Ex-top banker sees "moral disaster" in market

LONDON Sun Nov 6, 2011 9:35pm GMT

Lazard International Chairman Ken Costa listens during a Future of Finance Initiative conference in Horsham, southern England, December 8, 2009. REUTERS/Stefan Wermuth

Lazard International Chairman Ken Costa listens during a Future of Finance Initiative conference in Horsham, southern England, December 8, 2009.

Credit: Reuters/Stefan Wermuth

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LONDON (Reuters) - A former top banker, weighing into a protest movement in Britain against abuses and excesses of modern capitalism, said on Sunday the market economy had lost "its moral foundations with disastrous consequences."

Ken Costa, a former chairman of UBS Europe and Lazard International, spoke out after being appointed by Bishop of London Richard Chartres to lead an initiative aimed at "reconnecting the financial with the ethical."

Britain has become preoccupied with the ethics of elite financiers since a group of protesters, unhappy at the excesses of modern capitalism and its huge inequalities in wealth, pitched tents outside St Paul's Cathedral in London last month.

The controversy brought to a head by the St Paul's protest has elicited comments from Prime Minister David Cameron and the head of the Church of England, the Archbishop of Canterbury Rowan Williams, raising questions about regulation, including a financial transaction tax.

Writing in the Sunday Telegraph, Costa said he would look at "how the market has managed to slip its moral moorings.

"For some time and particularly during the exuberant irrationality of the last few decades, the market economy has shifted from its moral foundations with disastrous consequences," he said.

While still regarding financial incentives as "both valid and effective," he said there was a need to "rebalance the equilibrium between risk, responsibility and reward."

The St Paul's demonstration replicates others worldwide, but has spotlighted not only banker bonuses and directors' pay but also relations between politicians, financiers and the Church and the role they should play in society.

On Sunday, leader of the opposition Ed Miliband entered the fray, writing in the Observer: "You do not have to be in a tent to feel angry.

"Many of those who earn the most, exercise great power, enjoy enormous privilege -- in the City and elsewhere -- do so with values that are out of kilter with almost everyone else," Miliband said.

"Only the most reckless will ignore or, still worse, dismiss the danger signals." He said corporate bosses should have to justify their rewards to an employee who sits on a committee deciding salary packages.

The Archbishop of York John Sentamu, the second most senior cleric in the Church of England, wrote in a regional newspaper over the weekend: "The ill effects of very large income differences between rich and poor are that they weaken community life and make societies less cohesive."

A new survey showed that Britain's top company directors received a 50 percent average pay rise while the majority of Britons are having to endure a pay freeze during a period of austerity imposed by the government to reduce high debt.

(Reporting by Avril Ormsby; Editing by Mark Heinrich)

(This story corrects the first name of the opposition leader in paragraph 9)

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Comments (3)
Jnoone765 wrote:
The Politicians and Clergy can whine all they want about
large pay packages to top executives,
if they are employed by non governmental organisations it’s
for the shareholders to decide what is appropriate.
(Also, since when did morality enter into decisions about
business strategy?)

Nov 07, 2011 5:16am GMT  --  Report as abuse
Ken-midlands wrote:
This same agruement about directors pay has completely gone now, ie that you must pay the highest wages to attract the best people. What has really happened is that big investment companies pay their staff ridiculous salaries and these companies are the main shareholders who let company directors award themselves massive pay awards as they can’t say no as they already pay themselves ridiculous salaries. All this happens with the goverments blessing because they don’t have the backbone or inclination and they are so closely linked to these high powered individuals (went to the same schools) to stand up to the city. The effect has been reduced pensions and higher prices for millions of ordinary people. I don’t see how they can change the system now until it has collapsed which, is what we are seeing at the moment.

Nov 07, 2011 7:57am GMT  --  Report as abuse
ultimate wrote:
Totally agree with KenMidlands comments regarding the close relationships that exist,that get in the way of sensible and fair minded decision making.This kind of thing was very much in evidence during the recent commons select committee hearing on the phone hacking scandal.Hauled before the committee were three met officers,the chief constable and two lower ranking officers.For the chief constable,there were smiles and compliments about his time as head of the met (despite the phone hacking scandal!!!).For the lower ranking officers the gloves came off and the claws came out.But then of course these committee members donot banquet with the lower ranking officers!!!.

Nov 10, 2011 8:14am GMT  --  Report as abuse
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