The third feature of the virtuous person highlighted by
MacIntyre is awareness of other actors and their good, and a
commitment to give each their due: the virtue of justice. This
seems to be in stark contrast to the habitual attitude of finan-
cial operators, in particular traders, who act exclusively or
almost exclusively in their own interest, at others’ expense.
By way of illustration, we could consider the imposition of
unjust debt, for example, debt charged to future generations
who had no hand or part to play in incurring that debt (2015,
p. 19), a consequence of ruthlessly self-interested and unjust
behavior, not only tolerated but encouraged and required by
the global financial system as it stands.9
Finally, the fourth feature of moral character discussed
by MacIntyre is a sense of the historical context of one’s
actions, which entails the ability to interpret one’s actions
and one’s situation in relation to one’s life and actions and
even in relation to their place in the history of a commu-
nity, nation, or civilization. This broad historical perspec-
tive gives one’s projects and judgments a proper sense of
perspective and helps one avoid repeating the errors of one’s
predecessors. The short-termism typical of the financial sec-
tor impedes the development of this important virtue (Mac-
Intyre 2015, pp. 9–12).10
MacIntyre’s conclusion from this analysis is that “were
we successfully to impose on someone the kind of disci-
pline that issues in the formation of genuine moral character,
we would have disqualified that someone from success as
a trader and, most probably from employment as a trader”
(MacIntyre 2015, p. 12). It inescapably follows from this
bold claim that if we want to be good traders—if by “good”
we mean successful within the terms of finance and trad-
ing—we need to abstain from living up to the standards of
virtues and work on the formation of a series of habits that
are morally vicious or corrosive of the virtues of a good
person. In short, according to MacIntyre those who wish
to be good qua traders cannot escape being bad qua human
beings.
The figure of the successful trader as an agent immersed
in vice is clearly not meant to depict an anomalous situa-
tion, but to depict the typical conditions for success in finan-
cial trading. But these vitiating conditions, on MacIntyre’s
view, are not a necessary correlate of finance and trading
as such, but rather, an outgrowth of finance and trading as
they have been conceived and implemented in the modern
era. To show this, MacIntyre provides a backstory for his
argument, a narrative to explain how the financial system
(and financial trading which in reality seems to be just a
vivid case to illustrate a general moral pathology) came to
be antithetical to the exercise of virtue. According to that
story, economic thought and practice11 have evolved in the
modern era in such a way that the standards of money have
come to predominate over the standards of virtue. Money
has been transformed from being a tool useful for obtaining
particular goods, to a measure of everything, so that the dis-
tinction between money as an instrumental good and virtue
9 “Those who were the engineers of this debt and who had already
benefited quite disproportionately from the extension of credit have
been to an extraordinary degree allowed to exempt themselves from
the consequences of their delinquent actions” (MacIntyre 2015, p.
19).
10 These features, “habits,” that MacIntyre highlights are confirmed
by some financial literature, especially in the field of behavioral
finance. See, for example, Barber and Odean (1999, 2001) on over-
confidence and excessive courage as explanation of the level of trad-
ing in financial markets; Brown etal. (2010) show how the habit of
being self-interested distinguishes people involved in finance from
other people as early as during their college years; on the relationship
between finance and short-termism, see Mauboussin and Callahan
(2015).
11 We should clarify that here as elsewhere in the paper, we use the
term “practice” in its ordinary everyday sense, to indicate a purpose-
ful, structured, and more or less complex cooperative human activity
carried on in a more or less routinized or habitual manner, not in the
special sense intended by MacIntyre.
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Can aGood Person be aGood Trader? AnEthical Defense ofFinancial Trading
1 3
as an intrinsic good has become practically irrelevant, and it
has become impossible to reconcile the standards of money-
making with the standards of the virtues.
We could observe, in support of MacIntyre’s position,
that the globalized economy has stacked a range of institu-
tional and cultural incentives in favor of vices such as greed
and injustice, such as win–lose gaming scenarios and legal
protection for reckless risk taking, along with cultures that
attach enormous prestige to the accumulation of vast quanti-
ties of wealth by individual economic actors. It should come
as little surprise, then, that participants in the globalized
economy, as MacIntyre rightly observes, have been domi-
nated by an intemperate desire for the acquisition of wealth
and resources—what Aristotle would call the vice of pleo-
nexía (see, for example, Aristotle, Nicomachean Ethics, V,
1129b), directly opposed to the virtue of justice. Even if
they were not predisposed to such vices, the conditions of
financial trading may very well present powerful incentives
to develop them.
We could strengthen MacIntyre’s case against the ethical
value of financial trading by taking a closer look at the role
of the trader in the financial system and highlighting specific
aspects of trading activity that are hard to reconcile with a
virtuous life or a commitment to the common good. Accord-
ing to MacIntyre, “traders” are “those at work in the finan-
cial sector who trade in securities and currency, either on
behalf of their firm’s clients or for their firm itself” (2015, p.
10). Hull (2012) offers a more fine-grained account, enumer-
ating three principal types of trader: (a) hedgers, who gain
from the price difference of the same product at different
times; (b) arbitrageurs, who gain from the price difference
of the same product in different markets; and (c) speculators,
who take a position in a market, betting on the increase or
decrease in a price, gaining from the difference with the real
price if their bet is correct. If we focus on the amount of time
they hold their positions, we can make a further distinction
between scalpers, day traders, and position traders. Scalpers
hold their position for a very limited amount of time, even
just a few minutes; day traders close their position within the
trading day; and finally, position traders hold their position
for longer periods, hoping to gain from price movements
across a larger time frame.
The activity of financial trading performed by specula-
tors, especially those who hold their positions for a very
limited amount of time, could be morally suspect or even
illegal if it is aimed, for example, at price manipulation,
which could give rise to dangerous price bubbles. This kind
of financial attitude, which is supported by those habits of
moral character described by MacIntyre as excessive self-
confidence, temerity, and scarce attention to others and to
the historical context, can be considered as immoral because
it has destabilizing effects on the market, especially when
it is applied to big—or even huge—quantities of money or
assets. While intelligent long-run investment in companies
is a perennial and respectable way of participating in the
realization of socially valuable projects, buying and sell-
ing within a very small time slot does not look at assets or
projects in themselves, but rather, seeks to profit from their
short-term price movements. This behavior effectively con-
verts financial speculation from a rational and socially ben-
eficial investment activity into a form of reckless gambling.
There are other aspects of financial trading that straddle
the borderline between illegality and immorality and seem to
lend further corroboration to MacIntyre’s argument against
trading. Four are especially worthy of comment: (1) “cor-
nering the market” (Hull 2012), (2) “front running” (Hull
2012), (3) proprietary trading (U.S. Department of Treasury
2013), and (4) two interrelated features of many financial
transactions, namely their high level of opacity (Sato 2013)
and impersonality (O’Hara 2016). It is worth discussing
these problematic aspects of trading so that we get a more
vivid and fine-grained picture of the ways in which trading
can become an instrument of corruption and injustice.
1. “Cornering the market” is a way of distorting the origi-
nal purpose of futures, one of the most used products in
the derivative market. The original function of a future
is to protect the counterparties of a deal from the risk
of the change of a price over time. When they subscribe
to a future contract, the parties commit to exchange an
established quantity of a product/commodity/financial
asset (which is called the “underlying asset”), at a fixed
price, at an established future date (maturity of the con-
tract). The one who is committed to buying the underly-
ing asset at the maturity of the contract is said to hold a
“long position”; the one who is committed to sell holds
a “short position.” From the perspective of the one who
holds the long position, “cornering the market” consists
in performing the same financial transaction that a “nor-
mal” user of a future on a product would do, but for
purposes of speculation rather than in order to protect
the price of a commodity over time. A speculator, in this
context, might “corner the market” by buying a large
long position on the future market of a commodity and
also acquiring a large share of the commodity to which
the future is linked. In this way, when the future contract
is approaching its maturity, the one who holds the short
position goes to the market in order to buy the amount
of the commodity he or she owes from the one who
holds the long position. The problem is that the specu-
lator, buying a large quantity of the underlying asset,
made its price go up, because he made the commodity
scarce. So, in order to keep the commitment he or she
has, the one on the short side will be compelled to buy
the commodity at the (inflated) market price. This shows
how the activity of the owner of both the commodity
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M.Rocchi, D.Thunder
1 3
and the long position on the future contracts engages in
intentional price manipulation. Those who were on the
short side of the future contract have in this way been
“cornered” by the speculator.
