Ethical Discourse in Finance Interdisciplinary and Diverse Perspectives Marizah Minhat Full Chapter
Ethical Discourse in Finance Interdisciplinary and Diverse Perspectives Marizah Minhat Full Chapter
Ethical Discourse in Finance Interdisciplinary and Diverse Perspectives Marizah Minhat Full Chapter
Ethical Discourse
in Finance
Interdisciplinary and Diverse Perspectives
Edited by
Marizah Minhat · Nazam Dzolkarnaini
Palgrave Studies in Impact Finance
Series Editor
Mario La Torre, Department of Management, Sapienza University of
Rome, Rome, Italy
The Palgrave Studies in Impact Finance series provides a valuable scien-
tific ‘hub’ for researchers, professionals and policy makers involved in
Impact finance and related topics. It includes studies in the social, polit-
ical, environmental and ethical impact of finance, exploring all aspects
of impact finance and socially responsible investment, including policy
issues, financial instruments, markets and clients, standards, regulations
and financial management, with a particular focus on impact investments
and microfinance.
Titles feature the most recent empirical analysis with a theoretical
approach, including up to date and innovative studies that cover issues
which impact finance and society globally.
Ethical Discourse
in Finance
Interdisciplinary and Diverse Perspectives
Editors
Marizah Minhat Nazam Dzolkarnaini
The Business School The Business School
Edinburgh Napier University Edinburgh Napier University
Edinburgh, UK Edinburgh, UK
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Foreword
Dear Reader,
I am a Conservative Peer in the House of Lords and my business has
always been in financial services. I have had the pleasure of working with
Marizah Minhat and Nazam Dzolkarnaini for many years and I attended
a conference held by them in Edinburgh which was expertly run and
productive. I am always impressed by their knowledge of Islamic finance
and commitment to its ethical values.
I founded the All-Party Parliamentary Group (APPG) in the British
Parliament on Islamic Finance, which is supported by numerous members
of the House of Commons and House of Lords and it has 100 stake-
holders who are accountants, solicitors, advisors and bankers. I am also
a patron and advisor of the Islamic Finance Council, who also provide
secretariat support to the APPG.
When I worked in the City, I was the chairman and chief executive of a
very successful insurance broking and financial services company. Further-
more, I have been the president of my professional body and I have hosted
and spoken at many meetings on Islamic finance and Takaful insurance
both in the UK and overseas. I have also been an advisor to a Takaful
company.
The UK has the biggest Islamic finance industry outside the Muslim
world and the City is a global leader in Islamic finance.
I believe that there is a huge opportunity to further develop Islamic
finance and that Islamic finance can play an important role in the green
v
vi FOREWORD
There are now many different types of ethical funds and the book offers
a timely insight into the rise of environmental, social and governance
factors (ESG) in what consumers decide to invest in.
The third part of the book looks at regulations and has an interesting
discussion of the Islamic finance market in the UK. This is something I
have discussed widely as part of the APPG on Islamic finance, and it is
good to see further critical analysis on what can be improved in existing
regulation in order to expand Islamic finance in the UK and make it more
accessible. This is important as over the last 18 months the largest devel-
opments in Islamic finance have been in fintech-based start-ups, so we
need to see what we can do to improve access to finance for entrepreneurs
and SMEs.
As the book finds, bank regulation and ethics complement and rein-
force each other, and we need to think about how we can support and
develop these links. I have no doubt you will enjoy reading the different
perspectives in this book, and I encourage you to think about the authors’
findings and help us develop further the world of ethical finance.
