Wednesday, May 3, 2017

The Shared Value in Finance Industry

This week’s article “Creating Shared Value” makes me rethink the role of business in the entire society, especially the finance industry. The concept of “shared value” is very forward-thinking in term of creating mutual benefits for both the private companies and the society. Combing the public finance lecture I have attended recently and my past internship experience in asset management firm, I see the both worst and best practice from this shared-value perspective.

In the public finance lecture given by alumni Mark Melio on April 11th, he talked about the crazy mindset of Wall street bankers before the 2008 financial crisis. The description is very vivid that “During 1980s, bankers first evaluate if the deal is ethically, then if it is legally, but after 2000s, if the deal is legally, it automatically becomes ethically.” The vision of creating best service and values for clients is totally an illusion in IBD and Sales & Trading department. The capital just goes in an entirely negative way regarding shared-value approach. This ridiculous methodology of only creating inclusive value finally bear the disastrous consequences in 2008 crisis.

However, he also shared his thoughts and feelings in Goldman Sach’s public finance department, issuing the municipal bonds for hospitals. He was always happy to help the clients and in the meantime create some revenue for his firm (although much less than two main departments). He was pride of his work when showing the newly completed healthcare building in the community to his children. In my perspective, it is a way to still create some shared value in this industry driven by making money, which is still quite meaningful.

My boss in previous internship always said we should not be an elegant egoist. To achieve this goal, we should not only consider our clients’ interests but also the whole interests of society. This is an extremely strict regulation for herself and us to keep out of many investment opportunities, as the entire asset management industry is disordered in China. For example, once we gave up a very profitable deal in tobacco industry considering its negative shared values.

As for me, this concept goes beyond the simple business practice to necessarily be integrated into daily actions and my own future career path. I think it is very hard for business to actually evaluate how much shared value they create, but easy for individual to follow initially because of the good feeling associated with this approach.

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