2. “Front running” is an unethical and illegal way of prac-
ticing the activity of financial trading performed by
an authorized financial intermediary. A paradigmatic
situation of front running could be the following: a
client goes to a brokerage firm to invest her financial
resources, and she is assigned to a broker; the brokerage
firm, thanks to information it owns, can give a recom-
mendation to the client about which stocks it is better to
buy. If, for example, the brokerage firm gives the client
one of the strongest recommendations possible (the so-
called strong buy), it means that those particular recom-
mended stocks promise high revenues. “Front running”
happens when, in a situation like the one described, the
broker, called to execute the trade on behalf of the cli-
ent, decides first to buy part of those stocks for his own
personal account and then to execute a bigger order for
the client. In this way, when the price of the stocks goes
up because of the large buy order he executed for the
client, the broker himself benefits personally from the
higher price by re-selling the stocks he acquired before
the price went up. Essentially, front running is a way
of abusing privileged information while performing the
activity of financial trading.12
3. Proprietary trading has found itself in recent years in
the crosshairs of financial regulators. Essentially, pro-
prietary trading happens when a financial institution
engages in financial trading with its own money and
for its own profit, rather than for external clients. The
problem arises especially when this financial institu-
tion happens to be a bank collecting deposits from nor-
mal savers, whose money is managed and invested by
the bank itself. In this case, a conflict of interest arises
because the bank is trading for itself as well as for its
clients: they happen to be both (the bank and the client)
on the same market, but for divergent—and potentially
conflicting—interests. The Volcker Rule (Sect.619 of
the Dodd–Frank Wall Street Reform and Consumer Pro-
tection Act, U.S. Department of Treasury 2013) tried to
eliminate this conflict of interest by banning proprietary
trading activity for commercial banks, and prohibiting
them from trading in derivatives or participating in
hedge funds; these activities are considered too risky
for a financial institution devoted to protecting and man-
aging clients’ savings. All these restrictions are meant
to establish a more robust financial system, based on a
reliable commercial banking sector: applying the Vol-
cker Rule means guaranteeing the clients that the bank
is acting in their interests, and not exclusively in its own
interest, and that the bank is not engaging in financial
trading activities that are too risky. The Volcker Rule is
more complex and detailed than expressed here, but for
present purposes suffice it to say that the need for this
rule is arguably another corroboration of the tenden-
cies observed by MacIntyre within the financial sector
toward selfish profiteering and recklessness.
4. Finally, besides cornering the market, front running, and
proprietary trading, the growing complexity of financial
transactions has rendered the financial market increas-
ingly opaque and impersonal, making the identification
of the parties to a transaction and the attribution of per-
sonal responsibility for the quality of an asset or product,
increasingly difficult (O’Hara 2016). A person who buys
or sells a product in large quantities with little knowl-
edge of either the product or the parties implicated is,
arguably, acting recklessly.13 Thus, the very structure
of the financial market can frequently militate against
a strong sense of personal integrity, responsibility, and
accountability.
The take-home point from MacIntyre’s assessment of the
financial system, apparently corroborated by a variety of
instances of financial trading activities and strategies cata-
logued above, is that the financial system is fundamentally
immoral, constituted by a culture, institutional context, and
standards of conduct which both make it impossible or nigh
impossible for virtuous agents to be successful financial
operators, and tend to support and reward vicious agents in
their efforts to advance their own careers at the cost of soci-
etal flourishing or to the obvious detriment of other people,
at times even their own clients. This is an exceedingly bleak
picture of our financial system, with radical implications
for its participants, effectively compelling them to choose
between continuing in their professional role and remain-
ing faithful to their commitment to living a worthy life. If
this is the only choice they have, then virtuous agents have
13 Nowhere was this more vividly illustrated than in the pivotal role
of mortgage-backed securities in the 2008 financial collapse. The
problem with such a financial product is not merely that it is complex,
but that the number and variety of assets and financial actors impli-
cated in it is too large and dispersed to guarantee realistic account-
ability and transparency for either the seller or the buyer.
12 This problem seems to be even greater in emerging financial mar-
kets, where, due to poor regulation and governance of market inter-
mediaries, many brokers together could agree on a strategy of price
manipulation using the privileged information they have. This kind
of behavior affects the functioning of the market and also threatens
justice: for example, in a study of an emerging stock market such
as Pakistan, Khwaja and Mian (2005) reveal that rates of return for
brokers are 50–90% higher than those for a normal “outsider” stock
investor.
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Can aGood Person be aGood Trader? AnEthical Defense ofFinancial Trading
1 3
compelling grounds for surrendering the terrain of finance
to their vicious colleagues, making future reforms of the
system all the more unlikely.
Before resigning ourselves to such a dismal outcome, let
us inquire whether or not MacIntyre’s depiction of the finan-
cial sector is in fact fair and accurate. Our analysis below
reveals that in spite of the corrupting tendencies that can
be widely observed in the financial sector, MacIntyre’s case
against the compatibility of financial trading with the human
virtues is significantly overstated and thus stands in need of
careful qualification. We show this through a critical exami-
nation of MacIntyre’s claims in Sect.4. But to provide an
adequate theoretical context for this critical assessment, we
begin by considering the broader purpose of finance itself,
since financial trading is only intelligible as part of the finan-
cial system.14
The Broader Purpose ofFinance
andFinancial Trading
If we are to understand how financial activity, including
trading activity, can be intelligible and valuable for its par-
ticipants (taking seriously the perspective of the person
seeking to live a worthy life), and more specifically, how it
can enhance or undermine virtues, then we need to define
finance not only from a technical or operational perspective,
but with explicit reference to its purpose and meaning for the
community within which it operates.
In this section, we deliberately do not use the MacInty-
rean concept of practice (MacIntyre 2007[1981])15 to assess
the ethics of financial trading—even if we recognize that the
concept of practice may illuminate the dynamics of coopera-
tive human activities—because the practice–institution dis-
tinction raises complex questions of social ontology whose
resolution is not required for the limited purposes of our
argument. Purposeful human activity can call forth a range
of human virtues just insofar as it is oriented toward good
purposes, even if the relation of the activity to those pur-
poses is indirect or remote, and even if the activity itself is
not necessarily expressive of the full range of human virtues.
Our goal is not to develop a detailed account of the social
ontology of finance, but to show that there is a space in the
financial sector for an ethically responsible form of trading,
by identifying the principal social values served by financial
activity, and the means through which finance characteristi-
cally realizes those values.16
Having said that, we happily acknowledge our intellectual
debt to MacIntyre for his contributions to our understanding
of the dynamics and structure of social activities, and the
crucial role of virtues and moral formation in the constitu-
tion of good social practices (MacIntyre 2007[1981]). While
the present argument does not require us to specify the exact
relation of financial trading to MacIntyrean practices, the
general approach we take—namely, to examine financial
trading as an enduring cooperative activity oriented toward
specific ends, and regulated by its own standards of excel-
lence—is broadly MacIntyrean in spirit. The tricky point is
that financial trading is inserted within the architecture of
financial services more generally, and services the ends of a
multitude of human practices. Consequently, insofar as the
goods that render it intelligible are in some cases external
to the activity (for MacIntyre, a practice is a cooperative
activity constituted by its own internal goods), it is not a
straightforward matter to define financial trading as a MacIn-
tyrean “practice” in the strict sense. It is, however, clearly a
practice in the ordinary sense of a cooperative and purpose-
ful human activity, maintained over time, and constituted by
certain standards of success and failure. It is thus perfectly
legitimate to assess its moral worth as a practice in this more
everyday sense, without settling larger questions (questions
undoubtedly worth exploring in another context) about the
social ontology of the entire financial sector or mapping the
complex relations between financial trading and MacInty-
rean practices.
Finally, even if we concede that much financial activity,
notwithstanding the intrinsic goods it ultimately serves, has
a partial and instrumental character, it would be a serious
error to assume that the financial system must furnish its
participants with opportunities for and training in the exer-
cise of the full panoply of human virtues. Like any special-
ized work environment, certain virtues will be emphasized
more than others, and a person who seeks to grow in the
full spectrum of virtue will probably have to complement
her work with other social spheres such as family, athletic
associations, volunteer associations, church groups, and
14 Indeed, as MacIntyre himself admits, the target of his argument
is implicitly not only the financial trader, but the financial system
as a whole. It is “the financial sector as a whole,” he insists, and not
just trading, “that is from the Thomistic Aristotelian point of view a
school of bad character” (2015, p. 12).
15 Defined by MacIntyre as “Any coherent and complex form of
socially established cooperative human activity through which goods
internal to that form of activity are realized in the course of trying to
achieve those standards of excellence which are appropriate to, and
partially definitive of, that form of activity, with the result that human
powers to achieve excellence, and human conceptions of the ends
and goods involved, are systematically extended” (MacIntyre, 2007
[1981]: 187).
16 We are not denying that finance might count as a MacIntyrean
practice, just insisting that (a) this is a claim that requires consider-
able argument to establish, and (b) it is not a claim we need to make
in order to vindicate the ethical value of trading.