ix
x PREFACE
1 Introduction 1
Marizah Minhat
1 International Platform 1
2 Intellectual Activities 2
3 Abstracts of Chapters 10
4 Part 1: Actors 11
5 Part 2: Products 12
6 Part 3: Regulations 14
7 Navigating the Future 16
References 17
Part I Actors
2 Does Professionalism in Financial Services Have
a Future? 21
Charles W. Munn
1 Professionalism—A Definition 21
2 Rulers and Regulators 22
3 Culture and Competition 23
4 Public Concern 25
5 Drivers of Change 26
6 Big Bang 27
7 Money—The Great Motivator 28
8 The Financial Crisis 30
xiii
xiv CONTENTS
9 Restoring Trust 32
References 37
3 Boardroom Morality and the ‘Fit and Proper’ Test:
An Aristotelian Perspective 39
Owen Kelly
1 Introduction 39
2 The Philosophy of the ‘FIT’ 40
3 ‘Reputation’ 46
4 The Indispensability of Character 47
5 Aristotle’s Particularism 48
6 Confronting the Question of Character 48
7 Conclusion 51
References 52
4 Optimising Employee Engagement Through Effective
Ethical Leadership: A Case Study of a Canadian Based
Insurance Company 53
Alethia Amoy O’Hara-Stephenson
1 Introduction 53
2 Literature Review 54
3 Research Methodology 63
4 Data, Findings and Discussion 65
5 Conclusions 69
Appendix A: Impact of Leadership Styles on Engagement 71
Appendix B: Action Plan to Optimise Employee
Engagement 75
References 78
Part II Products
5 A Christian Approach to Interest 83
Jock Stein
1 Introduction 83
2 Seven Snapshots 85
3 Interest and Christian Ethics Today 91
4 The Question of Interest Today 94
5 Conclusions 99
References 100
CONTENTS xv
Index 271
Notes on Contributors
xvii
xviii NOTES ON CONTRIBUTORS
Chapter 6
Fig. 1 Suggested accounting treatments for the Sale Agreement 113
Fig. 2 The Bank’s statement of financial position (excerpt) as of 31
December 2018 (£’000) 114
Fig. 3 An excerpt of Islamic investment portfolio as at 31 December
2018 (RM’000) 118
Chapter 7
Fig. 1 Screening strategies and different ethical fund styles 133
Fig. 2 Ethical fund styles in terms of investor, market and company
perceptions 134
Fig. 3 The relationship between screening criteria and the asset
universes of funds 135
Fig. 4 Growth of ethical fund strategies around the world
(2016–2018) 138
Chapter 11
Fig. 1 Milestones in financial stress testing 227
Chapter 12
Fig. 1 The five types of conduct under sharia (ethical and unethical) 254
xxi
List of Tables
Chapter 1
Table 1 ICMGR’s key intellectual public engagements (2017–2019) 3
Chapter 7
Table 1 Description of screening strategies of ethical fund styles 130
Table 2 Description of ethical fund styles according to the screening
strategies 131
Table 3 Proportion of investment in ethical funds relative to total
managed assets 136
Table 4 Growth of ethical investment assets by region 2014–2018
(Figures in billion of $) 137
Table 5 Investment in different ethical fund styles in the UK
under different screening strategies during the period
of 2011–2017 139
Chapter 11
Table 1 Overview of the three major classes of normative ethical
theories 231
Table 2 Framework of normative principles for the discussion
of financial stress tests 232
xxiii
CHAPTER 1
Introduction
Marizah Minhat
1 International Platform
Anyone can be inspired by the legacy of the Scottish economist and
moral philosopher, Adam Smith.1 According to Smith, the ‘disposition to
admire, and almost to worship, the rich and the powerful, and to despise,
or, at least, to neglect persons of poor and mean condition’ is ‘the great
and most universal cause of the corruption of our moral sentiments’ (The
Theory of Moral Sentiments, I.iii.3.1, p. 61).
In Edinburgh, the International Centre for Management and
Governance Research (ICMGR) at Edinburgh Napier University had
contributed to reviving a discourse on moral sentiments among diverse
stakeholders. During my leadership as Co-Director, the Centre actively
reached out and engaged with local and international communities
M. Minhat (B)
The Business School, Edinburgh Napier University, Edinburgh, UK
e-mail: [email protected]
2 Intellectual Activities
Above and beyond academia, ICMGR’s intellectual and public engage-
ment activities set an exemplary practice where academics were not
confined within their ‘ivory tower’, as views from non-academic stake-
holders were taken on board open-mindedly towards bridging academic
and practical knowledge around ethical and governance issues in the
financial and business world. As a professional accountant, I believe intel-
lectual activities that further public interest are important for building a
better future.
