Download Debate on Liability Ethics in China Financial Market

Debate on Liability Ethics in China Financial Market
CHEN YunPing1 ZHANG XiaoFeng2
1.School of postgraduate, Jiangxi Normal University, P.R.China, 330022
2. Business & Management School, Jiangxi University of Finance and Economic, P.R.China, 330013
：
Abstract Liability is one of the important moral principles in financial ethics, therefore its deficiency
has become one of the keys in ethic conflict issue. Liability deficiency in the financial market of China
is widespread and can be found everywhere. Construct the liability ethics of the financial market need
absorbing China traditional philosophical thinking.
Key words Financial Market,Liability Ethics, China traditional philosophical thinking
：
1. Deficiency of Liability Ethics in the Financial Market of China
Modern financial market has witnessed continuous increase of financial ethic conflicts, which has
become an outstanding issue. Liability is one of the important moral principles in financial ethics,
therefore its deficiency has become one of the keys in ethic conflict issue. Liability deficiency in the
financial market of China is widespread and can be found everywhere.
As far as Chinese banking is concerned, legal cases have been exposed in an alarmingly frequent
manner, while severe cases have shocked the supervision/regulatory level. Recently, seen from the
senior leaders’ layer of Chinese banking, there are at least four high officials at or above vice ministerial
level in financial field have been investigated and subjected to punishment due to violation of rules and
regulations.
The State Audit Administration announced its audit results in Nov. 2004 that a part of branch
agencies of the Industrial and Commercial Bank of China have been found violating rules and
regulations in granting of loans, honoring bills and processing discount transactions, involving more
than 30 suspected illegal criminal cases adding up to about RMB 6,900 million yuan. Northeast
Expressway, a listed company in stock market, disclosed on Jan 15, 2005, that RMB 293.37 million
yuan this Company deposited in two accounts opened at Hesongjie Street Sub-branch, Helongjiang
Provincial Branch of the Bank of China was missing mysteriously and whereabouts unknown. The Bank
of China claimed that this is a negotiable instruments defraud case suspected of internal and external
collusion, involving billions’ yuan of fund from many enterprises including Northeast Expressway, now
the previous official in charge of this Branch, Gao Shan, was suspected of being guilty and had
absconded overseas.
On Feb.22, 2005, the Intermediate People’s Law Court of Changchun Municipality announced the
first-instance verdict over the financial fraud case involved Zhaoyang Sub-branch and Railway
Sub-branch, both affiliated to the previous business department of Jilin Provincial Branch of the
Construction Bank of China. Between Dec.1999 and Apr.2001, the fraud gang won some staff members
of this Bank over and corrupted them to involve in fraud activities of extracting loans, accepting and
honoring bills of exchange amounting to RMB320 million yuan, via engraving stamps privately, making
fake contracts and deposit credentials and forging qualification, credit and guarantee documents etc.
On Mar.24, 2005, the Banking Regulating Committee announced severely illegal operation cases
by the Baotou City Branch of the Agricultural Bank of China in Inner Mongolian Autonomous Region.
From Jul.2, 2003 to Jun.4, 2004, part of staff members of Hutong Sub-branch and Donghe Sub-branch
affiliated to Baotou City Branch of the Agricultural Bank of China and some staff members of a part of
cooperatives affiliated to Damao Banner Rural Credit Cooperatives Union, in collaboration with some
people without public positions, cheated the Bank’s credit loan capital to profit great number interests
involving 98 sums of fund accumulatively amounting to RMB114.985 million yuan, via appropriating
capital of the cooperatives’ union, falsely making out large amounts’ time deposit documents, forging
pledge loans and processing discounts in violation of rules and regulations etc.
Banking institutions are merely a part of financial market, there are still more non-banking
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financial institutions as securities companies etc. apart from them. Recently, securities companies have
also exposed shockingly serious problems. One of the major reasons for frequent occurrence of the
financial cases should be the deficiency of liability ethics, as therefore calls for necessity of
strengthening of liability ethics.
2. Retrospection to Liability Ethics Thoughts
No matter in western culture or traditional Chinese culture, there exist abundant resources of thoughts
on liability ethics. In western ethic thoughts, famous German scholar Mr. Marx Web proposed the
concept “liability ethics” expressly and made clarification thereon, and put forwards “liability-oriented
ethics” and “conviction-oriented ethics” in two respective speeches. As said by Mr. Web, “We must
understand one fact, all ethically inclined acts/behaviors can be dominated by one of two principles,
which have essential difference and cannot coexist together. The principle that governs an act can be
conviction-oriented or liability-oriented. Acts that abide by conviction-oriented ethics, in religious
sense, is somewhat like Christ doing his justice while God being responsible for consequence”.
