Eight men out

By Chris Fievoli, FCIA

Last year, I recorded a podcast episode with Frank Grossman, discussing a research project he completed looking at ethical concerns within the profession. I’ve known Frank for over thirty years, and I don’t think we have ever had a conversation that lasted less than an hour, so I wasn’t surprised when we continued talking for another forty minutes after the recording was completed.

Eventually, our discussion became intertwined with another mutual interest of ours – baseball history. And when it comes to discussing ethical lapses in the national pastime, the conversation inevitably turns to the 1919 Chicago White Sox, who infamously threw the World Series to the Cincinnati Reds in exchange for a payout from Arnold Rothstein’s gambling syndicate.

Eight members of the so-called “Black Sox” were banned from the game for life, including ‘Shoeless’ Joe Jackson, holder of the third-highest career batting average in major league history.

It was this event that initiated baseball’s obsession with avoiding anything remotely associated with sports gambling, which eventually leads to the modern-day example of Pete Rose. Baseball’s all-time hit king, known to many as “Charlie Hustle,” was placed on the sport’s permanently ineligible list in 1989 after it was revealed that he placed bets on games in which he was involved.

Although he claimed that he never bet against his own team, he was still in a position to potentially influence the outcome of a particular game. Besides that, major league baseball’s rules on betting have been abundantly clear, as was his violation. It’s hard to argue that his suspension was not justified.

As we continued our conversation, Frank and I ran into a conundrum – namely, how do we square this aversion to gambling with baseball’s long-standing tradition of cheating? For well over a century, players have bent the rules in countless ways in order to gain an edge. Doctored baseballs, sign stealing, overwatering the infield to slow down an opponent’s ground balls – all of these tricks have been tried over the years, with varying degrees of success.

Take, for example, Gaylord Perry, a Hall of Fame pitcher who won 314 games, two Cy Young Awards, and apparently rarely threw a pitch that didn’t have some sort of foreign substance on it to make it more unhittable.

Perry’s antics were an open secret in the baseball world and were greeted with a nod and a wink over the course of his 22-year career. It’s a fair question as to why Gaylord Perry is considered a pitching legend, but Pete Rose and Joe Jackson remain vilified.

We eventually figured out the major difference: intent. Regardless of what Gaylord Perry did, he was always trying to win; his antics were ultimately for the benefit of his team. Joe Jackson and the rest of the Black Sox were doing the exact opposite – purposely trying to lose games. And with Pete Rose, the problem was that you could never be certain, which is perhaps just as bad.

So, what could this possibly have to do with ethics in the actuarial profession? When we think about situations where we may have to make an ethical decision, we tend to imagine that we will be dealing with a Joe Jackson/Pete Rose scenario, where the transgression is so obvious, there is no question that it is out of bounds.

For example, imagine that you are a valuation actuary and that you are asked to purposely reduce your reserves and trigger a management bonus that is based on company earnings, even though such action would contravene the Standards of Practice. It should go without saying that this sort of action is clearly unethical and would be the actuarial equivalent of fixing the outcome of a baseball game. No one in good conscience should do that, and the fraudulent intent would be unquestionable.

On the other hand, what if we find ourselves in a Gaylord Perry situation; namely, where taking an ethically questionable action has the potential to benefit everyone involved? For example, suppose you are pressured to be lenient on an assumption that you are responsible for setting.

One can imagine all the arguments presented in favour of doing something like this – it’s only a temporary measure, it will help us through a difficult financial period, we can reverse it out next quarter, no one will know, it’s not going to affect anyone, we all win. In this instance, it may actually be even more difficult to stick to your ethical principles, since the pressure to “be a team player” would be very compelling, and the transgression itself would not be as obvious.

In fact, I would be willing to bet that the likelihood of finding oneself in this second situation is far greater than that of the first one. So instead of hoping that we can demonstrate our ethical principles in the face of some grand felony, we may be called on to stick to our guns in a series of smaller misdemeanours. Metaphorically, you’re not being asked to throw the game – just to put a little grease on the ball to help everyone out.

The takeaway from this discussion is that we have to be careful not to let the end justify the means when it comes to ethical behaviour in any role, whether baseball or actuarial work. The question should not be “Is anyone being harmed” but rather, “Is this the correct thing to do.” Even if it looks like a win-win for everyone involved, we still have a professional responsibility to follow our rules of conduct and act with honesty and integrity.

Baseball players will inevitably find new and creative ways to gain an unfair advantage (Houston Astros, anyone?), but that’s not a game that actuaries should be playing.

Note: At the time this was written, it wasn’t clear that the 2022 baseball season was even going to happen. My contingency plan was to invite you to relive one of the greatest games ever played; namely Game 6 of the 1975 World Series. Even though we now know that we will have baseball this year, it’s still worth watching – be sure to stick around to the end.

This article reflects the opinion of the author and does not represent an official statement of the CIA.

The following comments were shared by readers:

Lorna Schiralli: My takeaway is that being an Actuary (defined as an FCIA) in Canada brings with it an ethical obligation to follow the rules of professional conduct. I don’t disagree with that stance at all.  Enhances the brand. But I just caution that many actuaries might choose specifically not to join the CIA specifically because their hands might be tied. No matter what role they might be engaged in. I remember when the Chief Actuary was dismissed many years ago when he would not budge from his professional responsibilities to change his CPP valuation assumptions. Quite a price he had to pay. Dammed if he did. Dammed if he did not. Maybe that price was considered just a cost of doing business for the CIA.  I also remember when the valuation actuary, (now Chief Actuary) was put under extreme pressure to change their assumptions or lose their job. Quite a tricky situation. I advise the CIA not to further box itself in. We are in a new world where data management and analysis skills are key.  Our bread and butter. I worry the CIA might be shortchanging itself by limiting it’s membership to technicians.

Joe Nunes:  I laughed when I read “I don’t think we have ever had a conversation that lasted less than an hour.”  I have had the good fortune of many interesting and challenging conversations with Frank – and they just take time which is always well worth it.  I highly recommend the podcast especially to anyone that thinks they haven’t faced any ethical dilemma’s at work or are unlikely to face one in the future.  Frank’s comments on those viewpoints are very interesting.

Like Lorna (previous commenter), I don’t want our profession to limit its future membership to technicians – although we should agree that becoming a technician is the entry point from which one grows into a professional.  Where I see things differently than Lorna is that I think it is critical that we have clearly written and well understood Rules of Professional Conduct and that we remind members of their importance through regular communication and in rare circumstances disciplinary actions.  The recent development of an online professionalism module as part of our continuing professional development is an outstanding effort for promoting professionalism among our members.

Frank talks about actuaries under ‘pressure’ and Lorna gives some examples.  The road forward is not only education about the choices that actuaries should be making in difficult situations but also support for those actuaries to help push back against pressure.  If we all stand together and agree to do what is right not only for our clients but for the beneficiaries that rely on our work, our profession will be respected widely and we will all sleep well at night.