Setting a Higher Standard

How do we raise the bar for ourselves?

Photo: Douglas Tengdin

People face ethical issues every day. How meticulous do I need to be with my records? Could accepting a gift affect my objectivity? How responsible are supervisors for the actions of their subordinates? Most people can agree on a basic moral framework —universal rules like don’t lie, don’t steal, respect everyone, be kind, generous, and fair. But how do we work that out in practice? How can we hold ourselves accountable to do what’s right, not just what’s expedient?

We all have an endless ability to rationalize our own behavior. We justify small compromises, and small things end up becoming big things. That’s the lesson behind fictitious bank accounts at Wells Fargo, the way VW manipulated emissions tests for its diesel cars, and Bernie Madoff’s mammoth Ponzi scheme. All these folks justified their own actions – until they got caught.

That’s why objective standards are so important—like corporate credos, or professional codes. Johnson and Johnson has its credo chiseled in granite outside of the corporate headquarters. It outlines their responsibilities to customers, employees, communities, and shareholders. Their credo established a firm moral compass that helped guide management during the Tylenol crisis 35 years ago. Now J&J is one of the most trusted brands in the world.

Source: Johnson & Johnson

In finance, ethics have to be central to what we do. We’re dealing with other people’s money. The CFA Institute established an ethical code and standards of professional conduct 50 years ago, and has further articulated it over the years. It addresses things like maintaining adequate records for investment recommendations, or disclosing conflicts of interest. Members need to uphold the standards, and supervisors who are members are responsible to see that their staff follow them.

We all face multiple duties: to our profession, to our clients, to our employers, and to our families. A code of ethics isn’t just a theoretical construct; it can be a practical guide to give clear direction when circumstances seem murky. After all, it’s impossible to be objective when you’re personally involved.

And when you’re riding, the best way to raise the standard is to ask someone else to lift the bar.

Douglas R. Tengdin, CFA

Chief Investment Officer

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