Latin American Capital Markets

418 OSVALDO R. AGATIELLOsales and marketing, legal and contractual, accounting and auditing, research analysis,asset management, advisory relationships, and many other activities, with varying degreesof discretionary authority. Be they accountants, attorneys, notaries, company andtrust formation agents, or other licensed professionals, they are mandated to complywith the codes of ethics and professional standards that govern their respective professionsas well as with the requirements of continuing ethical education in the jurisdictionswhere they are admitted to practice. 2 Consider the business conduct andsuitability rules of the National Association of Securities Dealers for registered dealerbrokers,the American Bar Association professional responsibility rules and standardsand model rules of professional conduct for attorneys and judges, and the codeof professional conduct of the American Institute of Certified Public Accountants,among others. Similar guidelines and regulations apply in other capital markets, expressinga delicate balance between the punitive power of the controlling authoritiesand the moral voice of the professional communities.Codes have a tradition of institutionalizing ethics into culture that dates backto the third millennium B.C. A professional code establishes standards of practice fora particular group, whether by describing appropriate existing practice or by institutingnew ones. It is a higher morality in terms of gradation of moral conscience—thatof voluntarily adopting a set of stricter-than-customary moral standards in order tobe recognized as a full-fledged member (Ryan 1997; Davis 1997). 3Thus, professional careers can be viewed as social functions that carry general,group, and personal rights and obligations. On one hand, professions are a uniquesocial product, organized and financed at great cost to society. On the other, individualprofessionals are required to dedicate themselves to satisfying the (legitimate)requirements of their particular clients. This creates multiple fiduciary relationships(professional-client, professional-profession, and professional-community), with conflict-2 Requirements of the latter sort are virtually nonexistent across Latin America and the Caribbean.3 Kohlberg (1981) suggests that moral development can be classified according to levels (pre-conventional, conventional,post-conventional), stages, behaviors, and attitudesThe pre-conventional level includes the stages of punishmentand obedience and instrumental relativism.The conventional level includes the stages of social conformity and orderand legality.The post-conventional level includes the stages of social contract and universal principlesThe correspondingattitudes are avoiding punishment and obeying power blindly; pragmatically satisfying one's own needs; pleasingothers to obtain their approval; submitting to an impartial, orderly regime of social, legal, or religious norms; definingright and wrong after rationally arriving at social utility considerations; and deciding what is just by applying individuallychosen principles. Kohlberg's research shows that individuals' ethical intuitions rarely go beyond one stage aboveor below the average morality of their societies, that progress from one stage to the next takes several years of maturation,and that progress can be accelerated through ethical training (Colby and Kohlberg 1987). In other words,societies as much as individuals also grow (or regress) in moral terms. Within this context, at a post-conventionalmoral level, a social contract stage must be reached for capital markets (and democracies) to prosper.Copyright © by the Inter-American Development Bank. All rights reserved.For more information visit our website: www.iadb.org/pub