Dr. Kara Tan-Bhala is a distinguished scholar, financial expert, and advocate for sustainable finance, renowned for her influential contributions to the intersection of economics and environmental responsibility. With a rich background in international relations and law, Dr. Tan-Bhala brings a unique perspective to the global discourse on sustainable finance, emphasizing the imperative of aligning economic practices with ecological integrity. As the President of the sustainability-focused advisory firm Seven Pillars Institute, she leads initiatives that promote ethical decision-making within financial systems, underscoring the importance of responsible investing. Driven by a commitment to fostering positive change, Dr. Kara Tan-Bhala is a sought-after speaker and author dedicated to advancing the conversation around sustainable finance and its pivotal role in shaping a more equitable and environmentally conscious future.
In your view, what is the relationship between financial sustainability and ethical finance?
The link is closer than practitioners and academics would like to think. If Modern Finance Theory, derived from Milton Friedman’s free market economic models, really worked, then there should not be market crashes because, according to the assumptions of the model, economic agents are rational. The market can price in all available information. And yet, look at the number of market crashes in the past 40 years or so.
- Savings and Loans Crisis – 1984
- Junk Bond Crisis – 1989
- Japanese Bubble Bursts – 1992
- Mexico Currency Devaluation – 1994
- Barings Securities Collapse – 1995
- Asian Currency Crisis – 1997
- Russian Currency Devaluation and Default – 1998
- Long Term Capital Management Bailout – 1998
- Dot-Com Bubble Bursts – 2000
- Bear Stearns Bailout Funds – 2007
- Lehman Goes Bankrupt – 15 September 2008
Bubbles and crashes are proof of the non-rationality of markets so there goes the predominant finance theory of the past 80 years. Simply summarized, I would say, and many would agree, that greed was a big contributor to all these crashes. And what is greed but a vice? (one of the seven deadly sins, according to Christian theology). And how do we counter vice? By instilling and extolling virtues instead. Because, behind every market crash is an ethical failure.
What ethical dilemmas do professionals in the finance industry often face, and how can they navigate them?
Besides the credo of modern finance theory that upholds the primacy of profit maximization and self-interest, one reason ethics has been discarded in the practice and theory of finance is the belief among many, that ethics issues are fundamentally unsolvable. This view comes from frequently referring to supremely complex and difficult moral problems such as abortion or euthanasia. In practice, ethics issues in the workplace are far more quotidian and uncomplicated. For instance, what do you do when a client who is a big fee generator, asks you to do something that is not illegal but, in your view, unethical. I write about such a case in Chapter 2 of my book, “Bangkok Misadventure Case Study.” All the case studies in the book involve regularly recurring problems that finance professionals encounter.
What motivated you to write your book, Ethics in Finance: Case Studies from a Woman’s Life on Wall Street, and what message or insight do you hope readers will take away from it?
I wrote the book for four reasons: First, for my daughter, Shera, because I would like her to know what her mom did before she graced our lives with her beautiful and amazing presence. Through this memoir she had an enduring document to read about what I did while she was at school, between making breakfast and serving dinner. Second, I want to help young people entering the finance industry, to try to figure out what to do when faced with moral problems. They probably never had a class in financial ethics in college. Third, I want to help the public figure out ethics issues with readily accessible tools. Finally, the book contributes to fulfilling the mission and the quest of the Seven Pillars Institute.
I founded the Institute in 2010 after the Great Financial Crisis of 2008. The Institute is the world’s only independent think tank for researching, educating, and promoting financial ethics. That statement is our mission and our elevator pitch. SPI has a mission, but we also have a Quest. Unlike a mission, which tends to be corporate and bland, a quest is cosmic, world-changing. The quest of the Fellowship in The Lord of the Rings was to find the ring that rules them all and then destroy it. If the ring is not destroyed, evil wins over good and Middle Earth is lost! So much rides on the quest. In a few words, Seven Pillars Institute’s Quest is to make ethics an integral part of finance theory because where theory goes, practice follows.
In this book, you discuss the challenges of navigating a male-dominated industry. How do these experiences tie into the broader theme of ethics in finance?
A male-dominated industry tends to discriminate against women, either ostensibly or through conduct and policies informed by implicit bias and driven by systemic bias. As you mention, I tackle the issue of outright gender discrimination through exclusionary policies, in the chapter entitled “High Finance Gender Inequity Case Study.” And I talk about implicit and systemic gender bias in the penultimate chapter of the book about treatment of women in the academy. In both these cases I give reasons why gender discrimination is unethical when evaluated through every conceivable framework of ethics. There is no ethics system that allows for gender discrimination. The chapters conclude with suggested actions we can take to mitigate this still prevalent concern.
How can individuals and organizations get involved or support the work of your organization, Seven Pillars Institute?
There’s a “Donate” button on the website! We always are grateful for funds to help finance our research and publications. If anyone would like to contribute their stories involving financial ethics, I encourage them to write and contact us. We are always looking for source material. And of course, please read our work and spread the word.