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M.Rocchi, D.Thunder
1 3
extra-professional friendships, in order to attain a rounded
education in the virtues.
A historical exploration sheds light on the original mean-
ing and purpose of finance. Neal (2015) retraces the history
of finance back to its very first stages and observes that long-
distance trade and long-lasting productive assets are what
motivated the emergence of finance. Human progress and
institutional evolution make this activity more complex, but
do not alter its basic function of channeling resources from
those who have monetary resources to those who have scarce
means and good projects, through a loan given for a defined
time slot in order to both obtain a revenue from the returns
and realize a worthwhile project. The technical definition
of finance is related to its functions: most authors agree in
defining finance as the set of activities aimed at channeling
savings to investments, mainly through managing risk and
facilitating payments (among many others, see Greenwood
and Scharfstein 2012; Samuelson and Nordhaus 2010).
In order to adequately grasp the basic purpose of finance,
it is important to understand that finance came into being
to make possible intergenerational projects that serve the
well-being of persons and communities. Part of present-day
finance is still aimed at the realization of long-term pro-
jects—e.g., providing a mortgage to buy a family home, bor-
rowing to make it possible to go to college, securing funding
for building a school, saving for a pension, making available
easy and secure ways of making monetary transactions, and
many other activities. From this perspective, each branch
of finance acquires meaning only if viewed in light of the
broader human purpose of finance. Someone who is just
trading a security, without grasping its content and purpose,
will likely become enslaved to technical ends divorced from
their rational warrant, namely their potential contribution to
worthwhile human projects. Someone, on the other hand,
who practices finance as a project-realizing activity instead
of exclusively as a money-making enterprise, could be eli-
gible to live aworthy life, at least under the right conditions,
as we suggest in the final section.
Admittedly, some sectors of finance are not directly
linked to particular projects: the phenomenon of financiali-
zation involves the increasing role of financial markets and
motives in the economy (Epstein 2005) and an increasing
gap between financial transactions and the real economy
(Freeman 2010). However, financialization implicitly betrays
the true purpose of finance, which is clearly not the accu-
mulation of wealth for its own sake. If there are no worth-
while projects at stake, for example projects that enhance
the life of human communities, there is no need or justifica-
tion for finance. So a finance not anchored in real projects,
that genuinely contribute to the well-being of persons and
communities, is no longer “finance,” properly speaking: it
can be defined as a money-making activity, but it cannot be
called finance.
In Defense ofFinancial Trading: Problematic
ButNot Irredeemable
Keeping in mind the broader purpose of finance, we are now
better positioned to directly address the central question
of this paper, namely, “Can a good person be an effective
trader, and if so, under which conditions?” As we have seen
before, MacIntyre advances plausible objections against the
financial system, and his analysis of the relationship between
the standard of the virtues and the standard of money in
many respects accurately reflects trends in the modern global
economy, especially in advanced, post-industrialized soci-
eties. However, even if MacIntyre is right about current
tendencies, it does not necessarily follow that a virtuous
agent cannot undertake financial trading successfully or,
conversely, that a financial trader is precluded from practic-
ing the human virtues.17 This is so for a number of reasons.
First, we should be careful not to identify all trading
scenarios with the worst situations we can imagine. While
we have considered numerous scenarios in which trading
techniques are used to undermine justice and the common
good, there are many instances of trading activities that, far
from being abusive or unjust, support a thriving market and
economy, and advance worthwhile projects that rely on the
support of investors to get off the ground and remain sol-
vent: for example, using financial trading strategies to pro-
tect against disadvantageous changes in prices when starting
to build an infrastructure—such as a dike, a highway, or a
bridge; buying the right of acquiring a certain good at a
certain date to have the price of a final good fixed; or selling
part of a company to increase investments. These and other
examples of good use of trading techniques illustrate the far-
reaching beneficial effects of responsible financial trading
(and conversely suggest the potentially disastrous effects of
irresponsible trading).
Indeed, as Shiller affirms, for a well-functioning financial
system, “we need traders in the same way we need used
furniture dealers and scrap metal dealers” (Shiller 2012, p.
58). Harris (2003) elucidates this statement from a technical
point of view, explaining that financial traders play a criti-
cal role in: (a) discovering prices and making them more
informative, i.e., making them reflect as much information
as possible, thus facilitating informational transparency and
reducing the vulnerability of investors to lies and manipula-
tion concerning the value of potential or actual investments,
17 Adding “human” to virtue is not entirely redundant—it is meant
to underscore the fact that we are concerned with virtues that per-
tain, properly speaking, to human beings, and not simply to financial
operators, athletes, or some other person in his or her role-performing
capacity. Virtue is, in this sense, an analogous and multivalent term,
even though it has become far more “moralized” in English than the
equivalent Greek term, arete.
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Can aGood Person be aGood Trader? AnEthical Defense ofFinancial Trading
1 3
and (b) making the market more liquid, that is, rendering
the assets traded in that market more easily convertible into
cash. In a liquid market, there are more buyers and sellers,
making it harder to manipulate asset prices (Harris 2003).
Although these market functions cannot justify reckless
forms of speculation and price manipulation, they do provide
a compelling rationale for other forms of financial trading,
such as those described below.
(a) Arbitrage, as we mentioned earlier, is the activity of
buying and selling the same asset simultaneously on
different markets, benefiting from the difference of the
asset price. Arbitrage is harder in contemporary finance
because machines detect this kind of price difference
among different markets, so they directly execute this
kind of trade, limiting the possibility for a “human”
trader to exercise arbitrage-oriented financial trading.
Nonetheless, even if performed by trading machines,
the activity of arbitrageurs keeps the prices at a fair
level, confirming O’Hara’s endorsement of arbitrage as
highly beneficial for the economy if it is properly per-
formed (O’Hara 2016): arbitrageurs are continuously
monitoring if an asset is assuming a higher or lower
price in different markets. In the end, arbitrageurs can
detect and combat price manipulation.
(b) Even speculators, if they act within a legal and ethical
framework, have a legitimate role to play in the finan-
cial system. Speculation is the activity of performing
high-risk financial transactions having on the one hand
the possibility of big losses and on the other hand the
possibility of huge gains. Speculation is obviously sub-
ject to reckless misuse, including taking disproportion-
ate risks with a client’s money. Nonetheless, as Samuel
Gregg argues, the “misuse of speculative techniques
does not mean that the practice itself is evil” (Gregg
2016, p. 115).
Gregg advances several arguments in defense of
financial speculation: first, Gregg rightly points out that
every economic choice involves a degree of specula-
tion, if by speculation we mean the assumption of a
risk that cannot be exactly controlled. This shows that
speculation is not different in kind to many ordinary
financial transactions, without which the financial
market could not function properly. This point brings
home the fact that risk taking, i.e., committing capital
or assets to projects insituations of incomplete infor-
mation and uncertainty about the future performance of
those projects, far from being exclusively the mark of
reckless financiers, is an ordinary and essential compo-
nent of any thriving economy and should only be con-
demned in case the risks assumed are disproportionate
or involve some moral defect such as a clear conflict of
interest between the trader and her client.
Second, in answer to those who view speculation
as unmerited or unwarranted economic gain, we agree
with Gregg that other things being equal, the assump-
tion of a risk typically does provide a justification for
the receipt of a benefit in the event that the risk pays
off—clearly, it would be unfair to expect a person who
risks his assets on a project to incur large losses in the
event that the project goes “south” but not benefit eco-
nomically in the event that the project is successful.
This qualified defense of speculation as a legitimate
trading technique and an essential component of a
healthy economy is given technical corroboration by
authors such as Angel and McCabe, who explain that
speculators “provide risk bearing capacity to the econ-
omy” (2009, p. 280), help in discovering and stabilizing
prices, and help increase the level of production.
(c) Agency traders are crucial for the functioning of a mar-
ket economy. Agency traders act on behalf of a client
and execute financial trades for him: they take care of
each step of the trade, from the identification of the
market to the actual execution and registration of the
order. The reason for the existence of agency traders is
twofold: on the one hand, not all those who have funds
to circulate in the market have time and financial capa-
bility to profitably invest them; on the other hand, some
markets require traders to be registered, so there is a
need for a category of financial agents who act under
license on behalf of savers and investors. In the end,
without financial agents who act as agents for savers
and funds owners, many current market transactions
would never happen.