Compared with acts following liability-oriented ethics that must take possible consequence of acts into
account, there stands very significant contrast opposite to each other. “Liability reason” is a core idea
hidden in Web’s proposition. It is a capacity of moral practice that enables a person to recognize his acts’
consequence independently and initiatively, a moral practice reason that can turn liability into conviction,
take passion and desire as motivation and adopt the competence of judgment based on rational thinking
as safeguard, and furthermore, it is a modern reason characteristic of mutual combination of
liability-oriented ethics and conviction-oriented ethics, mutual support of tool-oriented reason and
value-oriented reason and mutual affinity of reason and passion.
In Kant’s opinion, “liability” is the basic concept of ethics, while the fundamental issue of ethics is
to illustrate “liability”. It is just centered on “liability” that Kant depicted his ethics and regarded it as
the source of all moral values. In this way, in order to cause rational human to be morally kind, it is
required that human’s acts is to fulfill liability for liability’s sake to realize human’s freedom and
upgrade human’s dignity. Kant put forwards his general order of liability therefrom, “your action, must
turn your behavioral principle into general law through your will of power. Liability is behavioral
necessity arising from honoring laws”. It is through three propositions that Kant had demarked his
concept of liability. The first proposition is: motivation proposition of liability. Only behaviors out of
liability can be of moral value; the second is: formal proposition of liability. The moral value of a
behavior out of liability is not dominated by the intention it is purposed to fulfill, while should be
determined by the principle governing it; and the third may be described this way: as the consequence of
the above two, liability is the very behavioral necessity due to respect for law. Rational individuals are to
fulfill responsibility for liability’s sake, while liability is based on law, consequently we can derive that
it is for honoring law that an action is taken. This proposition may be called as proposition of liability
honoring.
Besides, western academic circle of ethics has also published a large quantity of works on liability
ethics. For example, Liability Theory by famous U.S. philosopher Famberg, Academic Liability by
Donald Kennedy, Administrative Ethics: Channel to Realize Administrative Liability by Terry L Kuppa,
Liability and Control: Theories on Moral Liability by John M Fishier and Mark Lawezet of Great
Britons, The Principles of Liability by Hans Jonanth of Germany, Introduction to Applied Ethics:
Liability and Conscience by Lunk, Global Liability by Hans Queen etc. Therefore, “liability” has
become one of the core categories in applied ethics.
In traditional Chinese culture, even early in ancient classic works The Book of Changes written
during Zhou Dynasty period, there witnessed the thoughts of liability ethics. Liability ethics
consciousness in the Book of Changes have their source from its consciousness of misery and hardship
in the Book, which is the radical motivation to form liability ethics which in turn is the unavoidable
consequence produced by the consciousness of misery and hardship, therefore, The Book of Changes is
intended to conduct active and positive transformation of unfavorable consequence of behaviors to make
its liability ethics value come true. Moreover, from Mencius’ teachings, we can see not only the thoughts
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on the policy of benevolence and arguments on obligations and interests, but thoughts on liability ethics.
Mencius held that should the liability of the supreme ruler be looked into, feeble theories should have to
give way to practical rights/might. Because the supreme ruler held the unrestrained supreme power in
his hand, would he stoop to look into his own liability? Therefore, Mencius only placed his hope onto
moral character of the ruler/king, which is a kind of liability ethics. Mencius regarded that a subordinate
to the king would have to resign from duty initiatively when he failed to fulfill his duty because he was
still under the supervision of an upper leader. However, a supreme sovereign could only be persuaded to
fulfill his duty when he failed to administer his state. Liability means punishment therewith, why there is
punishment, is because the subject fails to fulfill the obligation or responsibility that shall be performed.
Judging from above retrospection on the liability ethics, the Author has reached the conclusion that
liability ethics means one taking possible consequences of the very behavior into account and being
prepared to take responsibility when playing a social role and performing his obligation, which should
be the subjective moral principles guiding behaviors of the role. Therefore, liability ethics may be
understood as the moral requirements to professionals of certain field.
3. Construction of Liability Ethics in the Financial Market
Deficiency of liability ethics in the financial market requires to be made up for as soon as possible, then
how to construct the liability ethics of the financial market? The Author holds that it is advisable to start
from the following points:
3.1 Construction of liability ethics of the financial market should be focused on the exploration of
liability ethics resources in our cultural essence via “equity” and “honesty” education to workers
in the financial market.
Equity means a good act that exchanges advantages and disadvantages on an equal basis. Two
parties of a transaction in the financial market shall conduct exchange or deal of advantages or
disadvantages equally and shall not carry out exchange or deal of unequal advantages or disadvantages.
