Professional Ethics in Banking and Finance - a Praxeological Approach to the Social Embeddedness of Finance

In our paper we raise the question of the relationship between finance and society which, in economic sociology, is known as the problem of embeddedness. In contrast to the two main approaches in the special field of financial markets research (the social studies of finance on the one hand, the politico-economic approach on the other) we propose a praxeological notion of embeddedness which considers the normative capacities of financial actors. More precisely we examine how financial actors themselves refer to the question of societal responsibility of the financial industry. Our findings thus contribute to the controversial debate about finance´s potential for normative self-regulation.

The analysis of more than 20 semi-structured interviews in the field of banking and finance which were conducted within a current research project at Frankfurt University reveals a dilemma: Even though financial actors do raise moral claims, these claims don´t affect the societal sphere in which normative concerns would be particularly necessary. The empirical findings rather show that the professional ethics in banking and finance feature an internal morality which is primarily addressed to clients, colleagues or employees. Society only plays a minor role in the moral considerations of the interviewees. We identified four different ways in which they interpret societal responsibility: 1) abstractly (without specification and reference to their own practices); 2) as disconnected from occupational practice (transferred to the charity commitments of corporate citizens or private persons); 3) as image work; 4) negatively.

As we will show, the absence of societal concerns in the professional self-conceptions of financial actors relates to a twofold process of structural dissociation. Regarding the dissociation of finance industry’s interest in profit making from real economic concerns and developments on the one hand, we particularly want to draw attention to what we call a socio-structural process of dissociation: The widespread homogeneity of the social milieus of financial elites is deeply intertwined with an internally directed professional ethics that largely disregards the societal consequences of economic action. Processes of social closure, which occur during education and in the working and private lives of financial actors prevent the reflexive confrontation with perspectives beyond the own privileged group, which in turn reduces the probability of the emergence of normative concerns towards external interests. Our findings are validated by contrasting financial actors who work in “ethical banks” and commonly share a different and more heterogeneous social background. The societal disembeddedness of economic action is thus not only due to economic reasons but also results from the structure of a social group that is widely disconnected from lifeworlds other than their own. The problem of the disembeddedness of financial industry thus also reflects the problem of social inequality.