Before engaging with MacIntyre’s arguments in greater
detail, let us briefly consider the charge that the financial
market’s opacity fuels reckless forms of trading. Now, there
is no denying that certain financial products are so opaque
and complex that it is difficult to trade them in an open and
transparent manner. Nonetheless, like speculation, opacity
comes in different forms and degrees, so we should be care-
ful not to assume that it is a univocal property of all financial
transactions. The simplest of market transactions, such as the
purchase of a bottle of milk, involves some degree of opac-
ity, in the sense that I may have no easy way to reconstruct
the history of the product I am buying or identify all of the
individuals and companies involved in the chain of produc-
tion. Nonetheless, if the nature of the product and identity
of the seller is more or less clear to the buyer, then gaps in
information about the production chain and other implicated
parties may be tolerated and compensated for by a general-
ized trust in the market and more specifically trust in the
integrity of the seller. Although in certain cases this trust
may not be warranted, trust is nonetheless a basic precon-
dition for a functional market, and opacity only presents a
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M.Rocchi, D.Thunder
1 3
moral difficulty if it reaches such a level that reliable assess-
ments of risk are impossible, or the number and diversity of
implicated parties undermines any reasonable basis for trust
in the integrity of the asset or production chain.
There is a strong case to be made for reforming finan-
cial regulations to ensure some minimum level of transpar-
ency, but the problem of excessive opacity is not systematic
enough, in our view, to warrant a wholesale condemnation of
the financial market. Securitization is a process that clearly
raises a serious problem of opacity. Securitization “occurs
when a financial instrument, such as a simple home mort-
gage, is sliced and diced, repackaged, and then sold on secu-
rities markets” (Samuelson and Nordhaus 2010: 432). This
process—heavily simplified by this definition but sufficiently
descriptive for the purposes of our argument—involves
many passages and actors, and the abuse of securitization
has been pointed to as one of the main causes of the housing
market collapse. Buchanan (2016) discusses the pros and
cons of securitization as one of the components of increas-
ing financialization. Her approach, like ours, is to begin by
examining its historical path and the reason it came into
existence in the first place. She goes as far as to affirm that
there is “nothing inherently injudicious about the securitiza-
tion process” (2016: 568) and that it serves the purpose of
“reducing informational asymmetries, servicing as a lower
cost of financing source, reducing regulatory capital, and
reducing bank risk” (2016: 565). However, like other finan-
cial instruments and processes, securitization evidently can
and has been used in greedy and dishonest ways, transform-
ing it from a beneficial financial instrument to “good inten-
tions gone amiss” (2016: 567).
Finally, it is worth mentioning “insider trading,” one of
the most controversial applications of financial trading. The
U.S. Security and Exchange Commission carefully distin-
guishes between an illegal form of insider trading—which is
defined as the activity of buying or selling a security taking
advantage of “material, non-public information” obtained
because of a fiduciary duty or another kind of relationship
of trust—and a legal form of insider trading, which regards
corporate insiders who “buy and sell stock in their own com-
panies. When corporate insiders trade in their own securi-
ties, they must report their trades to the SEC” (U.S. Security
and Exchange Commission 2013). Smith and Block (2016)
question the wisdom of regulations designed to curb insider
trading, arguing that “the justifications for the regulation of
insider trading are vague, incomplete and fallacious” (2016:
50) and that elite investors and regulators benefit from this
regulation, while insider trading would rather improve
price stability and a more efficient allocation of capital.
This debate, whichever side you end up coming down on, is
another good illustration of the need to get beyond generalist
arguments about finance, and consider financial practices in
a fully contextualized way, weighing their potential benefits
and harms, and taking into consideration the primary inten-
tions and purposes of the agents involved.
So far we have considered a variety of forms of trading
that support a dynamic investment market and do not impli-
cate traders or investors in dubious forms of speculation,
price manipulation, abuse of information, etc. MacIntyre
might reply that even conceding the ethical soundness of a
subset of trading activity, the “successful” trader, who lever-
ages the market unscrupulously to his own advantage, is the
dominant model of good trading. We would reply by point-
ing out that this conception of “success,” as the maximiza-
tion of prestige and/or income, is a rather impoverished one,
and need not be accepted at face value. There are broader
metrics of professional success, especially if we accept that
finance has broader human purposes. For example, one
may accept an income substantially lower than that of one’s
peers, or pass up economically lucrative trades, and still
contribute through one’s trading activities to the support of
valuable projects within the economy. One may take pride in
the supportive role one is playing in the wider economy, and
in the particular projects and communities one is supporting
by channeling savings to investments.
A second point worth making in order to blunt the force
of MacIntyre’s sweeping indictment of financial trading is
the fact that not all trading firms necessarily embrace the
same trading ethos or culture, and consequently, we must
carefully distinguish between different financial environ-
ments or working conditions. Not all working conditions
are equally corrupt or indeed equally susceptible to corrup-
tion. For example, some trading firms may require reckless
or reward highly manipulative forms of trading, whereas
others may permit or even encourage traders to exercise
prudence and circumspection in their trading. For example,
in the Standard of Practice Handbook of the CFA, a global
association of financial professionals (CFA 2014, “Char-
tered Financial Analyst”), there is a section entitled “Loy-
alty, Prudence, and Care,” Standard III(A), in the context of
the relationship with clients; the CFA certification is highly
appreciated in financial companies hiring new employees,
including financial traders.
Thirdly, even in cases where there exist significant incen-
tives to engage in dubious trades, not all pressures to deviate
from virtue are equally powerful or irresistible. For exam-
ple, a virtuous agent has some realistic prospect of success-
fully resisting “soft” pressures, such as the threat of a loss
of prestige among her peers, whereas “hard” pressures, such
as the threat of unemployment or being blacklisted among
future employers, may compel a virtuous agent to exit her
role entirely, on pain of making a “pact with the devil,” and
surrendering her commitment to the worthy life.
Fourth, any judicious normative assessment of a struc-
tured social practice must keep in mind that observed
tendencies in personality, mindset, or behavior are not
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Can aGood Person be aGood Trader? AnEthical Defense ofFinancial Trading
1 3
necessarily representative or exemplary of the practice at
its best. Indeed, it is perfectly possible that a large number,
even a majority, of practitioners are incorrectly interpreting
their role within this practice, or deeply misunderstanding
the point of the practice they claim to be representing. Thus,
habitual attitudes and behaviors (say, reckless risk taking)
within a social practice are not necessarily authoritative or
mandatory for participants; reasonable standards of profes-
sional excellence that track the purposes of the practice,
even if only honored by a minority of practitioners, may
nonetheless be authoritative from a normative standpoint
and more accurately reflect the purpose of the practice than
the behavior of a majority of its participants.
Environmental andAgential Conditions
forVirtuous Trading
The points discussed in the previous section are already suf-
ficient, in our view, to cast doubt upon MacIntyre’s gloomy
assessment of financial trading. This discussion highlighted
some significant flaws in MacIntyre’s case against the com-
patibility of financial trading with the human virtues. We
now propose to further hone our ethical defense of trading,
by inquiring under precisely which environmental and agen-
tial conditions an agent might successfully exercise the role
of the financial trader, notwithstanding its imperfections,
and simultaneously live up to the standards of virtue. Agen-
tial conditions refer to the preparedness of the agent—in
this case, the trader—to enact his/her professional duties in
a humanly admirable fashion, while environmental condi-
tions refer to the tendency of the social and institutional
context of trading—in particular the incentives, pressures,
and obligations it imposes—to support rather than inhibit a
virtuous life.18
Agential Conditions forVirtuous Trading: The
Adaptive Virtuous Trader
To reiterate, our central question is, “Under which condi-
tions, if any, can a financialtrader effectively enact his role
as a trader without abandoning his commitment to live a
worthy life?” In this section, we consider the agential con-
ditions presupposed by virtuous trading activity, in other
words the preparedness of the trader to enact his profes-
sional responsibilities with integrity, even in a scenario, all
too familiar to most of us, in which external incentives and
pressures toward virtue are mixed with incentives and pres-
sures toward vice. In this ethically ambivalent environment,
only particular types of character have a fighting chance of
resisting the temptations of diluting the quest for virtue to
either maximize the tokens of professional “success,” con-
ceived quite narrowly, e.g., monetary gain or the esteem of
peers, or avoid the potential losses and penalties, whether
material or reputational, triggered by virtuous behavior in
financial trading. A trader capable of persevering in virtue
in the face of these sorts of temptations, and framing his
professional activity against the backdrop of the long-range,
big picture goals of trading, would exhibit the following four
characteristics:
(a) He is excellent as a trader: a necessary, albeit insuffi-
cient condition for being a virtuous trader is possessing
practical, executable knowledge about financial trading,
being familiar with its purposes and knowing how to
apply its techniques successfully.