Only when financial equity is achieved can validity of financial supervision/regulation be safeguarded
basically. Just as Botteright said, “only when the market is regarded as equal, will people involve in the
capital market actively, therefore, only as a means for the efficiency-oriented purpose, can equity hold
an ethic value.” Therefore, we can conclude that without recognition of the people to equity of the
financial market, there would be no validity of the financial market.
Honesty & credibility is a fine character and hence a stable psychological quality formed by
behavioral subjects via continuous actions based on consistent deeds and words and unified thoughts
and speech. In the financial market, no matter the supervisors/regulators or various parties of
transactions, it is imperative to follow the spirit of honesty and credibility. In traditional Chinese culture,
“benevolence” and “honesty” is a supreme moral state, is the subject’s internalization of ethic principles.
When these principles are deposited into the subject’s deep psychological structure, the subject will
demonstrate sound ethic mental state. When trying to classify various liabilities, Kant held that full
liability of human to himself could be divided into the human’s liability to himself as an animal and the
human’s liability to himself as a moral being. In exploring the latter, Kant objected to lies,
miser/stinginess, and flattery. Besides, Kant also regarded honoring promises as a model to others’ full
liability, keeping promises is an item of full liability to others and its restraining power is absolute. If
this principle is broken, there would get stuck in self-contradiction. Kant’s thoughts is of vital
significance to construction of financial market, and provides a theoretic support for construction of
honesty and credibility at the moral layer in the financial market.
3.2 It is imperative to give scope to the government’s and leaders’ function of guiding public
opinion in the construction of liability ethics.
In traditional Chinese morality construction, politics played a very important leading role. As said
by Confucius, “Guided by politics and restrained by the law, people/the subject can avoid committing
crimes, but they will not know that committing crimes is disgraceful; while directed by morality, taught
by rituals, people/the subject will not only know that committing crimes is shameful, but yearn for
goodness from the bottom of heart.” “The foremost point of politics lies in education, the essentials of
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education is based on rituals and music, law and punishment is employed to facilitate education and
complement rituals; for rituals is performed before occurrence of a crime while law takes effect only
after a crime is completed”, “politics should be focused on forming moral character and personality and
correcting immoral acts; therefore, it can be concluded that “politics means justice, and rectifying unjust
things. Six items of politics cover law, morality, benevolence, holiness, rituals and obligation”.
Therefore, we can see that politics and morality are so closely correlated that there goes a saying as
“outside ethics there would be no politics”, this is where traditional Chinese morality alarms us till today.
The responsibility of the financial regulatory institution lies not only in balancing interests of various
parties, but also in serving a directory one in construction of liability ethics of the financial market.
3.3 It is necessary to activate the liability subjects to take part in construction of liability ethics of
the financial market consciously and voluntarily, and facilitate every subject to form his internal
principles via reason and honoring moral laws, thus turning external discipline to self-discipline.
It is well known that even financial law are as perfect as expected, it cannot cover all behaviors in
the financial market. Because ethic moral principles and regulations can cover all behaviors with social
efficacy, however, law can only govern those acts with major social utility. Moreover, law is based on
ethics. Botright also pointed in Financial Ethics that “law is a relatively coarse tool means and cannot
apply to all financial activities, especially those that cannot be simplified as elaborate rules and
regulations. Formulation and promulgation of the law is usually directed against immoral acts, therefore
it is very inappropriate to encourage financial staff to act discriminately until the law stops them.”
What’s more, “only honoring the law is not enough to manage an agency or run a company, because
employees, clients and other aspects all expect or require moral treatment from the Company. The idea
that only the law can restrain financial activities will give rise to more legislation, lawsuits and
regulatory measures. Self-discipline of individuals, agencies and the market is not only a more efficient
way to achieve moral behaviors, but a wise strategy to avoid more law supervision.” We can tell that
limitations of financial law-rule should be rectified by ethics and the liability ethics is purposed to
deposit into liability subject’s internal principle to realize self-discipline.
Chinese culture of Confucius school stresses a learning both sound in theory and practice as “holy
inwards and kingly outwards”, and pays great attention to the liability subjects’ cultivation and
tempering of personality, thus forming readily firm internal ethic conviction. This requires the subject to
take part consciously and voluntarily in turning external discipline into self-discipline. Should we
dedicate strong liability ethic consciousness to individual’s ethic conviction and make it reinforced
repeatedly, then liability will turn into internal firm conviction of individuals, and widespread of this
conviction will turn into moral spirit recognized in the financial market.
References
1.
2.
The Book of Analects (Politics the Second) (in Chinese)
Kant, The Principles on Moral Metaphysics, Germany, translated by Miao Litian, Shanghai
People’s Publishing House, June 2002(in Chinese)
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