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A recent full page advertisement in the Financial Times caught my eye.
This was an ad issued by the CFA Institute. There are more than 90,000 CFAs in the world, according to the website of the CFA Institute which is headquartered in Charlottesville, Virginia.
While browsing through the internet I came across this comment: "None of the star analysts implicated in the Wall Street scandal that led to the $1.4 billion settlement - Merrill Lynch's Henry Blodgett, Salomon Brothers Inc.'s Jack Grubman, and Morgan Stanley's Mary Meeker - had the CFA designation, according to CFA Institute records." Of course, that was written a few years ago so I don't have any idea if any CFAs were involved in the recent sub-prime and mortgage mess.
The star analysts listed above were research analysts hired by the large broking houses like Merrill Lynch, Salomon Brothers, and Morgan Stanley to cover the then-booming technology and internet sectors. These analysts, investigations indicated, were writing wonderful stories on companies because their employees (the brokers) paid them very well to write stories and not necessarily what they really felt about the companies. So, for example, in one memorable quote one of these analysts wrote, in an internal email, that the company was actually rubbish but, because there was a "transaction" happening, they were writing nice things about the company.
The "transaction" was a reference to a public offering that was due to come out which, when successfully placed with the public and the investors at large, would result in a nice fee for the broking house. And this nice fee would result in a nice bonus for the research analyst writing the wonderful story to support the wonderful IPO.
But - though I am not a betting man, as such - even though there were no CFAs involved in the "star analyst" scandal, I can bet that there were quite a few MBAs involved in that failure and in the recent sub-prime and mortgage crisis.
That's because of what they teach us (I am an MBA, too) at these business schools. We are treated like the chosen ones, some sort of saviours to mankind's problems. And we can solve them all in case studies in classrooms. And then, once we have done that we move on to mastering the art of making money. We MBAs are the ambassadors of capitalism - the science of being selfish and looking after our own interest - and sometimes disguised as the interest of The Company - is turned into an art. Capitalism is the given framework and we are taught to worship it. And further its cause. At any cost.
Don't get me wrong, there are many not-so-rich MBAs out there who believe in ethics and goodness and fairness. But, on balance, all the folks involved in some scandal or the other tend to be MBAs. This could be a sign that it is so easy to get an MBA that anyone who wants it can get it (so the course may not teach you greed and scandalous behaviour but the course selection process does not have the ability to check your background well).
Like a good friend from New York told me many years ago: "The closer you get to the money, the more it stinks". But - stink or no stink - many of us MBAs are out there hovering around for the kill.
Putting money matters into the hands of most MBAs is like giving a terrorist the key to a nuclear reactor. You know there will be a blow up - it's only a matter of time. And you know the damage will be huge.
And this is probably true for many CA's too. In an Indian context, tax avoidance is seen as another version of tax planning. And there are many CA's in this business. And in the fund distribution business, too. And not all of them act in an ethical or correct way.
So does the university that award the MBA take back the MBA degree?
A friend asked me once, what I would do after I stopped spending my time trying to enlighten and educate on money matters. I told him I would like to set up a university where we granted MBAs to students with an understanding that, if they misbehaved, the MBA degree would be withdrawn.
What if every MBA or CA degree could be withdrawn and the penalty along with the withdrawal would be a return of all the wealth created from the time the person graduated with the MBA or CA degree.
Come to think of it, if the people who grant the degrees cannot punish the recipients of their degrees, how useful are these degrees?
And if these same people enter the industry of financial services or work with companies that tap the financial markets, maybe SEBI should lay that down as Rule #1: "If you enter this industry and you are caught lying or cheating or indulging in fraudulent practices, we will take away all the wealth you have. And you have no recourse to a court that takes 25 years to decide whether you are guilty or not. Your fate will be decided by a jury comprising of the investors you serviced. If you agree to this rule, stay on in this industry otherwise find employment somewhere else."
A lot of people would leave this industry in a hurry - this would be an automatic wealth enhancement for most investors! A one-time "exit dividend" followed by the calm and peace of blissful, fair advice.
Think about it - but don't dwell on it.