(b) He is a person of integrity, that is, a person who exhib-
its “a wholehearted, responsible, and stable commit-
ment to integrate his desires, activities and projects into
a meaningful and worthy life” (Thunder 2014, p. 18)
and, concomitantly, a steadfast commitment to avoid
accepting “double standards” or rationalizing unethi-
cal behavior for “special” circumstances or social con-
texts.19
(c) He is disposed and able to engage in responsible adap-
tation: he adapts to the rules of the game in a critical
and selective spirit, harnessing them to his or her own
legitimate purposes and to the larger projects his activi-
18 This discussion complements the work done by Moore and Bea-
dle (2006) in the parallel field of business ethics. The principal dif-
ference is that while we view the problem of ethical integrity primar-
ily from the perspective of the moral agent, their study gives salience
to the perspective of the business organization. Building on MacIn-
tyre’s account of a social practice, they explore the way a business
organization could be virtuous, which for them means exploring
under which conditions a business organization might be favorable to
the sustenance and development of a practice in the way MacIntyre
understands it. They identify three preconditions for an organization
to be virtuous: the presence of virtuous agents, a mode of institution-
alization that is “conducive” to sustaining and developing the practice
that the institution houses, and a conducive environment. While they
aim at describing the conditions for an organization to be virtuous,
and their approach bears important structural similarities to ours, our
inquiry is driven by the perspective of the agent—whether a good
person can be a successful financial trader, and treats institutional
and environmental conditions under a single category, namely that of
environmental conditions.
19 This positive definition is entirely consistent with MacIntyre’s
more negative definition: “To have integrity,” on MacIntyre’s view,
“is to refuse to be, to have educated oneself so that one is no longer
able to be, one kind of person in one social context, while quite
another in other contexts. It is to have set inflexible limits to one’s
adaptability to the roles that one may be called upon to play” (Mac-
Intyre 2006: 192). While Thunder’s definition addresses the positive
effort of an agent striving to live a worthy life, MacIntyre focuses his
attention on the effort needed in order to avoid becoming a compart-
mentalized person.
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M.Rocchi, D.Thunder
1 3
ties are nested within, without capitulating to vice or
seeking monetary gain as an end in itself. Responsible
adaptation, insofar as it prioritizes the requirements of
virtue and the common goods of implicated communi-
ties, might very well result in lower profits, a reduced
range of investment choice, and a narrower portfolio,
when compared with ruthless or uncritical adaptation.
However, this would be a price worth paying for the
preservation of integrity and justice in all one’s deal-
ings. Responsible adaptation to the trading environment
is equally opposed to uncritical conformism, which sur-
renders blindly to the dictates of “the system,” and rigid
perfectionism, which cannot tolerate the inevitable fail-
ure of persons and institutions to be free from technical
and moral limitations.
(d) He is disposed, insofar as it lies within his power, to
improve the ethical tone of the institutional and social
environment within which he works, by promoting
more effective regulations, building associations of
responsible traders, supporting ethically sound mentor-
ing programs, or employing whatever other strategies
he deems appropriate.20 Since this is an imperfect duty
or an open-ended responsibility, it relies upon a gen-
eral commitment to promote sound financial practices,
which requires prudential judgments about how best to
do so, rather than upon adherence to preexisting, clear-
cut obligations and prohibitions.21
To sum up, these four features, (a) technical competence,
(b) personal integrity, (c) capacity for responsible adapta-
tion, and (d) willingness to promote appropriate institutional
and cultural reforms of one’s work environment, are the dis-
tinguishing marks of the “adaptive virtuous trader.
Environmental Conditions forVirtuous Trading:
ATolerable Work Environment
Let us now turn to the environmental conditions presup-
posed by virtuous trading activity. Even the agent who
achieves heroic levels of virtue may, if deprived of certain
environmental supports, find it impossible to continue exert-
ing her role as a trader without capitulating to vice and cor-
ruption. Thus, certain baseline environmental—by which we
mean both social and institutional—conditions must hold
if an agent is to exercise her role as a trader in an ethically
responsible manner. It is important to make a point here
that is sometimes given short shrift in MacIntyre’s analysis,
namely that the level of friendliness of financial institutions
to virtue may vary considerably across a financial system.
For example, trading for a company that is collectively com-
mitted to policies of sustainable development and commu-
nity-friendly investment would not be the same as trading
for a company that is only interested in the “bottom line.”
In order to respect the fact of environmental variation,
instead of discussing the entire financial sector as a homo-
geneous environment, we consider instead the quality of
the unique work environment confronted by each financial
trader. A work environment may be entirely irreconcilable
with virtue if virtue is aggressive rooted out by superiors or
penalized so harshly that nobody could realistically hope to
exercise it in their work life. A work environment is rarely
optimally attuned to the exercise of virtue, but it may be
considered tolerable if workers can find opportunities within
it to advance worthwhile projects and exercise the virtues,
and if they are not positively coerced into acting viciously
or cooperating with gravely unjust ends. We deliberately set
the threshold of the “tolerable” quite low in order to show
that even if we accept MacIntyre’s rather negative assess-
ment of the broad tendencies at work in the financial sector,
it need not follow that traders (or other financial operators,
for that matter) are generally condemned to a life of vice
or that financial trading is generally irreconcilable with the
exercise of virtue.
There is no need to dwell on the possibility of an abso-
lutely virtue-friendly work environment, since we concede
MacIntyre’s premise that many financial work environments
are, in important respects, unfriendly to virtue. Nor need we
dwell for long on a work scenario that is radically hostile
to virtue, imprisoning, ejecting, or bankrupting those who
display virtuous behavior, since this clearly rules out the
pursuit of virtue in financial trading. We would like to dwell
instead on the rather more mundane scenario of the tolerable
work environment that raises serious challenges for virtuous
agents but does not automatically obligate them to live a life
of vice. Our own observations and discussions with financial
operators suggest that this sort of environment could plau-
sibly reflect many trading scenarios. While this claim could
obviously be strengthened by further empirical corrobora-
tion, it relies on a more nuanced picture of the financial
world than MacIntyre’s and is consistent with a wider range
of plausible trading scenarios than MacIntyre’s approach.
In the “tolerable” work environment as we conceive it:
(a) “Soft” incentives (social approval, prestige, income
level), even if aligned with vice, can be resisted with-
out losing the minimum amount of income necessary
to support oneself and one’s dependents, or rendering
one’s work environment intolerable (e.g., through con-
20 See Herzog (2017) for a helpful discussion of some of these strate-
gies, though oriented to the banking sector rather than to trading spe-
cifically.
21 This is something like what Iris Young (2011) would call a “for-
ward-looking” responsibility to remedy systemic harms irrespective
of their precise causes, as distinct, for example, from a responsibility
to remedy a past wrong for which one is personally culpable.
Content courtesy of Springer Nature, terms of use apply. Rights reserved.
Can aGood Person be aGood Trader? AnEthical Defense ofFinancial Trading
1 3
stant harassment, regular public humiliation, and other
forms of abuse).
(b) Morally problematic professional requirements can
be resisted, negotiated, or interpreted “creatively” to
achieve greater congruence with the common good,
without automatically triggering expulsion or job loss.
(c) Complicity in serious systemic injustices is accidental
to the primary purpose and benefits of one’s trading
activities and does not rise to the level of formal coop-
eration22 or consent.
(d) Superiors, managers, and other authority figures are
disposed at a minimum to tolerate virtuous trading
behavior and attitudes, even if this behavior is not typi-
cal of other traders or partners in the firm, and even if
it is frowned upon by superiors.
We contend, pace MacIntyre, that it is realistic to envis-
age an adaptive virtuous trader maintaining his or her ethi-
cal integrity in a tolerable work environment, because the
adaptive virtuous trader knows how to interpret and apply
the rules of the system to advance his goals, yet also has the
virtues necessary in order to orient his financial activities
toward genuine human goods, and where necessary, to resist
soft pressures toward vice and corruption. We acknowledge
that not all work environments are “tolerable,” since there
are undoubtedly work environments in which virtuous trad-
ers are actively persecuted, harassed, intimidated, or fired.
But it seems implausible to suggest that financial environ-
ments generally or in virtually all cases embody this extreme
level of hostility to virtue.
Conclusions
Taking as our starting point the cases of Bruno Iksil and
Kwedu Adoboli, we have presented a sympathetic sum-
mary of MacIntyre’s argument that the moral character of
the virtuous agent and the skills required to be an effective
trader in the current financial system are mutually exclusive,
and we have undertaken a closer assessment of MacIntyre’s
claims. In spite of the manifest vicious tendencies at play
in many parts of the financial sector, MacIntyre assumes
without sufficient argument that financial environments are
generally and consistently evil or corrupt. The conditions of
financialtrading are likely to be more complex and varied
than this approach suggests. We suggest that many work
environments in the financial sector, in spite of their moral
deficiencies, are likely to be “tolerable,” or minimally per-
missive of virtue, although we admit that this intuitively
plausible claim could be strengthened by further empirical
corroboration. Nonetheless, it seems to us, on its face, more
plausible than MacIntyre’s sweeping, and no more empiri-
cally substantiated claim that financial activity is, as a gen-
eral rule, inconsistent with the exercise of virtue. Finally,
we have suggested that a tolerable work environment will
only produce virtuous trading to the extent that it is occupied
by adaptive virtuous agents, viz. traders who know how to
exercise their roles competently, adapting as necessary to
systemic requirements, but always in a critical and responsi-
ble manner, moved by virtues such as justice, generosity, and
prudence, prepared to promote appropriate ethical reforms
of their working environment, and sensitive to the personal
and common goods that are at stake in their decisions.