Our intellectual activities were essentially charitable in nature. Such
activities had flourished in Edinburgh during ICMGR’s years despite
resource limitations but an ambitious mind. It was through my humble
initiative that Edinburgh Napier University featured as a supporting
2 I am grateful for the mentorship and guidance of Professor Maura Sheehan, who
gave me the opportunity to shape ICMGR’s intellectual activities. I am also thankful to
Professor Simon Gao for his advisory role. Also acknowledged here the participation and
contribution of other colleagues at Edinburgh Napier University.
1 INTRODUCTION 3
Date Event
partner of the Global Ethical Finance Forum (GEFF) 2017, which was
held under the patronage of the Scottish Government and hosted by the
Royal Bank of Scotland (RBS). The event was held at the RBS Conference
Centre in Edinburgh on 13–14 September 2017, where, upon invitation
from the conference organiser, our doctoral student delegates provided
generous assistance throughout the event.3
Taking an academic lead on ethical finance and governance projects,
ICMGR organised and hosted two forums and three international confer-
ences during 2017–2019 period at Edinburgh Napier University, in
collaboration with internal and several external stakeholders. In addi-
tion to regular research seminars during autumn and spring trimesters,4
ICMGR’s notable public engagement events are listed in Table 1.
This introduction chapter acknowledges the contributors and their
contributions to the ICMGR’s intellectual activities. Participating stake-
holders included delegates from the Institute of Chartered Accountants in
England and Wales (ICAEW), the Research Centre for Sustainable Hong
Kong (CSHK), Shandong University of Finance and Economics, Univer-
sität Hohenheim, Al-Maktoum College Dundee, University of Bolton,
Regents’ University of London and China-Britain Business Council
(CBBC).
5 Among others, I acknowledge here the contributions of David Bond, John Danzig
and Keith Proudfoot, as well as administrative supports from Fiona Ormiston, Alison Tait,
Jane Walker and Sally Gallery.
6 Details of contributors are published at: https://www.napier.ac.uk/about-us/events/
ethical-finance-and-investment-2017 (Accessed 29 May 2021).
1 INTRODUCTION 5
8 My reflection about this conference was initially published by ICAEW (2018). Inter-
estingly, about a year later, ICAEW hosted a BRI Economic Forum in Beijing (Aplin,
2019). During 2017–2019, I also delivered talks at BRI conferences hosted by the
Confucius Institute for Scotland.
1 INTRODUCTION 7
in his capacity as the ICAEW’s Integrity and Law Manager, shared his
knowledge on professional ethics and the public interest. He highlighted
the challenges inherent in asserting the public interest, a framework for
analysis and ethics guidance in this area. The challenge was for the imple-
menters of BRI-linked projects to weigh public interest in their financing
and investment decisions.
In exploring an alternative ethical perspective, Owen Kelly OBE from
the University of Edinburgh shared some thoughts from his doctoral
research on Aristotelian ethics as a way of spanning cultures along the
BRI corridors. It was postulated that BRI will embrace as many ethical
traditions as societies it touches and, therefore, disagreement on moral
questions is unavoidable. He viewed that Aristotelian ethics provide a
‘lingua franca’ that could support BRI’s decision-making because they
do not rest on religious beliefs and do not prescribe rules.
Given the emergence of anecdotes displaying public disquiet about the
implications of BRI-linked projects in some host countries, the discourse
on public interest and ethics never seems less important. Reliance on
borrowing to finance BRI-linked projects was an issue raised during
the conference through a talk delivered by Dr. Nazam Dzolkarnaini.
