Is Wall Street corrupt? Responses vary depending on whom you ask. But ask the folks who work in the financial services industry and you'll get a surprisingly clear answer: "Yes."
A recent survey of 500 financial services professionals, conducted by market researcher Populus at the behest of law firm Labaton Sucharow, turned up some surprisingly candid results from the folks surveyed. For example:
- 39% of financial industry insiders surveyed "reported that their competitors are likely to have engaged in illegal or unethical activity in order to be successful."
- And this was more than just suspicion. "26% of respondents indicated that they had observed or had firsthand knowledge of wrongdoing in the workplace."
- Nearly one in four "believed that financial services professionals may need to engage in unethical or illegal conduct in order to be successful.
- Nearly one in three said they themselves felt "pressured by bonus or compensation plans to violate the law or engage in unethical conduct.
Well ... not necessarily.
- 16% of respondents admitted that they -- personally -- would break the law by trading on insider information "if they could get away with it."
- Fewer than half could say unequivocally that they would not engage in insider trading in a situation where they knew for sure that they would get away with it.
- What's more, chances are they can get away with it. Because "only one in four financial services professionals believe [financial watchdogs such as the SEC or other government regulators] are effective."
Needless to say, these numbers are a bit discouraging. After all, these are the people to whom we entrust our money, our nest eggs, our life savings. The people who are supposed to use their expertise to help us establish a secure retirement. The folks who, in theory at least, have a fiduciary duty to obey the law and put the interests of their clients first.
Yet out of the ranks of these supposed paragons of virtue -- bankers, fund managers, asset managers, and analysts -- one in six lacks sufficient moral backbone to resist the temptation to break the law unless someone's constantly looking over their shoulders, making sure they play by the rules. (And that's the best-case scenario. Theoretically, as many as half of our financial "professionals" are potentially corruptible.)
Now add to this fact the apparently widespread conviction that "everybody else is doing it" -- and getting away with it -- and the further belief that breaking the law is almost a job requirement.
All of a sudden, the epidemic of mortgage fraud, the Bank of America (BAC)-Merrill Lynch bonus debacle, the Madoff scandal -- all of it starts to make sense. Suddenly, you start to understand why Goldman Sachs (GS) CFO David Viniar, when asked earlier this week whether decreased profitability at his firm was a cue to cut costs after he had just noted that Goldman was paying out 44% of all corporate revenue as compensation for his employees, responded simply that "we aren't going to cut our way to prosperity."
As I heard it, he might as well have responded: "Hey, I've got mine, Jack." Because on Wall Street today, that's apparently all that matters.
Motley Fool contributor Rich Smith holds no position in any company mentioned. The Motley Fool owns shares of Bank of America. Motley Fool newsletter services have recommended buying shares of Goldman Sachs.