Acknowledgements We wishto thank the editor and two reviewers
for their diligent comments and feedback, which helped us refine and
clarify important aspects of the argument. Likewise, we thank the
participants in the conferences where we have presentedthepaper at
different stages of its evolution : IV Colloquium on Christian Human-
ism in Economics and Business (Berlin, 25th October 2016), Society
for Business Ethics Annual Conference (Atlanta, 5th August 2017),
and the workshop on “New Ideas in Economic Justice” at the Man-
chester Centre for Political Theory annual meeting at University of
Manchester (13th September 2017). Weare also indebted to several
financial practitioners for helpful and informative discussions of both
ethical and technical aspects of our argument. Marta Rocchi gratefully
acknowledges the financial support of the MCE Research Centre at the
Pontifical University of the Holy Cross, the School of Economics and
Business of the University of Navarra, and the Calihan Travel Grant
provided by the Acton Institute.Finally,David Thunder is grateful for
the support of a Ramón y Cajal research fellowship awarded by the
Spanish Government (Grant Number RYC-2015-18808).
Funding This study was partially funded by a Ramón y Cajal Research
Fellowship, awardedby the Spanish Government (RYC-2015-18808).
Compliance with Ethical Standards
Conflicts of interests Authors declare that they have no conflicts of
interests.
Ethical Approval This article does not contain any studies involving
human participants or animals performed by either of the authors.
Open Access This article is licensed under a Creative Commons Attri-
bution 4.0 International License, which permits use, sharing, adapta-
tion, distribution and reproduction in any medium or format, as long
as you give appropriate credit to the original author(s) and the source,
provide a link to the Creative Commons licence, and indicate if changes
were made. The images or other third party material in this article are
included in the article’s Creative Commons licence, unless indicated
otherwise in a credit line to the material. If material is not included in
the article’s Creative Commons licence and your intended use is not
permitted by statutory regulation or exceeds the permitted use, you will
need to obtain permission directly from the copyright holder. To view a
copy of this licence, visit http://creat iveco mmons .org/licen ses/by/4.0/.
22 The term “cooperation” (with evil or injustice) indicates “an
action that facilitates the execution of an evil design that another per-
son has” (Colom and Rodríguez Luño 2014, p. 361). If it is “willed
directly or through free initiative, and as such implies an approval of
the other’s action” (p. 362), it is defined as “formal cooperation.”
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M.Rocchi, D.Thunder
1 3
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... Rogue trading-considered as an unethical behavior violating ethical norms and potentially harming the interests of external stakeholders and the broader society (Effelsberg et al. 2014;Umphress et al. 2010)-has attracted much attention from the media, regulators, financial markets, academics, managers, and a wider audience unfamiliar with the world of trading. Scandals at Barings (Nick Leeson in 1995), Sumitomo Bank (Yasuo Hamanaka in 1996), UBS (Kweku Adoboli in 2011), and JP Morgan (Bruno Iskil in 2012) have also prompted discussion around the unethical behavior of traders in investment banking (Wexler 2010;Rocchi and Thunder 2019). ...
... Scholars have criticized MacIntyre's arguments about the irrelevance of ethics in trading and the financial sector (Rocchi and Thunder 2019;Rocchi et al. 2020). In particular, Rocchi and Thunder (2019) explore whether a "good" person can be a "good" trader while taking into account the dynamic relationship of a trader with her/his work environment. ...
... Scholars have criticized MacIntyre's arguments about the irrelevance of ethics in trading and the financial sector (Rocchi and Thunder 2019;Rocchi et al. 2020). In particular, Rocchi and Thunder (2019) explore whether a "good" person can be a "good" trader while taking into account the dynamic relationship of a trader with her/his work environment. Situating financial trading within the financial sector's architecture, they specify the institutional and social conditions under which trading could be reconciled with the pursuit of virtue. ...
Article
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Enduring unethical behavior in trading has generated much research interest, and scholars disagree on the reasons for this situation. According to MacIntyre (2015), this has to do with the personal traits of traders, whereas Rocchi and Thunder (2019) argue this is due to permissive work environment that can potentially be changed to favoring ethical trading. We contribute to this debate by exploring how interactions between organizational culture and management control systems (MCSs) may affect the enduring unethical behaviors of traders. We conceptualize this with the concepts of organized hypocrisy (Brunsson 1986, 1989, 1993) and decoupling (Meyer and Rowan 1977). An in-depth case study of fraud (Jerome Kerviel at Societe Generale), informs the empirical inquiry. We develop the concept of organized decoupling to characterize how the MCSs are articulated with the organizational culture favoring unethical behavior, while being used as a ‘safety mechanism’ to manage the legal and reputational risk of the bank. The analysis highlights three key features of the organized decoupling of MCS: physical distance, technical distance and social distance. The study contribution lies in showing that decoupling is not only emergent but might be intended and therefore organized. The findings also raise doubts on the role of MCSs in monitoring trading activities as presented by investment banking institutions and regulators, suggesting more organized hypocrisy, and raising significant concerns regarding the creation of tolerable work environment welcoming ethical behaviors in the investment banking sector.
... A virtue ethics lens focuses on overarching purposes (or telos), including the pursuit of common and individual good in some form and, ultimately, human flourishing (MacIntyre, 1999b). There has been a growing interest in using virtue ethics as a framework for refashioning business in general and finance in particular (Graafland and van de Ven, 2011;Grant et al., 2018;Moore, 2012Moore, , 2015Rocchi & Thunder, 2017;Rocchi et al., 2021;Sison et al., 2019). ...
... MacIntyre, however, is pessimistic about developing alternatives to dominant logics in the finance system, concluding that an "effective education into the virtues would in fact disqualify one for a successful career in the financial sector" (2015, p. 16). Nonetheless, along with a range of contemporary scholars (Moore, 2017;Rocchi & Thunder, 2017;Rocchi et al., 2021;Sison et al., 2019;Wyma, 2015), Content courtesy of Springer Nature, terms of use apply. Rights reserved. ...
... First, we do not contrast good and bad as opposite ends of an organization's objectives. Rather, we suggest that damaging outcomes are more often a failure to develop the whole body of virtue (see also De Bruin, 2013;Rocchi & Thunder, 2017). Financial institutions (and finance institution professionals) with largely vicious ends do exist, of which Stratton Oakmont is an archetype (Dervan, 2015). ...
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This article considers financial risk management practice using a virtue ethics lens, in response to ongoing critiques of risk management from within business ethics. Risk management should be seen as embedded within a complex system of cultures, organizations and regulations that are underpinned by a quantitatively reductive or ‘mechanistic’ economic paradigm, where dominant logics of self-interest, profit maximization and short-termism prevail. Building on recent work applying virtue ethics in finance, an alternative to the values, normative expectations and priorities in financial risk management is presented in the form of a refined ‘taxonomy’ of the virtues that can be applied to individuals and organizations engaged in financial risk management. This article aims to contribute to and extend debate on the ethical aspects of risk management and presents an alternative to more technically based critiques which do not engage with the underlying socially constructed foundations of risk management practice. It thereby provides a basis to critique the mechanistic and narrow approach used in the current regulation of the sector.
... Por fim, sugerem que há uma oportunidade clara de relacionar as virtudes organizacionais ao desempenho financeiro, bem como o fato de que -os estudiosos também podem dedicar atenção à virtude e ao caráter do nível organizacional como uma -variável dependente‖ e procurar estruturas e processos organizacionais que melhorem a virtuosidade organizacional‖ (WRIGHT; GOODSTEIN, 2007, p. 948).É perceptível que as pesquisas diretamente ligadas as finanças não são abundantes como pode ser visto durante a análise dos artigos selecionados nesta revisão. Os artigos de forma geral concentram-se em analisar o caráter moral no ambiente de trabalho de forma mais abrangente, fazendo parte do escopo da ética empresarial.Entretanto, foi possível observar as diversas sugestões de autores(CHUN, 2005(CHUN, , 2016WRIGHT;GOODSTEIN, 2007;MOORE, 2015;ROCCHI;THUNDER, 2017) ao aprofundamento de aspectos do caráter individual e organizacional ao desempenho financeiro. Revista Gestão e Planejamento, Salvador, v. 21, p. 698-714, jan./dez. ...
