Editor's Note: This is a summary of an HBS Business Summit presentation. View a full summary and video of the event on the HBS Centennial Web site linked below.
|Date of Event:||October 13, 2008|
|Moderator:||Rafael M. DiTella, HBS faculty|
|Speakers:||Robert Glauber, Adjunct Lecturer in Public Policy, Mossavar-Rahmani Center for Business and Government|
Michael Oxley, Of Counsel, Baker Hostetler
Daniel Vasella, Chairman & CEO, Novartis
Drawing upon learnings from their work and experiences, the panelists and moderator exchanged views with the audience on the ethics and legitimacy of business and capitalism in general, and the financial crisis in particular.
The current financial crisis has raised questions about the legitimacy of capitalism. Ethical failures certainly played a role. While it remains to be seen whether and how many people blatantly broke the law, there are abundant signs of various forms of potentially unethical behavior. These include greed, unreasonable amounts of leverage, subtle forms of corruption (such as ratings agencies that appear to have had a conflict of interest), complex financial instruments that no one really understood, and herd behavior where people just followed along and failed to exercise independent judgment.
It is difficult or impossible to regulate against greed and against many of the other ethical shortcomings that have been seen. What can be done is to force greater transparency and accountability, a process which began with Sarbanes-Oxley and is expected to continue with new regulations of the financial system.
Key concepts include:
- The financial crisis may shift societal views on the legitimacy of business.
- Ethical lapses, failures of understanding, herd behavior, self-deception—all contributed to the financial crisis.