This chapter opens with a brief discussion of the nature of business ethics, its significance for corporations and the ethical dimensions of a corporation’s stakeholder relationships. The next section is focused on the causes of ethical problems: bad apples, bad cases and bad barrels. In order to examine these it presents the theory related to each before drawing on three case studies: the HIH failure, the LIBOR case and the destruction of Juukan Gorge. The extent to which we attempt to encourage ethical conduct is discussed in the following section. In particular, that section examines corporate accountability, individual accountability and organisation-level approaches that seek to shape the ethical conduct of corporations. The final section is devoted to some concluding remarks.

The LIBOR scandal stands out as the most striking failure of private financial standard-setting in the post-crisis era, and thus provides an important case study of the resilience of private authority. Public authorities brought corporate criminal cases against the world’s largest banks, imposed penalties of tens of billions of dollars, and indicted several brokers and bankers. LIBOR’s private administrator was replaced, and the public sector has played a central role in creating and administering new, more robust benchmark interest rates. Neither the transnational nature of the benchmark itself, its users, and the manipulation scheme, nor the fact that the scandal coincided with a financial crisis prevented this reassertion of public authority. The intervention of a different set of public actors—most saliently prosecutors—with different incentives and capabilities is the key factor that explains this outcome, which stands in stark contrast with the hands-off approach to LIBOR governance and reform followed by banking regulators before the crisis. This suggests that involvement of a broader range of public actors can restore the balance between private standard-setting and effective public oversight.

Financial crises have a tendency to expose the financial system’s inability to absorb large systemic shocks, the critical role of liquidity channels, and financial institutions with fragile balance sheets. Pinpointing the causes of systemic risk challenges supervisors because the range of risks are virtually unlimited. This chapter argues that the definition of financial stability must be revisited to enhance the efficacy of financial supervision by drawing upon the lessons learnt from the 2008–9 global financial crisis. Defining systemic risk requires a real-time perspective of risk transmissions between the financial system components. Supervisors should appreciate financial agglomeration, the interconnectedness of the financial system, and behavioural economics when regulating systemic risk. Liquidity mismatches that destabilize financial institutions’ balance sheets and the capacity to raise funding can cause financial instability. The inability of the Hong Kong Monetary Authority to control monetary policy constrains its power to fully manage these liquidity risks. Mitigating financial instability caused by systemic liquidity risks requires an understanding of prudential regulation and the management of monetary policy to stabilize bank balance sheets. Financial architecture must be properly utilized by supervisors to restore the orderly and rational functioning of the financial system.