the real economy suffered unprecedented output loss and growth. 30. following the financial crisis, efforts are afoot to make it harder for bad bosses to walk away with a fortune. a further key trend regarding executive pay that has emerged since the start of the crisis is that its regulation has taken on an international dimension. two g20 summits were held in 2009 that both substantially addressed the issue of executive pay. further, the financial stability board ( fsb ), a body of regulators to oversee the global financial system, has evolved a set of principles to govern compensation. the proposed framework involves increasing the proportion of variable pay, aligning it with long - term value creation and instituting deferral and claw - back clauses to offset future losses caused by the executive. we have recently advised our banks in india to initiate similar steps. ethics 31. what is the common thread running through these causes of the crisis and the swathe of reforms to prevent another? it is the ethical dimension. what the crisis highlighted was the massive breakdown of trust – trust in banks, in financial system, in rating agencies, in investment advisers and in politicians. trust is an important element in the functioning of financial markets as the very nature of financial contracts requires a high level of trust. this trust which takes time to build up was eroded during the crisis. several questions come to mind in this context. was the behaviour of the players across the chain of the financial system fair and ethical or was it influenced by the greed to make quick profits and fat bonuses? did the bankers and investment advisers explain the risks in the complex financial products they sold to their clients? and what about the credit rating agencies? did they compromise on their standards? 32. the crisis has triggered an interesting, if also a soul searching debate on whether the malaise that we have seen in the financial sector might in fact be a result of degradation of value systems in the society as a whole. this brings me to the issue of leadership. did leaders in the field of high finance let us down? whether the leaders were lulled by the phenomenal success of modern financial engineering and got carried away by “ irrational exuberance ” and could not see the “ black swan ”? probably ; the leadership qualities required is to keep the financial system stable so that it can serve the real economy. the mba oath 33. it is in this context that i will leave with you an important issue to ponder about. i hope you have heard of the mba oath. for

those of you who have not, this oath represent a small step towards professionalizing the management field in ways similar to the medical and law professions. it is the management equivalent of the hippocratic oath taken by doctors. it is a voluntary pledge that asks graduating mbas to commit towards the creation of value “ responsibly and ethically ”. two professors at harvard are working to create an mba oath that can later be possibly used as a global template. 34. although the oath is a formalized written version of an ethical code of conduct for managers, the concept behind ethics in business can be traced back to the initial formation bis central bankers ’ speeches of management education in the early twentieth century. the original intent of instituting a management degree was to educate a managerial class that would run corporates in a way that would serve the broader interests of society rather than the narrowly defined interests of capital or labour. in recent years, management graduates have been blamed for constructing a financial system with complex products without adequate controls. this compelled a team of harvard business school graduates to lead a student - based initiative to encourage all graduating students of the class of 2009 to sign on to the mba oath. it is understood that more than half of the graduating students in that year signed the oath. 35. true professions must bear a code of conduct and the meaning and consequences of those codes ought to be taught as part of the formal education of their members. i have personally brought up this topic here today to leave these thoughts with you as i believe that youth is a dominant section of our society. the value system that you practice in your personal and professional conduct influences the value system of the society. there is thus a great responsibility on your young shoulders to observe high ethical standards throughout your life. 36. some of the most successful and profitable companies in the world have also been those which have been known for observing very high ethical standards. idealism or ethics without ambition may not achieve much but ambition without idealism or ethics can play havoc. may you combine the two in right proportion, only then can you work in a manner which is mutually beneficial to you and the society. conclusion 37. let me now sum up. i started with the arab spring movement – a social revolution. i thereafter discussed the growing frustration of the public with corporate greed and wealth disparities that symbolised the occupy wall street movement. i touched upon the los indignados movement in spain reflecting the angst of the public which has grown res