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

Business Ethics and the Fiduciary Duties of the Manager 9
just the best known and perhaps most spectacular exploitation of insider knowledge
because large sums of money on the stock market are at stake.
The misuse of insider knowledge is not confined to the stock exchange and
financial institutions, however. It is a problem that affects all fields of economic
decision-making and action, in the private and in the public sector. In all branches
of industry and all domains of economic activity, the agents pursue knowledge that
only they have and that only they, as proprietors of this information, can exploit
for the accumulation of wealth. It can therefore be said that the pursuit of a certain
level of insider knowledge is perfectly legitimate. The entrepreneur must pursue the
knowledge that only he has, e.g. the manufacturing method, the patent, the brand
name, that only he possesses and has the right to, and of which only he possesses
insider knowledge. It is far from easy, and therefore all the more necessary, to draw
the line between legitimate practices and the unethical and unlawful or illegal pursuit
and misuse of insider knowledge.
How difficult this can turn out to be in grey areas in specific instances is illustrated
by the absence of any clear consensus, within the disciplines of law and
economics, on the question of whether insider trading, i.e. the misuse of privileged
information on the stock exchange, is economically harmful or – even – useful.
There are economists who believe that insider trading ought to be allowed because
of its economically important function of disseminating information.
As we see, this is a case of dissent among the subject disciplines as to which legal
norm should be valid at all in the operative domain of the stock exchange. What
can be done to throw light on academic dissent about a legal norm? If economists
and jurists cannot even agree on the justification of law, how should the individual
entrepreneur or banker draw the line between what is correct business practice and
what must be deemed unethical and illegal?
In economic ethics there is no evading the question of norm justification. In order
to shed light on ambiguous domains of economic ethical decision-making, it is necessary
to identify which norm applies to these domains and what the intention of the
norm is, so that the economic agents, as entrepreneurs and managers, as employees
and trustees, endorse the purpose and intention of the law and can refer to it as the
lodestar of their action.
Business Ethics and the Fiduciary Duties of the Manager
Applied business ethics comprises both the analysis of institutions and the rules of
action of the branch of industry, in this case the social or institutional ethics of the
financial sector, as well as the analysis of individual actions of individual managers,
their attitudes toward themselves, and the analysis of interpersonal communication
and interaction of members of the firm with others, with staff and customers. 5
5 On corporate ethics, cf.: F. NEIL BRADY: Ethical Managing: Rules and Results, Upper Saddle
River, NJ (Prentice Hall) 1989; R. E. FREEMAN, D. L. GILBERT: Unternehmensstrategie,