... Por fim, sugerem que há uma oportunidade clara de relacionar as virtudes organizacionais ao desempenho financeiro, bem como o fato de que -os estudiosos também podem dedicar atenção à virtude e ao caráter do nível organizacional como uma -variável dependente‖ e procurar estruturas e processos organizacionais que melhorem a virtuosidade organizacional‖ (WRIGHT; GOODSTEIN, 2007, p. 948).É perceptível que as pesquisas diretamente ligadas as finanças não são abundantes como pode ser visto durante a análise dos artigos selecionados nesta revisão. Os artigos de forma geral concentram-se em analisar o caráter moral no ambiente de trabalho de forma mais abrangente, fazendo parte do escopo da ética empresarial.Entretanto, foi possível observar as diversas sugestões de autores(CHUN, 2005(CHUN, , 2016WRIGHT;GOODSTEIN, 2007;MOORE, 2015;ROCCHI;THUNDER, 2017) ao aprofundamento de aspectos do caráter individual e organizacional ao desempenho financeiro. Revista Gestão e Planejamento, Salvador, v. 21, p. 698-714, jan./dez. ...
Article
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RESUMO Este artigo tem por objetivo conhecer os principais artigos e definir os conceitos mais utilizados pelos autores acerca do tema ética das virtudes, finanças e caráter dentro do escopo da ética empresarial. Para tal, utilizou-se a revisão sistemática de forma a definir o estado da arte e cooperar com a expansão do tema. A busca por trabalhos nas bases de dados utilizadas encontrou EBSCO com 973 referências, Proquest com 1.347 referências, Scopus com 584 referências e Web of Science com 1.368 referências, apresentando um total de 4.272. Desse total, treze artigos que estavam dentro do escopo da Ética empresarial foram analisados completamente. Após a análise dos trabalhos foi possível identificar os principais conceitos utilizados pelos autores no tocante à ética das virtudes, finanças e caráter, quais sejam: visão disposicionista e situacionista da virtude; visão redutiva e não-redutiva da virtude; caráter organizacional e caráter individual e forças de caráter. Os assuntos mais tratados foram sobre caráter individual e organizacional. Apesar de incluirmos na pesquisa da base de dados o termo finanças, não foi destaque nos artigos analisados. Como pesquisas futuras, testes hipotético-dedutivos e experimentos com o auxílio da psicologia positiva e mais precisamente da pesquisa organizacional positiva (POS) podem trazer mais precisão sobre o tema de finanças e sua relação com a ética das virtudes e forças de caráter. Palavras-chave: Ética das virtudes; Forças de caráter; Finanças; Ética empresarial, caráter. // ABSTRACT This article aims to get to know the main articles and define the most used concepts by the authors about the ethics of virtues, finances and character within the scope of business ethics. For this, systematic review was used in order to define the state of the art and cooperate with the expansion of the theme. The search for works in the databases used found EBSCO with 973 references, Proquest with 1,347 references, Scopus with 584 references and Web of Science with 1,368 references, presenting a total of 4,272. Of this total, thirteen articles that were within the scope of business ethics were thoroughly analyzed. After the analysis of the works, it was possible to identify the main concepts used by the authors regarding the ethics of virtues, finances and character, namely: dispositionist and situationist view of virtue; reductive and non-reductive vision of virtue; organizational character and individual character and character strengths. The most discussed subjects were about individual and organizational character. Although the term finance was included in the database search, it was not highlighted in the articles analyzed. As future research, hypothetical-deductive tests and experiments with the aid of positive psychology and, more precisely, positive organizational research (POS) could bring more precision on the subject of finance and its relationship with the ethics of virtues and strengths of character.
... Not many people believe that finance can be conducted along with business ethics. The article by Rocchi and Thunder ( 2019), contends that obtaining the ethical excellencies would under-mine somebody's ability to be a decent broker in the financial framework and, alternately, that an appropriate preparation in the temperances of good exchanging legitimately militates against the procurement of the ethical ideals. ...
... Moral values can help people in making ethical business decisions. Rocchi and Thunder, (2019) argue that a good person can be a good trader if they have a middle of the road workplace where along with practicing their job capability with ethical principals and values they can make moral or ethical choices in their workplace. On the other hand, Sison, Ferreroand Guitian,(2019) propose that many workplaces in the financial segment, notwithstanding their ethical deficiencies, are probably going to be "middle of the road,". ...
Article
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Business Ethics and Finance are assumed to be two variables that lead together in creating a better business environment. However many people argue that finance and business ethics do not work together. The aim of this research is to highlight the importance of business ethics in finance. This research is designed to show how business ethics and finance are linked together and once they are used together they can lead to positive business outcomes. This research is conducting by collecting previous scholarly articles on business ethics and finance that have high Scopus Impact Factor and a mini-review is done on the research objective, findings and results of those articles. This research includes results and discussion along with the two detailed tables. The first table is designed to show the article’s name, author, title, year published, and publisher along with the impact factor. The second table describes the articles' objective, findings and recommendations. Overall the all the articles chosen for the analysis conclude that business ethics is an integral part of finance. Not much research is conducted on business ethics and finance however the goal of this mini-review is to open doors for more research on the topic of business ethics and finance.
... In this way, they aim to offer an affirmative and reconstructive account of good work in capitalist society, and this contrasts with the 'left MacIntyrean' position, which aims to offer a broadly critical account of such work. This 'right MacIntyrean' orientation is also present in a growing literature on finance that draws on MacIntyre (see Rocchi and Thunder 2019;Roncella and Ferrero 2020;Sison et al. 2019;Rocchi et al. 2020; as well as the somewhat less optimistic Robson 2015), and contrasts with a 'left MacIntyrean' orientation, which I intend to develop in this paper. The 'left MacIntyrean' position would emphasise MacIntyre's critique of capitalism and his largely sympathetic treatment of Marxism, and sees in his concept of a practice grounds for a critique of contemporary work, one that motivates a radical opposition to capitalist society, rather than grounds for an articulation and affirmation of its good features. ...
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This paper draws a distinction between ‘right MacIntyreans’ who are relatively optimistic that MacIntyre’s vision of ethics can be realised in capitalist society, and ‘left MacIntyreans’ who are sceptical about this possibility, and aims to show that the ‘left MacIntyrean’ position is a promising perspective available to business ethicists. It does so by arguing for a distinction between ‘community-focused’ practices and ‘excellence-focused’ practices. The latter concept fulfils the promise of practices to provide us with an understanding of the best work for humankind and highlights the affinities between MacIntyre’s concept of a practice and Marx’s conception of good work as free, creative activity. The paper concludes with a suggestion that we reflect on the best forms of work so that we can strive to ensure the very best activities, those most consonant with our flourishing, one day become available to all.
... The choice of embodying one of these roles as a practitioner-instead of a mere executor for the sake of receiving a salary, and eventually gaining power and reputation -is always a possibility for the acting person in a conducive institutional framework (Moore 2012) or even simply within a tolerable work environment (Rocchi and Thunder 2019). In other words, people always have the agency to resist corruption: this holds not only for finance but also for every profession, which has at least the potentiality to be a practice or a domain-relative practice. ...
Article
Finance may suffer from institutional deformations that subordinate its distinctive goods to the pursuit of external goods, but this should encourage attempts to reform the institutionalization of finance rather than to reject its potential for virtuous business activity. This article argues that finance should be regarded as a domain-relative practice (Beabout 2012; MacIntyre 2007). Alongside management, its moral status thereby varies with the purposes it serves. Hence, when practitioners working in finance facilitate projects that create common goods, it allows them to develop virtues. This argument applies MacIntyre’s widely acknowledged account of the relationship between practices and the development of virtues while questioning some of his claims about finance. It also takes issue with extant accounts of particular financial functions that have failed to identify the distinctive goods of financial practice.
Conference Paper
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This paper studies the erosion of ethics in credit derivative leading to devastating losses to a financial intermediary, JP Morgan, in a scandal that had one of its protagonists earning the moniker the "London Whale." In the process, the paper suggests that the higher management will have to foresee how the limitations are imposed on the market values of the synthetic credit portfolio to avoid further breaches to be caused in other bank metrics. The accounting sectors will have to consider sub-methods like an integrated financial information system for purposes of accuracy to prevent the London whale from economic depressions.
