The Ethics of Banking: Conclusions from the Financial Crisis (Issues ...

Hyper-Incentivization and the Hubris of the Financial Manager 151
their business and artificially restricted supply, adopting oligopolistic practices to
create a kind of financial oligopoly. Furthermore, the shareholder-value principle
attempted to turn the manager into a speculator who must manage speculatively in
order to secure speculative capital gains from his firm’s shares, of which he in turn
receives a share. If the managers in the financial industry refuse to give up consistently
excessive returns on investment – i.e. returns consistently above the average
for successful industries in the real economy – nor their excessive bonuses, then
the legislator should amend tax law and tax the incomes and profits of the financial
industry at a higher tax rate than the rest of the economy. In this particular case it
would not violate the principle of equality, since the financial industry itself fails to
acknowledge such a principle but, as an industry, insists on a special right to rewards
and incomes that are not achievable under the conditions of normal market competition.
And if the state were actually to concede this special right, it could apply a
special rate of taxation as well.
The banks must return to “serving” the economy and the people. Financial capitalism
has largely lost sight of the doctrine of service. But it still has a meaningful
role to play. It belongs to the idea, rooted in capitalism, that the producer serves
the consumer. The finality of the economy is the consumer, not the financial service
provider. At the same time, it is important to know that the producer’s motivation
is rather different: the producer wants to make a profit. If a bank manager is driven
solely by shareholder-value and loses sight of the principle of service to the firm as a
whole, he has misunderstood his job and is destroying the invisible hand of the market.
The duties listed in his employment contract are far wider-ranging than merely
generating good yields for shareholders. In some circumstances, he must even put
the interests of the firm above those of the shareholders.
For the invisible hand of the market to function, the doctrine of service and the
profit motive, the finis operis and the finis operantis, must work in interaction; in
fact, they must become two sides of the same coin. The invisible hand of the market,
or of capitalism, consists in the fact that the entrepreneur can only make a profit
by serving the consumer – and in the emergence of a kind of pre-stabilized harmony
between entrepreneur and consumer. Without that, there is no functioning
market. The doctrine of service makes sense when it is accompanied by benefits
for the consumer and for the service provider. The business community must not
overplay the idea that people’s only motivation is to maximize profit. By virtue of
their money-creating role, banks have an ancillary public function, and for that reason
they cannot behave like sheer self-interest maximizers, any more than doctors
can be driven solely by the maximization of their own self-interest when they are
treating a patient.
Human beings are motivated by a variety of factors in everything that they do.
They constantly have both selfish and altruistic motives. It is impossible to do well
in any profession by thinking purely and simply about one’s own profit. The same
is true for banks. A manager whose mind is solely on his profit cannot be a good
manager, because he is not sufficiently orientating himself to the nature of the matter
of his or her task. Nothing prevents us from saying: in industry, the profit motive
is more predominant than in the church. And yet even in industry, the manager’s