Download - 05 Nov 2009-Justin O' Brien-IIEA PPT
-
8/8/2019 05 Nov 2009-Justin O' Brien-IIEA PPT
1/29
` 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.
` 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.
-
8/8/2019 05 Nov 2009-Justin O' Brien-IIEA PPT
2/29
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
-
8/8/2019 05 Nov 2009-Justin O' Brien-IIEA PPT
3/29
What can we learn about accountabilityby examining how it is used in thediscourses associated with the globalfinancial market crisis?
-
8/8/2019 05 Nov 2009-Justin O' Brien-IIEA PPT
4/29
` 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.
-
8/8/2019 05 Nov 2009-Justin O' Brien-IIEA PPT
5/29
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.
-
8/8/2019 05 Nov 2009-Justin O' Brien-IIEA PPT
6/29
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
-
8/8/2019 05 Nov 2009-Justin O' Brien-IIEA PPT
7/29
1944 1942 1944
-
8/8/2019 05 Nov 2009-Justin O' Brien-IIEA PPT
8/29
` 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)
-
8/8/2019 05 Nov 2009-Justin O' Brien-IIEA PPT
9/29
` 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)
-
8/8/2019 05 Nov 2009-Justin O' Brien-IIEA PPT
10/29
` 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).
-
8/8/2019 05 Nov 2009-Justin O' Brien-IIEA PPT
11/29
` 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
-
8/8/2019 05 Nov 2009-Justin O' Brien-IIEA PPT
12/29
` 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).
-
8/8/2019 05 Nov 2009-Justin O' Brien-IIEA PPT
13/29
` Raymond Williams: Keywords
` Democracy
` Equality
` Class
` Bureaucracy
Accountability
-
8/8/2019 05 Nov 2009-Justin O' Brien-IIEA PPT
14/29
` 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.
-
8/8/2019 05 Nov 2009-Justin O' Brien-IIEA PPT
15/29
` 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).
-
8/8/2019 05 Nov 2009-Justin O' Brien-IIEA PPT
16/29
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
-
8/8/2019 05 Nov 2009-Justin O' Brien-IIEA PPT
17/29
` Power of accountability as a keyword is rooted inwidely held beliefs about what accountabilitymechanisms can or should accomplish (e.g. control,performance, integrity)
-
8/8/2019 05 Nov 2009-Justin O' Brien-IIEA PPT
18/29
` 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.
-
8/8/2019 05 Nov 2009-Justin O' Brien-IIEA PPT
19/29
` Does reform enhance accountability?
`
Rhetorically focused on improving integrity of markets
` Actual proposals focused on repairing or creatingmechanisms of control
-
8/8/2019 05 Nov 2009-Justin O' Brien-IIEA PPT
20/29
` 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
-
8/8/2019 05 Nov 2009-Justin O' Brien-IIEA PPT
21/29
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
-
8/8/2019 05 Nov 2009-Justin O' Brien-IIEA PPT
22/29
` Responsive Regulation
` Smart Regulation
` Post-structural enrolment
Theories of Regulation
-
8/8/2019 05 Nov 2009-Justin O' Brien-IIEA PPT
23/29
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
-
8/8/2019 05 Nov 2009-Justin O' Brien-IIEA PPT
24/29
` 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)
-
8/8/2019 05 Nov 2009-Justin O' Brien-IIEA PPT
25/29
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
-
8/8/2019 05 Nov 2009-Justin O' Brien-IIEA PPT
26/29
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.
-
8/8/2019 05 Nov 2009-Justin O' Brien-IIEA PPT
27/29
` 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
-
8/8/2019 05 Nov 2009-Justin O' Brien-IIEA PPT
28/29
` 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
-
8/8/2019 05 Nov 2009-Justin O' Brien-IIEA PPT
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.