05 nov 2009-justin o' brien-iiea ppt

8/8/2019 05 Nov 2009-Justin O' Brien-IIEA PPT

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` Friday, 6 November at 12.45. EU Energy Securitywith Mr Jean Vinois,

Head of Unit for Energy Policy and Security of Supply, at DG TREN in

the European Commission.

` Wednesday, 11 November at 12.45. Europe - Global Leadership inthe Development of Carbon Marketswith Patrick Birley, Chief

Executive of ECX Carbon Exchange.

` Friday, 13 November at 12.45. Does Britain Have a Foreign Policy?

w

ithW

illiamW

allace (LordW

allace of Saltaire).

` Tuesday, 17 November at 12.45. The European Supergridwith Dr.

Eddie O Connor, CEO of Mainstream Renewable Power.


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Retrieving the Meaning of Accountability

in Financial Market Regulation

Professor Justin OBrienFaculty of Law & Faculty of BusinessQueensland University of Technology

Centre for Applied Philosophy and Public EthicsThe Australian National University


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What can we learn about accountabilityby examining how it is used in thediscourses associated with the globalfinancial market crisis?


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` Why has effective reform of capital markets proved soillusive?

` Mapping the parameters of what constitutes theparameters of accountability is an exceptionally complextask

` The creative ambiguity of accountability highlights apotential disconnect between the rhetoric and substanceof reform.

` We hypothesize that the failure of effective accountabilityto date rests essentially on the failure to focus on thenormative infrastructure.


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Three interlinked global phenomena: flawed governance mechanisms, including

remuneration incentives skewed in favour of short-term profit-taking;

flawed models of financing, including (but notlimited to) the dominant originate-and-distributemodel of securitization; and

regulatory structures predicated on risk reduction

which created incentives for arbitrage and paidinsufficient attention to systemic credit risk.


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Level Frequency Purpose

Social Norms 100-1000 years Non-calculative SocietalContract

InstitutionalEnvironment

10-100 years Overarching legal,political and bureaucratic

framework

GovernanceArrangements

1-10 years Aligning transactionswithin accepted rules of

the game

Resource Allocation Continuous Incentive alignments


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1944 1942 1944


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` The perennial gale of changeincessantly revolutionises the economicstructure from within, destroying the oldone, incessantly creating a new one. Thisprocess of Creative Destruction is the

essential fact about capitalism (p.84)` No social system can work in which

everyone is supposed to be guided bynothing except his short-term utilitarianends...the stock market is a poorsubstitute for the Holy Grail (p. 137)


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` A self-regulating market demandsnothing less than the institutionalseparation of society into an economicand political sphere (p.74)

` Aim was to annihilate all organic formsof existence and to replace them with adifferent type of organization, anatomistic and individualistic one bestserved by the principle of freedom tocontractTo represent this principle asone of non-interferencemerely theexpression of an ingrained prejudice infavour of a definite kind of interference,namely such as would destroy non-contractual relations (p.171)


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` Parties in the market should be free tosell and buy at any price at which theycan find a partner to the transaction (p27).

` To create conditions in which

competition will be as effective aspossible, to supplement it where itcannot be made effective....provideindeed a wide and unquestioning fieldfor state activity. In no system thatcould be rationally defended would thestate just do nothing. An effective

competitive system needs anintelligently designed and continuouslyadjusted legal framework as much asany other (p, 29).


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` We shall not grow wiser before welearn that much that we have donewas very foolish (p, 177)

Few discoveries are more irritating

than those which expose thepedigree of ideas - Lord Acton (p, 1)

I found a flaw. That is preciselythe reason I was shocked

because Id been going for 40years or more with veryconsiderable evidence that it wasworking exceptionally well AlanGreenspan, 23 October 2008


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` A keyword is a significant, binding term that is not onlyindicative of the meanings and interpretation of aparticular discourse but simultaneously forms elementsof the problem that the very discourse they addressed

had generated (Raymond Williams, Keywords: AVocabulary of Culture and Society, New York: OxfordUniversity Press, 1985, p15).


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` Raymond Williams: Keywords

` Democracy

` Equality

` Class

` Bureaucracy

Accountability


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` Accountability is treated as cause and/or cure

` As a causal factor, it is the absence or failure of effective

accountability that provides the focus of the discourse.` In contrast, accountability is also central to many

discussions about how to deal with specific failures or asa counter to the overall conditions that caused the crisis.


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` Accountability is discussed as both mechanism(designed to foster accountability) and condition (stateof being accountable)

` Being accountable means being subject to those

mechanisms that are designed to impose some form ofcontrol or guidance (answerable, liable, legally obligated,etc).

` Alternatively, accountability is also treated as a

manifestation of the normative condition of beingaccountable (something an agent is or ought to be).


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Focus on:

Perspective: Cause Cure

Accountability-as-Mechanism

(i.e., control)Failure of instrument

Reform, replace, repair the

instrument

Accountability-as-Setting

(i.e., normative infrastructure)

Absence or collapse of norms,

mores, standards

Reestablishing, rebuilding moral

community based on effective

norms/standards

Figure 1: Accountabilitys Discursive Roles


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` Power of accountability as a keyword is rooted inwidely held beliefs about what accountabilitymechanisms can or should accomplish (e.g. control,performance, integrity)


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` Strategic approaches to reform are related to theperceived promises of accountability.

` Therefore, the second stage of the research examinesthe role played by accountability in the design of

corporate and regulatory strategies in response to thecrisis, using a similar framework.

