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

Ethical Duties of the Investor 69
are normally applied to questions concerning the permissibility of expropriation and
to the possibility for the government and local authorities to place constraints on the
use of private property when this is in the public interest. 38 However, the obligation
of the investor – especially the investor of large capital sums – to take account of
criteria of ethical appropriateness and the public good in his investment decisions is
formulated in the article as a “shall obligation” and not as a “must law”.
These same ethical obligations on investment apply equally to the management
boards of firms preparing for stock market flotation, when making their decisions on
business strategy and business policy. In addition to these ethical obligations concerning
the strategy and business activity of a corporate management that is issuing
the shares, corporations preparing to go public are obliged, most of all, to keep
their shareholders and the market appropriately informed. Publicly listed firms must
provide investors with all relevant information about themselves, since it is in the
nature of the capital market that corporate managers have better access to information
about their corporation’s status and economic position than the public and
shareholders, especially minority shareholders who only hold negligible interests in
the corporation.
Since the payment of dividends is one of the main signals that the corporation
gives the public about its business position and status, the firm is obliged to operate
a rational dividend policy which neither retains excessive dividends for equity
financing nor pays dividends at a level that is not matched by the corporation’s performance.
The firm must not mislead the public by paying unduly high dividends
in order to portray corporate performance in a better light than is borne out by the
reality of the situation. 39
38 Cf. D. HESSELBERGER: Das Grundgesetz. Kommentar für die politische Bildung [Germany’s
Basic Law. Commentary for political education], Neuwied (Luchterhand) 8th edn. 1991, pp. 136ff.
39 On the problem of dividend policy cf. DAVID E. R. GAY: Article on “Dividend Policy”, in: The
New Palgrave. A Dictionary of Economics, London (Macmillan), New York (Stockton), Tokyo
(Maruzen) 1987, Vol. 1, pp. 896–899.