A concern was raised that BRI might fuel unsustainable debt burdens
among host countries. It was conjectured that genuine partnership or
joint ownership of BRI-linked projects is a sensible way forward if BRI is
about different countries or nations working together to develop projects
for commercial and social purposes. This notion is consistent with risk-
sharing financing as promoted through an Islamic finance lens. Islamic
finance is highly relevant because BRI involves the participation of many
countries with large Muslim populations. As evidence of impact, this view
was later picked up and reported in Asia (Singh, 2018).
Having taught Islamic finance in Hong Kong for about a decade, I had
also embarked on a collaborative research initiative there.9 As a result,
at the conference, the discourse on Islamic finance and governance of
BRI continued with research presentations by the partner delegates from
Hong Kong. This initiative was motivated by the need to enrich stake-
holders’ knowledge towards strengthening Hong Kong’s position as a
9 I attribute this collaboration to Dr. Stephen Chun Yue Li at City University of Hong
Kong. Also acknowledged are: Professor Linda Che Lan Li, Director, Research Centre
for Sustainable Hong Kong (CSHK); Dr. Michael Chak Sham Wong, Co-Leader, CSHK
International Hub for the Belt and Road; Julian Giew Leong Liew; and Jeffrey Chung.
8 M. MINHAT
O N the following morning Lane’s own private car was waiting for
him in Shaftesbury Avenue. He was expecting a message from
a trusted emissary, to whom he had given the three photographs of
Mrs. Morrice, and dispatched to watch the flat of Alma Buckley in
Elvenden Mansions.
About twelve o’clock the telephone bell rang. Lane answered it in
about as great a state of excitement as was permissible to a man of
his strong self-control. At the first words his face lightened. Once
again his instinct had led him right to the presumption that the
wretched woman, crushed under the weight of her misfortunes,
would fly for shelter to the friend of her youth.
“It’s all right, sir. The lady went out with another woman about an
hour ago; they have just returned.”
“Good,” was the detective’s answer. “I am starting now. Maintain
your watch till I come, it won’t take me very long to reach there when
I get through the Piccadilly traffic.”
He got into the waiting car, drove along as quickly as he could,
and halted at a spot a little distant from Elvenden Mansions where a
full view of the block of flats could be obtained. A respectable-looking
man was lounging about, who reported that the two women were still
there. He was quite a discreet person, and one often employed by
Lane on such errands. Not wishing to bring too many people into this
delicate affair, the detective would have preferred to put Sellars on
the job, but that would have been unwise, as the young man was
known to both Miss Buckley and Mrs. Morrice, and might have
scared his quarry away.
He dismissed his subordinate, ordered the car to wait where it
was, and proceeded to Number 5. The door was opened by a
comely buxom woman, whom he rightly took to be Alma Buckley.
“I wish to see Mrs. Morrice on very urgent business,” he said,
proffering his card which bore his name, profession and address.
“You will see from that who I am.”
The woman read the card, and her face paled visibly underneath
the thick rouge she had laid on it. She scented danger at once and
flew to that readiest resource of certain women of not too scrupulous
a nature, a lie.
“No Mrs. Morrice lives here. I am the sole tenant, and my name is
Buckley, Alma Buckley,” she stammered.
“I know quite well you are the owner of this flat, Miss Buckley,”
replied Lane suavely. “But you will pardon me for questioning your
statement. This place has been under observation by an employé of
mine. You and Mrs. Morrice went out this morning together, and
returned about three-quarters of an hour ago. You have not stirred
from it since, therefore Mrs. Morrice is within.”
When she saw he knew so much, she abandoned the fiction and
tried another tack. “It is quite true she is here for a short time, but
she is too unwell to see anybody.”
“Her indisposition must have come on very suddenly then, since
she was well enough to shop or walk about with you for over an
hour. Come, Miss Buckley, let us leave this fencing, it will do your
friend more harm than good. I wish to impress upon you, and
through you upon Mrs. Morrice, that it is necessary I should see her
in her own interests, apart from those of other people. If she refuses
to see me, her future will be jeopardized to an extent she does not at
present realize.”