` In particular we test (1) for the salience of the US-basedperspective on global patterns of policy responses to thecrisis and (2) for a possible disconnect between the

rhetoric and substance of reform traceable to thecreative ambiguity at the heart of accountabilitys statusas a key word.


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` Does reform enhance accountability?

`

Rhetorically focused on improving integrity of markets

` Actual proposals focused on repairing or creatingmechanisms of control


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` The actions of many firmsescaped scrutiny. In some cases,the dealings of these institutionswere so complex and opaquethat few inside or outside thesecompanies understood what washappening. Where there weregaps in the rules, regulatorslacked the authority to takeaction.Where there were

overlaps, regulators lackedaccountability for their inaction President Obama, 17 June 2009


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Specificity of accountable activity

Low High

Autonomy ofaccountable agent

High

Constitutive

Creation of accountable space

of internalized norms and

standards

Managerial

Set what agent is accountable

for (objective or standard), allow

agent to determine how

Low

Regulative

Creation and externalized

oversight of actions of agent

within accountable space

Performative

Set what agent is accountable

for and how to proceed

Figure 2: Accountable Strategies


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` Responsive Regulation

` Smart Regulation

` Post-structural enrolment

Theories of Regulation


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Immanuel Kants categorical imperative, namely act onlyaccording to that maxim whereby you can at the same timewill that it should become a universal law

Utilitarian or consequential approaches apportion blame onimpact

Essential to differentiate between the product and theinappropriate uses to which it was put to work

It is a deficient defence to claim ignorance of how theseproducts were structured or how unstable the expansion ofalchemistic engineering had made individual banks or thesystem as a whole

The failure to calculate the risks and design or recalibraterestraining mechanisms at the corporate, regulatory andpolitical levels grossly exacerbated the externality costs


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` elevation of the values of the market to a central social placerisks creating the circumstances in which the concept of thevirtues might suffer at first attrition and then perhapssomething near total effacement (After Virtue, p 256, p.196)

` effectiveness in organizations is often both the product and

the producer of an intense focus on a narrow range ofspecialized tasks which has as its counterpart blindness toother aspects of ones activity (1982)

` Compartmentalization occurs when a distinct sphere of socialactivity comes to have its own role structure governed by itsown specific norms in relative independence of other suchspheres. Within each sphere those norms dictate which kindsof consideration are to be treated as relevant to decision-making and which are to be excluded (1999)


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Integrity is a cluster concept: consistency of actions, values,methods, measures and principles within or between biological andecological entities

The condition of having no part or element wanting; unbroken state;material wholeness; completeness; entirety (OED);

Unimpaired or uncorrupted state Soundness of moral principle (responsibility?); the character of

uncorrupted virtue(s); honesty (self-interrogation), sincerity (self-synthesis)

Practical not a theoretical issue informed by practice: Lawyers must do more than know the law and the art of practicing

it. They need as well to develop a consciousness of their moral and

social responsibilities .... Merely learning and studying the Code ofProfessional Responsibility is insufficient to satisfy ethical duties asa lawyer - Justice Sandra Day OConnor


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ASIC has completed a strategic review of its operations.

a focus on outcomes;

the development of initiatives to help retail investors manage andprotect wealth;

the introduction of new investigative techniques to reduce systemicproblems;

the reduction of red-tape in administration; and

an emphasis on facilitating inward and outward investment bydifferentiating the Australian marketplace by demonstrable

improvements in business integrity Success, however, will depend on ASICs ability to cause market

participants to embrace the reform agenda including, crucially, itsconception of business integrity.


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` The market in unrated, unlisted bonds accounts for $8 billion andinvolves 92 vehicles with variable risk

` Benchmarked articulation of risk (e.g. credit rating, equity capital,liquidity, lending principles, portfolio diversification, valuation ofstock, related party transactions and rollovers and early redemptionpossibilities and penalties)

` External gatekeepers should explicitly take disclosure into accountwhen issuing valuations but also risk that enhanced levels ofdisclosure can obfuscate as well as illuminate

` Attention must also be placed on and accountability demandedfrom those providing corporate advisory services and the creationand dissemination of technically legal but misleading advertising(i.e. not just trustees and auditors but also copywriters, productionteams, publishers)

` Requires professional groups to acknowledge their ownresponsibility and be accountable: acquiescing to external scrutinyof what codes of conduct mean in practice


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` Retrieving the Meaning of Accountability in the Causesof the Global Financial Crisis

` Retrieving the Meaning of Accountability in the PolicyResponses

` Explaining the Gap Between Rhetoric and Substance inCapital Market Regulation

` Transcending Regulatory Failure by focusing oninteraction of Rules, Principles and Social Norms in

Capital Markets` Integrating Integrity into Accountable Design


29/29

` Friday, 6 November at 12.45. EU Energy Securitywith Mr Jean Vinois,

Head of Unit for Energy Policy and Security of Supply, at DG TREN in

the European Commission.

` W

ednesday, 11 November at 12.45. Europe - Global Leadership inthe Development of Carbon Marketswith Patrick Birley, Chief

Executive of ECX Carbon Exchange.

` Friday, 13 November at 12.45. Does Britain Have a Foreign Policy?

withWilliamWallace (LordWallace of Saltaire).

` Tuesday, 17 November at 12.45. The European Supergridwith Dr.

Eddie O Connor, CEO of Mainstream Renewable Power.

05 nov 2009-justin o' brien-iiea ppt

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