Download Corruption in the financial markets 29012009

Corruption in the financial
markets : soft and hard
Eric De Keuleneer
29/01/2009
Remuneration
 Remunerations, bonuses, stock
option, push management to privilege
risk, and shareholder value, vs
stakeholders, CSR.
 Getting there with the advice of head
hunters, who are at least conflicted.
 Employees and brokers financially
motivated to sell some products,
rather than to advise.
2
Professional services
 Financial analysts: Should give a
professional advise, but often influenced by
employer. M&A corruption & blackmail +
Insider info
 Auditors: Certify accounts but give
consulting; greatly improved since 2003.
 Rating agencies:" rate” companies + “sell”
ratings ⇒ encourage off balance,
securitisation.
3
IPO
 Under pricing; issue price
(substantially) below first market price.
 Allotments to “friends and family”.
Flipping, potential clients, asset
managers, others.
 Soft or hard corruption ?
4
 Asset management
 Risk of paper pushing
 Soft commissions
 Laddering / flipping ?
 Others: varia, school vendors,
pharma, …
5
How to improve?
 Ethical codes (are ethics profitable?) or
rules; for employees, brokers, lobbying.
 Remove asymmetric internal and external
remuneration, make board accountable.
 Internal controllers best paid employees
 IPO process normalise
 Single functions :
 Brokers
 Asset managers
 Deposit banks
6