There was no mistaking the gravity of his manner. Miss Buckley
was a strong-minded woman and capable of holding her own in an
equal encounter. But she recognized that this calm, strong man was
master of the situation.
“Come in, then,” she said, in a tone the reverse of gracious. “I will
see if she is well enough to permit your visit. I must ask you to wait in
the hall, I have no spare apartment to which to show you.”
Lane was not a man much given to unprofitable moralizing, but as
he stood in the small hall, he could not help reflecting on the awful
havoc which a few hours had wrought in the fortunes of this
wretched woman. From the splendid house in Deanery Street with its
luxurious apartments, its retinue of trained servants, to this middle-
class flat in which there was not even an apartment to which to show
a visitor! What a descent! Truly the way of the transgressor is hard!
In a few minutes, Miss Buckley reappeared and announced that
Mrs. Morrice would see him. She led him into the comfortably
furnished room in which Sellars had interviewed her. The detective
was favourably impressed by the air of decent well-being about the
place: there was no evidence of straitened means. Still, it was a
terrible come-down for the wife of a millionaire.
Mrs. Morrice was seated in an easy-chair, the marks of acute
suffering plainly written on her ravaged features. She nodded slightly
to him, and as she did so, the music-hall artist withdrew, closing the
door after her.
“Your business with me, Mr. Lane?” she said in a very low voice.
“Miss Buckley told you the truth when she said I was not in a fit
condition to receive visitors. But I understand you have important
reasons for desiring an interview.”
Lane wasted no time in preamble. Truth to tell, he lacked the wide
charity of Rosabelle, and had no compassion for the woman who
was ready to sacrifice Richard Croxton without compunction, also
her niece’s happiness.
“As my card will have informed you, I am a private inquiry agent. It
is through me that these discoveries have been made; the
systematic sale of your valuable jewels to supply young Brookes with
money for his extravagant needs; the fraud you and Sir George
Clayton-Brookes have practised in passing him off as the nephew of
both. Since you left the house yesterday, serious as these things are,
we have discovered something more serious still.”
At these ominous words he saw a shudder shake her body, but
she uttered no word.
“I discovered the original memorandum of the mechanism of your
husband’s safe, locked up in one of your boxes, securely as you
thought; I have it in my pocket at the present moment. At last we
have put our hands upon the actual criminal who purloined the
million francs, the loose diamonds, committed the second small
robbery, made some inconsiderable restitution in the third—the
criminal who left an innocent man, Richard Croxton, to suffer for her
crime, reckoning on the fact that the evidence was so strong against
him that one would not be tempted to look elsewhere.”
He paused, expecting that she would show some sort of fight, say
something, however feeble and unconvincing, in denial. Had he
been dealing with a woman of the calibre of Alma Buckley, she
would have lied and turned and twisted and fought him as long as
she could. But Mrs. Morrice was made of weaker stuff. Rosabelle
had been right when she said she had never regarded her aunt as
resolute and strong-minded.
She was trembling all over. “What does Mr. Morrice intend to do?”
she asked in a faint voice, and admitting her guilt by putting the
question.
“This is his last word. Write him a full confession giving him ample
details of the burglaries, and equally important, the actual truth about
young Brookes, in what way he is connected with you. If this is done,
secrecy will be preserved.”
“And if I refuse?” she asked in the same faint voice. But Lane was
sure she would not refuse in the end.
“In that case, he will publish the facts to the world, and he will not
give you one penny towards your support.”
Of course, Lane had not received any such instructions from
Morrice, he was acting entirely on his own initiative, judging that he
knew better than the financier how to wring the truth out of obstinate
malefactors.
She rose. “Excuse me for a few moments while I speak to my
friend. Mr. Morrice has you for an adviser, I have only her to consult.”
