John R. Boatright - Ethics in Finance Blackwel publishers, foundations of business ethics series 1999
Fairness in Financial Markets
"Boatright's Moral Market Model is based on a conception of business etbics that focuses on individuals acting in the marketplace"

Boatright addresses the ethics of financial markets in terms of fairness. Herehe makes the critical distinction between fairness as a necessary condition for market efficiency, and fairness as an end in itself where it can challenge efficiency (p. 31), He sees this tension in financial market regulation as well, "The broad aim of financial market regulation is to secure 'fair and orderly markets' or 'just and equitable principles of trade,' Tbese expressions combine tbe economic values of efficiency with an ethical concern for fairness or equity, thereby giving rise to the familiar equity/efficiency trade-off.

In finance, fairness as a component of market efficiency is an underemphasized point. Fairness as a challenge is largely ignored, Boatright concentrates on fairness as an element of efficient markets. He accepts that "markets produce winners and losers and many exchanges are zero sum games" (p, 32).

His concern is more that market participants have access to "a level playing field" than with the circumstances in which the losers may find themselves. An example is the access to information. The flow of information in the marketplace and its "asymmetry" is one of the most intensely studied aspects of financial markets.

Basic information needs to be available to all participants as a condition of efficient markets, Tbe analysis of information that enhances a decision, however, is a function of skill and the investment of resources, thus becoming proprietary, Boatright is right on target when he makes this distinction. He recognizes that the ethical issue is in the access to the basic information—the fairness that contributes to market efficiency, Boatright's approach to fairness in financial markets refiects his preference for a market-oriented model of ethical behavior as distinct from one focused on the management of the enterprise.

We must look beyond this text to Boatright's other work, however, to find an articulation of this preference. In his presidential address to the Society for Business Ethics, Boatright proposed a Moral Market Model,5 This model fits with the financial ideal of efficient markets and effective regulation. When markets are efficient and regulation effective, there is no freedom of action available to the manager.

All managers would be driven by the competition of the efficient market to maximize the productivity of the enterprise (and thus the wealth of the enterprise and its shareholders) to the limits allowed by effective regulation,* In our world of inefficient markets and ineffective regulation, however, managers do have some decision-making freedom, thus raising the issue of responsibility, Boatright places this responsibility on all market participants, "The model I propose would place responsibility on all of us to improve the business system.

That is, to create more efficient markets and more effective regulation," Boatrigbt's Moral Market Model is based on "a conception of business etbics that focuses on individuals acting in the marketplace The fundamental problem is how to create moral markets.