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Sovereignty, for Derrida (2005, 2009), is defined by an exception-to-the rule attitude: the sovereign is the one who decides on an exception. A sovereign can thus “go rogue” and behave as an outlaw, transgressing the rules of his own community. This article applies this conception of sovereignty to analysis of the Kerviel-Société Générale (SocGen) rogue trading affair. It examines the exception-to-the-rule attitude found in the actors of the financial sphere (the trader, the bank, the State) and the underlying control dynamics. Our results show that the trader acts as a rogue when he takes the exceptional right to place himself above his bank’s rules on position-taking. The bank is equally rogue when it reserves the exceptional right to place itself above the prudential regulations governing its sector. The State goes rogue too, granting the banking supervisory body the exceptional right to administer criminal justice. Following Boltanski (2011), our analysis explains these exception-to-the-rule behaviors by the contradictory logics that drive them. Two logics are identified in the financial sphere: the market logic, and the prudence logic. We highlight that fraud, and more generally the exception-to-the-rule attitude, result from the ambivalence generated by the coexistence of these contradictory logics of action, which are notably conveyed through control mechanisms. The study concludes that the State has a major role to play in this respect. More specifically, we raise the point that the neoliberal style of the penal State contributes to the occurrence of fraud.
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This paper synthesizes the details of the whole accounting misdeed using Repo-105 as an instrument in the Lehman Brothers’ case. Roles and responsibilities of internal staffs and vendors have been discussed to access on a high level responsibility and the ownership assessment of this financial fiasco. The paper discusses in detail the notion of Business ethics in the context of financial intermediary using the concept of “Deontological Ethics” as a premise with a relevance to capital market and cost of reputation. The paper suggests improving the management culture and the independence of external bodies in these firms.
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CST is widely disregarded in the academic and public discourse. This essay argues that this is the case for two related reasons. Firstly, CST is based on the pre-Enlightenment approach to moral philosophy, virtue ethics, while the mainstream in business ethics favours the rule-based approaches consequentialism and deontology and their variants. Secondly, mainstream approaches also have adopted a positivist epistemology where theories represent the Truth that must not be questioned: they have become ideologies. This paper argues that CST, mainly through the virtue ethical doctrine of the mean, is saved from having become an ideology and is much closer to the ideal of science as a self-questioning system than the mainstream in business ethics. This essay explains this counter-intuitive conclusion by tracing the history of CST and embedding it in an epistemic discussion and then suggesting what business ethics could take from CST to regain the all-important discursiveness it once had.
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The paper develops a responsibility-based account of professional ethics in banking. From this perspective, bankers have duties not only toward clients—the traditional focus of professional ethics—but also regarding the prevention of systemic harms to whole societies. When trying to fulfill these duties, bankers have to meet three challenges: epistemic challenges, motivational challenges, and a coordination challenge. These challenges can best be met by a combination of regulation and ethics that aligns responsibilities, recognition, and incentives and creates what Parsons has called “integrated situations”. Professional associations play an important role for this purpose, especially as spaces in which peer recognition is earned. But financial incentives equally need to be brought in line, for example, through deferred bonuses or claw backs. Such measures can create a new culture of accountability in banking.
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Alasdair MacIntyre’s After Virtue presented a reinterpretation of Aristotelian virtue ethics that is contrasted with the emotivism of modern moral discourse, and provides a moral scheme that can enable a rediscovery and reimagination of a more coherent morality. Since After Virtue’s (AV’s) publication, this scheme has been applied to a variety of activities and occupations, and has been influential in the development of research in accounting ethics. Through a ‘close’ reading of Chaps. 14 and 15 of AV, this paper considers and applies the key concepts of practices, institutions, internal and external goods, the narrative unity of a human life and tradition, and the virtues associated with these concepts. It contributes, firstly, by providing a more accurate and comprehensive application of MacIntyre’s scheme to accounting than that available in the existing literature. Secondly, it identifies areas in which MacIntyre’s scheme supports the existing approach to professional accounting ethics as articulated by the various International Federation of Accountants pronouncements as well as areas in which it provides a critique and challenge to this approach. The application ultimately provides an alternative philosophical perspective through which accounting can be examined and further research into accounting ethics pursued.
Book
Alasdair MacIntyre explores some central philosophical, political and moral claims of modernity and argues that a proper understanding of human goods requires a rejection of these claims. In a wide-ranging discussion, he considers how normative and evaluative judgments are to be understood, how desire and practical reasoning are to be characterized, what it is to have adequate self-knowledge, and what part narrative plays in our understanding of human lives. He asks, further, what it would be to understand the modern condition from a neo-Aristotelian or Thomistic perspective, and argues that Thomistic Aristotelianism, informed by Marx’s insights, provides us with resources for constructing a contemporary politics and ethics which both enable and require us to act against modernity from within modernity. This rich and important book builds on and advances MacIntyre’s thinking in ethics and moral philosophy, and will be of great interest to readers in both fields.
Chapter
Business ethics scholars have made much use of Alasdair MacIntyre’s distinctive account of the virtues. This chapter discusses MacIntyre’s influence and considers four distinctive types of enquiry inspired by his seminal 1981 text After Virtue. These comprise:(i) The moral status of the manager (ii) The application of MacIntyre’s notion of practice in business (iii) The relationship between practices and institutions (iv) Empirical enquiry using MacIntyre’s “goods-virtues-practices-institutions” framework The remaining chapters in this section exemplify these enquiries.
Chapter
Business ethics scholars have made much use of Alasdair MacIntyre’s distinctive account of the virtues. This chapter discusses MacIntyre’s influence and considers four distinctive types of enquiry inspired by his seminal 1981 text After Virtue. These comprise:(i) The moral status of the manager (ii) The application of MacIntyre’s notion of practice in business (iii) The relationship between practices and institutions (iv) Empirical enquiry using MacIntyre’s “goods-virtues-practices-institutions” framework The remaining chapters in this section exemplify these enquiries.
Chapter
In this article we shall lay down the parameters within which the practice of the virtues may be enabled in the field of finance, drawing from two main sources, Aristotle and MacIntyre. We shall respond to the question of what ought to be done for financial activities to truly contribute to eudaimonia or human flourishing (Aristotle), and how three distinct kinds of goods, those internal to practices, those of an individual life and those of the community (MacIntyre) can be achieved.
Article
The present contribution explores the role of (the lack of) professionalism and professional ethics in the global credit crisis. It will be argued that the credit crisis is partly due to a lack of professionalism in the financial sector. The unrestrained pursuit of profit that has pervaded banks, rating agencies, and investors has led to a compartmentalized sense of moral responsibility and an erosion of central virtues such as truthfulness, integrity, justice, and courage in their way of doing business. To explain the meaning of professionalism we will use Alasdair MacIntyre's virtue ethical framework, which focuses on the tension between the internal goals of a practice and the external goals of the institution that supports the practice. The relation between a practice and professionalism will be further explored by a discussion of Kasher's theory of what constitutes a profession. Before applying this framework to professionals in banking, the paper first embarks on a hermeneutical exercise, to see whether it makes sense to interpret banking as a practice in the sense that MacIntyre understands it.
Article
Once a sleepy old boys' club, the U.S. financial sector is now a dynamic and growing business that attracts the best and the brightest. It is tempting to declare the industry a roaring success. But its purpose is to serve the needs of U.S. households and firms, and by this standard its performance has been mixed. The sector's growth has been beneficial for U.S. corporations, which enjoy ready access to the deepest capital markets in the world. Venture capital, for example, and the public equity markets that support it, has channeled money to innovative ideas that have transformed industries and generated new ones. The rest of the economy, however, has not been well served by the financial sector's boom. First, the shift from deposit-based banking to a market-based "shadow banking" system, without adequate regulatory adjustments, has left the financial system vulnerable to crisis. Second, trillions of dollars have been steered into residential real estate and away from more-productive investments. Third, the cost of professional investment management is too high, which drains talent from other industries. The financial sector could promote the health and competitiveness of the U.S. economy by increasing capital and liquidity requirements, reorienting the discussion around housing finance reform from keeping mortgage credit cheap to ensuring financial stability, and instituting measures that compel asset managers to compete on the true value of the services they provide.
Book
What does citizenship have to do with living a worthy human life? Political scientists and philosophers who study the practice of citizenship, including Rawlsian liberals and Niebuhrian realists, have tended to either relegate this question to the private realm or insist that ethical principles must be silenced or seriously compromised in our deliberations as citizens. This book argues that the insulation of public life from the ethical standpoint puts in jeopardy not only our integrity as persons but also the legitimacy and long-term survival of our political communities. In response to this predicament, David Thunder aims to rehabilitate the ethical standpoint in political philosophy, by defending the legitimacy and importance of giving full play to our deepest ethical commitments in our civic roles and developing a set of guidelines for citizens who wish to enact their civic roles with integrity. In this way, this book provokes a lively conversation about the ethical foundations of public life in constitutional democracies.