She was so broken down and unnerved that she almost tottered
through the door which Lane held open for her. While she was
absent he kept a sharp look-out on the hall from force of habit. But
he was quite sure she would not attempt to run away. What was the
use of flight? It would only supply additional evidence, if further were
needed, of her guilt.
At the end of half an hour she returned, a little more composed
than when she went away, the two old friends had had a long talk
together.
“Sit down, Mr. Lane. I will sign any confession you like to draw up,
on the understanding that it is shown only to the persons actually
interested. I will answer truthfully any question you like to put to me,
and give you all the details of my life since I left the village of
Brinkstone.”
CHAPTER XXV
MRS. MORRICE’S CONFESSION
A ND this was the story told by Mrs. Morrice, as she sat facing
Lane in the small but elegantly-furnished room of her friend
Alma Buckley’s flat. She told it throughout in a low voice which now
and then broke down, indicating that she was on the verge of tears.
For the most part it flowed forth in a continuous narrative, but now
and then she paused to answer some question, to give fuller details
of some incident, at the detective’s request. She informed him at the
beginning that although Miss Buckley knew much—she did not know
everything—that she was ignorant of the robberies.
Lane thought better of the music-hall artist after that. From the
readiness to tell a lie, he had judged her to be a fairly unscrupulous
woman, with full knowledge of her friend’s criminal acts, probably
drawing a handsome share of the proceeds. It was evident that she
drew the line at actual lawbreaking.
Lettice Larchester and her father had gone straight to London after
leaving Brinkstone, and established themselves in some cheap
lodgings in the Fulham district. Larchester had left the quiet little
village for more than one reason. For one thing he had grown tired of
it, had become weary of the ignorant people who frequented the bar
of the Brinkstone Arms, his visits to which constituted his sole social
recreation. Then the inspiration which he first derived from the
charming scenery around had waned in its intensity, and stimulated
him no longer. He was also rather weary of working continually at the
one theme of landscape, and trusted that by moving to London he
might break fresh ground amongst dealers and infuse variety into his
rather monotonous art.
This hope was not realized to any considerable extent. For the first
three months he displayed a certain feverish activity both in the
business and the artistic side of his calling, with decidedly beneficial
results to his exchequer. He was fairly moderate in his use of
alcohol; out of every payment he received for a picture he put a
small proportion in the Savings Bank for “a rainy day” as he
announced with importance to his hopeful daughter, who really
began to believe he had made up his mind to turn over a new leaf.
Alas, at the end of those three comparatively bright months, the
old deterioration set in, the old dissolute habits once again assumed
mastery of his relaxed will power. He had long bouts of
intemperance, during which he could not do a stroke of work. By
degrees the small savings were withdrawn from the bank to pay rent
and purchase the bare necessities of life.
Then came the sudden death of old Mr. Buckley, and the arrival in
London of his daughter Alma. The girls had corresponded
occasionally, and the first thing Alma did when she reached London
was to visit her old friend. The acquaintance which had been so
close in the country soon ripened again, and this time into a life-long
friendship. With her father now beyond hope of salvation drifting
rapidly downward, this companionship was a great consolation to
Miss Larchester. Old Buckley had left more money behind him than
people would have expected, and every penny had gone to the
daughter. It was, of course, only a very modest competence, but it
removed the girl for ever from any fear of poverty so long as she did
not touch the capital, which being a very level-headed young woman
she was never tempted to do. She was a very kind friend to the
Larchesters—helping them often in their hours of need, which grew
more and more frequent, as the artist’s powers of self-control waxed
weaker and his capacity for work declined in consequence.
She did not, however, propose to live on a small income all her
life. Her great ambition was to go on the stage, but as her several
attempts in this direction met with no result, she grew less ambitious,
and in time blossomed into a music-hall artist who could generally
rely upon engagements at moderate fees which made a very
pleasant addition to her private income.
She was fairly launched in this career when Larchester died after a
lingering illness, the cause of death being an internal malady which