Finance and ethics

Yesterday I attended another meeting of a so-called ‘Christian Leadership Council’. It was held at the headquarters of Rabobank in Utrecht, and one of their Board members, former Minister of Economic Affairs Joop Wijn, held a very interesting speech. He zoomed in on the ethical aspects of banking and how Rabobank wants to incorporate ethical behaviour in their organisational and procedural structures. It sounded a bit like the gospel: almost too good to be true. He explained some of the dilemma’s they face in the business by presenting business cases that are also found online. The simple fact that they are willing to see these as dilemma’s is very promising in the first place.

Of course this raised a lot of questions, most of which had to do with the motivations: why would a bank do this, and how far do you go? And honestly, I was impressed with the way Rabo handles these things. Maybe it is time for Rabobank indeed?

Afterwards, the discussion turned towards the financial crisis. Wijn was very strong in emphasizing that this crisis is in the core a moral crisis – the greed has found its way from the heart of the people to the heart of the financial system. A top lawyer, involved in last year’s catastrophic Fortis – ABN AMRO deal, supported this by calling it ‘an ethical discussion’. Wijn gave a very good example of how a small technical detail in accounting rules actually is a moral dilemma: in the new Accounting Rules, a company can value a debt it has (for example a bond) at market value (the price the market would pay for it). This means that if you lend 100, and the market thinks you can only pay back 95, your books will show a debt of 95, while morally you have the obligation to pay back 100. This is what has happened at a wide scale (and only one example), and the effect is that numbers cannot be trusted anymore – hence today’s credit crisis…

It was fascinating to hear this, particularly because I have been involved in implementing these new rules for several clients while still working with KPMG Consulting.

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