Citigroup Inc (C), Morgan Stanley (MS), JPMorgan Chase & Co. (JPM), And How the Revolving Door Leaves Investors Out to Dry

If this is the case, it would help explain why the big banks mentioned above may benefit from offering special financial favors to employees leaving to work for the government.

But if a large number of high-level regulators have ties to the industry they regulate, this receptiveness may be against the best interests of investors. Specifically, investors should be concerned that this revolving door can help businesses derail the creation of laws that protect us from executives who wish to engage in many of the same risky behaviors that tanked our portfolios in 2008.

Also, as I discussed in a previous article, revolving-door practices can undermine enforcement of laws that protect investors by creating loyalties between regulators and the managers at their previous places of employment.

The Foolish takeaway
It’s possible that the special financial treatment many big banks accord to employees shifting to the public sector isn’t motivated by a desire to manipulate policy in their favor. However, it’s reasonable to expect that such compensation practices will promote a loyalty between the government workers and their former employers — one that could lead to policies that do a better job of protecting executives than they do of protecting investors. As a result, I believe we should be wary of companies with policies that fuel the rotation between the public and private sectors.

The article How the Revolving Door Leaves Investors Out to Dry originally appeared on Fool.com.

Motley Fool contributor M. Joy Hayes, Ph.D. is the Principal at ethics consulting firm Courageous Ethics. She doesn’t own shares of any of the companies mentioned. Follow @JoyofEthics on Twitter. The Motley Fool recommends Goldman Sachs. The Motley Fool owns shares of Citigroup and JPMorgan Chase.

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