Kara Tan Bhala is the President and Founder of Seven Pillars Institute for Global Finance and Ethics, USA, the world’s only independent think tank for research, education, and promotion of financial ethics. She was an Honorary Research Fellow at Queen Mary University of London, U.K., currently sits as a Jury Member for the Ethics and Trust in Finance Global Prize based in Switzerland, and is the U.S. Ambassador for the Transparency Task Force (U.K.). Dr. Tan Bhala has a rare combination of professional training and extensive experience in both global finance and moral philosophy. She has nearly 30 years of experience in global finance, much of which was gained through working on Wall Street. She has been a sell-side equity analyst, a sell-side equity salesperson, a buy-side equity analyst, a portfolio manager, and a lecturer in finance. For 18 years she ran her own international financial markets consulting firm. Dr. Tan Bhala has five degrees across three disciplines: a Bachelors (City, University of London, UK) and Masters (Oxford University, UK) in Business, a Masters in Liberal Studies (New York University, USA), and a Masters and PhD in Philosophy (University of Kansas, USA). She has lived and worked in London, Oxford, Singapore, Hong Kong, New York, Washington DC., and currently resides in Kansas City, MO. She is a member of the Council on Foreign Relations, USA, and the Royal Society for Asian Affairs, UK.
Can you talk about your background and what inspired you to work in the field of ethics and finance?
I was born and brought up in Malaysia, earned my undergraduate degree at the University of London, and moved to the US in 1988 when the British broking company I worked for in Singapore transferred me to its Wall Street office. I loved New York and liked investment analysis. I made up my mind to work my way up the greasy pole until I became a senior portfolio manager with direct responsibility for managing a major fund. I achieved this goal with the Merrill Lynch Dragon Fund and embarked on a 25-year journey in asset management, much of which I enjoyed.
Later, I took a break from the industry to spend more time with my one-year-old daughter. The pause also provided an opportunity for me to pursue a Masters and PhD in philosophy. When I received my doctorate in 2009, it happened to be a year after the great financial crisis. That event shook me. Greed, regulatory capture, and moral indifference resulted in financial catastrophe. So I decided to use my experience in finance and my background in philosophy to do something about getting ethics back into finance, both at a theoretical level and in practice. I’ve been quite fortunate in my life. I guess I wanted to pay it forward by setting up a non-profit think tank to help educate and promote financial ethics.
How do you see the role of ethics in shaping financial institutions and markets?
You see, ethics became a discard of finance when Milton Friedman published his essay, “The Methodology of Positive Economics” in 1953. His view goes something like this: economics is a science – an objective discipline that doesn’t concern itself with values. Economics deals only with facts. Finance being the stepchild of economics, wholly embraces this position on value neutrality. Finance scholars and practitioners give no space to ethics because they believe the market, assumed as efficient, decides what is right and wrong. Over decades, this theory has evolved into conventional wisdom for many and hardened into implacable ideology for hardcore believers.
What can you do with that history in mind? First, remember prevailing theories generally are supplanted when they no longer work. We see movement away from Friedman’s ideology with increasing incidents of market failure, income inequality, and the rise of both economic and political plutocracy. There’s more talk of stakeholder capitalism rather than shareholder capitalism. Ethics can shape the purpose of institutions so that they serve others rather than just maximizing profits.
Not only are you the President and Founder of your organization, Seven Pillars Institute, but also a successful author of Ethics in Finance: Case Studies from a Woman’s Life on Wall Street. Could you provide an overview of the book’s format, and the case studies it explores from your experiences on Wall Street?
The book is both a memoir of my experiences as an Asian woman working on Wall Street, and an explainer on how to work out ethics issues commonly encountered in the finance industry. In the old days, stories we told to teach morals about how we should live were called parables. With the ascendency of business, “parables” have morphed into “case studies”. In keeping with business trends, my book comprises case studies, which essentially are edifying stories, or stories as a means of teaching ethics. In sum, the book uses stories, from my own work in finance over two and a half decades, to teach how to spot ethics issues, think about why something is wrong, and then provide guidance to do the right thing. I write about, for instance, my experience at company holiday parties, at which women are not invited into an exclusive room accessible only to senior level men.
Could you provide examples of companies or financial institutions that are exemplary in terms of ethical practices?
I’m not in a position to know the deep internal cultures of companies and financial institutions. Suffice to say there exists plenty of value washing among corporations and it takes much investigative research to arrive at the truth.
Can you discuss any research or initiatives your organization is currently involved in to advance ethical finance?
Currently Seven Pillars Institute (SPI) focuses a measure of attention to climate finance because of the global, urgent threat of climate change. We have a climate finance or Clifin series that covers topics such as green bonds, the European Green Deal, and fossil fuel divestment. We also are engaged in research on ESG (Environmental, Social, Governance) investing and we’ve started a new series called Financial Ethics 101 where our research provides general overviews of selected topics like insider trading and money laundering.
