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Professional Authority After the Global Financial Crisis pp 33–63Cite as

Palgrave Macmillan

The Dynamic Authority of Leading Financial Services Providers

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Abstract

This chapter traces the dynamic authority of three sets of UK- and US-based financial services providers: the major American credit rating agencies Moody’s, Fitch and Standard & Poor’s; the global accounting firms Deloitte, Ernst & Young, and PwC; as well as the technology, information, and news corporations (TINCs) whose ranks include Bloomberg, Thomson Reuters and Dow Jones. The pre-crisis authority of these professionals that was long underpinned by expert identities was challenged by tensions stemming from their widespread failures in the 2007–8 global financial crisis. In the immediate aftermath of this period of instability leading Anglo-American financial services providers undertook explicit engagements with macro-level moral issues. These dispersed ethical emphases culminated in attempts to re-legitimate professional power by shifting identities from neutral providers of financial services to overt contributors to wider common concerns.

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Notes

  1. 1.

    The precise definition of a formal debt default varies widely, from a failure to honour interest payments to a small delay in debt repayment, for an overview see Ang and Patel (1975).

  2. 2.

    See Campbell-Verduyn (2013) for an overview.

  3. 3.

    Moody’s for instance had the highest profit margins of any S&P 500 company between 2000 and 2005 as shares in this firm increased by nine hundred per cent over the decade.

  4. 4.

    The Sarbanes–Oxley Act of 2002 created the Public Company Accounting Oversight Board.

  5. 5.

    KPMG, the fourth large global accounting firm, is based in the Netherlands while the fourth largest Anglo-American accounting firm, Grant Thornton, has revenues less than a quarter of those of the Big Four in 2012 (Accountancy Age 2013).

  6. 6.

    The Colonial BancGroup Inc et al v PricewaterhouseCoopers et al, U.S. District Court, Alabama Middle District, No 11-cv-00746 was settled for over $5.5 billion in 2016.

  7. 7.

    See Mimms v. PricewaterhouseCoopers LLP et al, U.S. District Court, Southern District of New York, No 11-00030 as well as Financial Crisis Inquiry Commission (2011).

  8. 8.

    See for instance, re Bear Stearns Companies, Inc. Securities, Derivative, and ERISA litigation, U.S. District Court, Southern District of New York, 08-1963.

  9. 9.

    For example by the State of New Jersey and the Alameda County Employees’ Retirement Association. In the People of the State of New York v. Ernst & Young LLP, 11-cv-00384, U.S. District Court, Southern District of New York (Manhattan), the New York Attorney General has sought that EY “disgorge” the $185 million in fees earned preparing the investment bank’s financial statements as well as pay for investor damages, see Sandler (2012).

  10. 10.

    European regulation 537/2014 mandates that public firms to rotate auditors at least every decades.

  11. 11.

    After significant industry opposition the Board settled for increased transparency requirements (Securities and Exchange Commission 2016).

  12. 12.

    Organisation scholar Barbara Czarniawska (2011: 190–1) provides further examples of this phenomenon.

  13. 13.

    An overview of which can be found in Standard and Poor’s Ratings Services (2014b: 78–9).

  14. 14.

    Sukuk refers to financial instruments that are structured in accordance with Islamic law, Sharia. “For the most part,” as Bill Maurer (2005: 25) notes, “the lingua franca of Islamic finance is English; Arabic terms supplement it, and most if not all of those supplementary terms are nouns naming contracts or concepts.”

  15. 15.

    An overview of pre-crisis ratings agencies involved sustainable finance is provided by both Beloe et al (2004: 8) and Observatoire sur la Responsabilité Sociétale des Entreprises (2007: 70–1).

  16. 16.

    For example, S&P co-hosted a Climate Change Financing round-table discussion in 2010 intended “to assess investor appetite for climate change financing, identify innovative financial structures that could be applied to fund climate change projects, and examine the risks and barriers that might prevent their implementation” (Parhelion and Standard and Poor’s 2010).

  17. 17.

    <http://www.unep.org/newscentre/default.aspx?DocumentID=2758&ArticleID=10698#sthash. 9WM3ZvtW.dpuf>.

  18. 18.

    <http://www.spindices.com/indices/equity/sp-global-water-index>.

  19. 19.

    Dow Jones indexes merged with S&P indexes and remains an industry leader in this field, see Environmental Finance (2015).

  20. 20.

    A founding partner of the GISR, Bloomberg also signed a Memorandum of Understanding with the IIRC in 2014 “to promote and support the global alignment of corporate reporting and ratings frameworks” (Cohn 2014). The GISR’s steering committee also has the large Anglo-American accounting firms as “strategic sponsors.”

  21. 21.

    For a more detailed overviews of initiatives undertaken following the outbreak of the global financial crisis, see Lovell and MacKenzie (2011).

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  1. Balsillie School of International Affairs, Waterloo, Ontario, Canada

    Malcolm Campbell-Verduyn

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Campbell-Verduyn, M. (2017). The Dynamic Authority of Leading Financial Services Providers. In: Professional Authority After the Global Financial Crisis. Building a Sustainable Political Economy: SPERI Research & Policy. Palgrave Macmillan, Cham. https://doi.org/10.1007/978-3-319-52782-6_3

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