Ethics in Finance

The third edition of Ethics in Finance presents an authoritative and wide-ranging examination of the major ethical issues in finance.

This new edition has been expanded and thoroughly updated with extensive coverage of the recent financial crisis and the very latest developments within the financial world.

• Substantially updated new edition with nearly 40% new material, including sections on credit cards, mortgage lending, microfinance, risk management, derivatives, and securitization
• Includes coverage and references to the recent financial crisis and the very latest developments within the financial world
• Focuses on the practical issues that confront finance professionals, policy makers, and consumers of financial services
• Cites examples of the scandals that have shaken public confidence in Wall Street and world financial markets
• Includes numerous examples throughout to illustrate the concepts and issues described within the text

Preface vii

Acknowledgments ix

Abbreviations x

1 Finance Ethics: An Overview 1

The Need for Ethics in Finance 2

The Field of Finance Ethics 13

2 Fundamentals of Finance Ethics 26

A Framework for Ethics 27

Agents, Fiduciaries, and Professionals 40

Conflict of Interest 45

3 Ethics and the Retail Customer 63

Sales Practices 64

Credit Cards 78

Mortgage Lending 96

Arbitration 108

4 Ethics in Investment 120

Mutual Funds 121

Relationship Investing 141

Socially Responsible Investing 148

Microfinance 155

5 Ethics in Financial Markets 171

Fairness in Markets 172

Insider Trading 182

Hostile Takeovers 189

Financial Engineering 201

6 Ethics in Financial Management 223

The Corporate Objective 224

Risk Management 234

Ethics of Bankruptcy 243

Corporate Governance 254

Index 273

John R. Boatright is the Raymond C. Baumhart, S.J., Professor of Business Ethics in the Quinlan School of Business at Loyola Universi­ty Chicago, and Director of the Baumhart Center for Social Enterprise and Responsibility. He is the author of the book Ethics and the Conduct of Business (2012) and the editor of Finance Ethics: Critical Issues in Theory and Practice (Wiley, 2010). He is a past President of the Society for Business Ethics, and he serves on the editorial boards of Business Ethics Quarterly, Journal of Business Ethics, and Business and Society Review. He received his PhD in philosophy from the University of Chicago.

The third edition of Ethics in Finance presents an authoritative and comprehensive examination of the major ethical issues in finance, ranging across the major areas of financial markets, financial services, financial management, and finance theory.

The new edition has been expanded and brought up-to-date, along with coverage of the recent financial crisis. The text also includes new sections on credit cards, mortgage lending, microfinance, risk management, derivatives, and securitization, and it also covers the very latest developments within the financial world. With extensive use of examples to illustrate concepts and issues described in the text, Boatright explains the importance of ethics in finance and provides a probing analysis of the major ethical controversies, from the ethical treatment of the retail customer in the offering of financial products to the activities that take place on Wall Street and world financial markets. Ethics in Finance is vital reading for students and scholars of finance and business ethics, as well as anyone involved in financial activities.

“The world of finance is changing so quickly that we need strong moral guidance. In its third edition, John Boatright’s Ethics in Finance still serves as a safe guide. This book should be on the desk of scholars, experts, managers, and analysts from all financial institutions and markets."

—Antonio Argandoña, IESE Business School

“Frederick the Great, author of the first Prussian banking law, famously said that finance is a special business practiced by special people. He was right. This excellent volume shows why. And how far we must go to return to first principles."

—Ingo Walter, Stern School of Business, New York University