In an extremely competitive world, people tend to become primarily focused on themselves. Sometimes this focus on their own person or interests induces ethical conflicts, with outcome there is arrival at deliberate cheating of others to whom they owe some fiduciary responsibility.
Whenever one person owes fiduciary responsibility to another, there exists a morally or legally binding demand for trustworthiness.
Illustrations of fiduciary responsibility are inclusive of teacher — student relationships, that is, the fiduciary responsibility that students’ grades be fair representations of their performance — the fiduciary responsibility that ranking of students’ performance be fair.
If Professor A ranks students I and II as scoring 90 & 80, respectively, and Professor B of similar or higher expertise who lacks any conflict of interest with Professor A ranks same students as scoring 89 and 82, there does not exist any violation of fiduciary responsibility on the part of Professor A.
Another illustration of fiduciary responsibility is the relationship between company auditors and shareholders, that is the responsibility of auditors to point out to shareholders any frauds detected in course of statutory audits.
Yet another illustration of fiduciary responsibility is the expectation that analysts who provide ‘buy’ and ‘sell’ recommendations on stocks not willfully misdirect clients who pay for their services. When the organization that employs an analyst takes a buy position in a stock that is recommended as a sell by it’s analysts, this is violation of fiduciary responsibility.
In reality, self interest tends to rear it’s head for arrival at violations of fiduciary responsibility. Accounting firm — Arthur Andersen — which then was one of the top three audit firms, failed because it did not perform it’s fiduciary responsibility towards shareholders in context of statutory audits of Enron’s books. Enron committed frauds of which Arthur Andersen was aware, yet shareholders were not notified. So then, Arthur Andersen paid the ultimate price — cessation of business.
Whenever the Bank of England imposes fines on investment banks for manipulation of interest (Libor) rates, it is because a self interest induces violation of fiduciary responsibility towards the Bank of England. Whenever the Bank of England channels monetary policy through banks, banks have a fiduciary responsibility not to collusively attempt to offset objectives of the Central Banker. Whenever there is collusion for undoing of objectives of monetary policy, this is violation of fiduciary responsibility.
Whenever analyst recommendations are found to have been misleading — and this is well documented and fined by the Securities and Exchange Commission (SEC) — it is because analysts and/or their employers place self interest ahead of fiduciary responsibility to their clients. If you are interested in the evidence, check out Hirsch and Pozner (2005).
Whenever problems emerge in society, while a determination of punishments for wrong actions always is important, it equally is important that society arrive at mechanisms that mitigate occurrence of similar wrong behavior in future.
In this respect, note that punishments for wrong actions typically are easy to arrive at, do not require much thought. Usually, there already exists some legal code that enables determination of punishments, a legal code within whose context consequences for wrong actions can be established. Absent an exercise in Thoughtfulness, however, arrival at mechanisms that deter occurrence of wrong actions is highly unlikely. Most times there exists some loophole, bad policy, bad law, or yet to be discovered principle or mechanism — hidden, or seemingly in plain view, but yet to be recognized — that encourages exercises in wrong behaviors.
While both are important, it is more important to deter feasibility of wrong actions in future than it is to punish wrong actions that already have transpired.
Absent thoughtfulness, arrival at mechanisms that deter wrong actions is nigh impossible.
In wake of the Enron scandal that induced demise of Arthur Andersen, accounting firms subsequently were barred from provision of consulting services to firms for whom they simultaneously served as auditors.
With this remedy, the regulator recognized that in presence of a conflict between fiduciary responsibility towards shareholders, and access to consulting contracts, which paid a lot more than audit fees, that accounting firms are more likely to violate than adhere to fiduciary responsibility. In presence of such skewing of incentives, the regulator determined it was best to render such conflicts impossible in future.
So then the thoughtful remedy, namely impossibility in principle of provision of each of audit and consulting services to the same client. Punishment of Enron and Arthur Andersen was important, thoughtfulness that ensured the problem would become less likely to recur in future was of far greater importance. Rather than waste tax dollars chasing after accounting firms for deciphering of violations of fiduciary responsibility — an extremely difficult objective — the regulator wisely chose to devote energies to deciphering of conflicts of interest that can induce violations of fiduciary responsibility— an extremely easy objective.
Note that the tougher objective would have rendered the regulator much larger, for there would have been demand for hiring of a lot more people, and designing of a lot more programs and processes for achievement of little or nothing — for absent incidence of some seemingly uncorrelated event, deciphering of violations of fiduciary responsibility by audit firms is nigh impossible. Thoughtfully, the regulator chose not to grow ineffectively larger, chose effectiveness, efficiency, and sustainability over self aggrandizement.
Thoughtfulness seeks out the best feasible solution, not the solution that aggrandizes the person or organization of whom some thought is expected.
Thoughtfulness is not evident in evidence that a matter has been thought about; thoughtfulness is evident in a deliberate attempt to think through to the best feasible solution.
Sometimes a new innovation arrives, and it renders some prior innovation totally obsolete. The Walkman and the iPod are a case in point — on arrival of the iPod, the Walkman in essence became obsolete.
Yet at other times, arrival of a new innovation does not in entirety render another innovation obsolete, simply may render it obsolete in some contexts. Consider then that whereas the iPod became an instant hit in developing countries, the iPhone did not, this because centralization of a home entertainment system around an iPhone hardly was a need in such countries. So then, while the iPod rendered the Walkman obsolete in developing countries, the iPhone did not achieve the same objective, was in developing countries more of a luxury than a need.
Enter then open access programming, and development of Android phones, with outcome Android phones, which are significantly cheaper than the iPhone, have become ubiquitously a need in most developing countries. Android phones provide what was needed more in developing countries — a device that performs some of the data or file manipulation functionality of computers. If Apple were to ramp up it’s marketing of the iPhone in developing countries, it would do little to raise it’s profile for, in developing countries, file swapping capacity of Android phones is of far greater importance than centrality of iPhones for home entertainment systems.
Apple thoughtfully has concentrated marketing of the iPhone within developed countries, thoughtfully has ceded most of the market for intelligent phones within developing countries to makers of Android phones.
Thoughtfulness induces companies to focus on their niche market, as opposed to engaging in price wars within all markets. Thoughtfulness induces regulators to come up with easy solutions that simultaneously are ‘best’ solutions, as opposed to solutions that merely render the regulator richer, more foreboding, and larger than life. Thoughtfulness is required for arrival at best approaches to regulation of banks, and best mechanisms for mitigation of deviations from fiduciary responsibility by analysts who provide buy and sell recommendations on stocks.
Thoughtfulness is a much underappreciated feature of the best solutions to which we attain. In today’s socioeconomic and political limelight, there exists the danger — in fact there already subsists the danger — that thoughtfulness is taking a back seat to self aggrandizing solutions, to solutions that merely are foreboding, as opposed to effective, efficient, and sustainable. Whether it be in realm of politics, social interactions, management, finance, economics, or whatever other sphere, most of the solutions being bandied around today tend to be self aggrandizing solutions, as opposed to thoughtful reminisces over what is effective, efficient, and sustainable.
Where there is Thoughtfulness, arrival at the best solution is more important than success at foistering of a self gratifying slant on the solution on the rest of society.
If society is to arrive at any sort of good equilibriums, equilibriums that are sustainable into the future, such equilibriums only are attainable in context of Thoughtful, as opposed to self aggrandizing, equivalently, self gratifying solutions.
Turns out thoughtfulness is a lot more important than you and I thought it to be.