Introduction
As I am sure you are aware of, some of the executives of Goliath National Bank have been accused by the Financial Standards Authority, the Bank of England and the Government of engaging in fixing inter-bank rates.
Further investigation into this issue reveals that their accusations do have substantial merit albeit the fact that such forms of “fixing” has existed informally to a certain extent in the banking industry for years. When examining the situation at hand it is recommended that the bank focus on preserving the reputation of the organization.
To ensure continued consumer trust well into the future, the following plan has been developed:
- Mention that the bank was not aware of the activities of the executives
- State that their method of “fixing” the inter-bank borrowing rates was purely informal
- Emphasize that the bank would put stop gap measures to ensure this will not be repeated
State that the bank will do all it can to cooperate with authorities to investigate this issue.
While such actions will help to resolve the bank’s current problems in the short term, they do not address the possible problems it will encounter in the long turn given that this incident has cast serious doubt on the ethical and moral conduct of the bank’s executives.
It is based on this that it is recommended that aside from the recommended actions to address the concerns of the media, the company should also revaluate its current corporate culture and implement a better and more ethical business environment.
Necessity of Ethics Training
Various studies on corporate culture have emphasized the importance of ethics training as a means of encouraging and facilitating proper ethical practices within the workplace (Schwartz 2002, pp. 27-43). Furthermore, they indicated that ethics training allows a workforce to be more aware of the ethical codes of conduct that a company abides by and as a result enables them to be far more likely to conduct themselves in a manner that is in line with the highest standards of moral and ethical behavior (Ethics cannot be ignored 2002, p. 4).
Even organizations with the best ethical codes in the world often fall prey to instances of unethical conduct within its ranks (as seen in the current incident) and as such it is important to constantly re-evaluate whether the executives and employees that we have at the present have the necessary ethical and moral compass to do what is right for both the business and the general public (Ethics cannot be ignored 2002, p. 4).
In order resolve such issues for the company, it is recommended that the use of ethical training sessions be implemented as a means of building up on the framework of actions initially established by the ethical codes of conduct emphasized by the company (Gasorek 2003, p. 24). Based on what has happened at the present, I believe that ethical codes are not enough to dissuade unethical actions, it is often necessary to create an even greater emphasis on ethics in order for employees to feel the correlation between ethical action and the company culture that they are a part of.
Business Culture and Ethics
The fact is that ethical behaviors from employees are influenced by business culture and the corporate environment that they are exposed to (Eleftherlou-Smith 2011, p. 1). The more ethically oriented the business culture and corporate environment is, the more likely employees are to display ethical behaviors (Eleftherlou-Smith 2011, p. 1). The reverse is also true wherein the more unethical the environment the greater the potential for employees to show unethical behaviors.
I feel that the bank itself is at fault in this regard wherein in the pursuit of profit we have failed to pursue the moral highroad on how such profits are made in the first place. It should be noted though that even if ethical codes of conduct and ethical training sessions are implemented to create ethical employees, this does not mean that the end result will create an ethical company (Pactwa 2006, pp. 3-9).
Even the most ethical of employees with the best code of ethics and ethical training possible can fall prey to unethical actions within a business culture when it concerns either the performance of the company or the necessity of implementing measures connected to competitive survival (Pactwa 2006, pp. 3-9). This was seen in the case of the outsourcing industry wherein many companies outsourced various aspects of their operations to other countries such as India and China.
On the surface such companies stated that they stuck to the strict environmental rules and regulations established by the EPA within the U.S., however, since such regulations do not apply to outsourced operations in other countries these companies can in effect flagrantly degrade the environment through their operations while still stating that they were not the ones directly responsible for the incidences, rather, it is all the fault of one of their suppliers.
This is just one of the numerous examples of corporate double standards that exist in organizations that supposedly have high ethical codes of standards and undergo ethical training sessions. In order to avoid falling into such a state we must be wary that profits alone do not dictate the way in which we choose to operate.
Code of Ethics
There is an old saying that states that “the left hand doesn’t know what the right hand is doing”, in the case of the bank this takes on a more significant meaning due to the proliferation of various departments, operational sites and standards of doing business in particular areas which allowed the actions of the executives to happen in the first place (Magnet & Elliott 1986, p. 65).
Not all departments actually know what other departments are doing and, as such, this leaves a great deal of ambiguity as to what sort of ethical practices particular departments are or are not engaging in (Robinson 2002, p. 16).
As such, this presents the necessity of establishing a standard set of ethical practices and procedures across all departments due to the need to ensure that when represented by a particular department in a certain business venture their ethical practices do not reflect badly on the rest of the bank’s operations (Robinson 2002, p. 16).
What must be understood is that when a particular operation, department or employee engages in a distinctly unethical practice this makes consumers think of the bank as a whole as being unethical despite the action being isolated to that particular instance (Something’s Rotten in Banking–and It’s Not Just Barclays 2012, p. 8).
It is based on this particular example that there needs to be a certain code of ethics in order to ensure a generalized form of ethical accountability across all departments in order to prevent any action that might jeopardize the company’s image.
Conclusion
The best way of preventing the bank from conducting unethical actions is to implement proper methods of ethical evaluation and overseeing the actions of the bank itself. At times this involves the creation of a separate department within the bank whose main purpose is to evaluate the ethical actions of the bank and propose suggestions which are in line with widely accepted ethical procedures and practices.
It is expected that should such actions be implemented, we can avoid the current fiasco from happening again in the future.
Reference List
Eleftherlou-Smith, L 2011, ‘Branson puts ethics at core of Virgin bank plan. (cover story)’, Marketing (00253650), p. 1
‘Ethics cannot be ignored’ 2002, Banker, 152, 914, p. 4
Gasorek, D 2003, ‘Corporate Ethics is Not About Governance’, U.S. Banker, 113, 7, p. 24
Pactwa, TE 2006, ‘The Banking Industry — Ethics and Recent Trends: An Interview with William A. McKenna, Jr., Ridgewood Savings Bank Chairman Emeritus’, Review Of Business, 27, 1, pp. 3-9
Magnet, M, & Elliott, M 1986, ‘THE DECLINE & FALL OF BUSINESS ETHICS Beyond Ivan Boesky and Dennis Levine, a profit-at-any-price malaise is spreading through investment banking and reaching into other industries as well’, Fortune, 114, 13, p. 65
Robinson, K 2002, ‘The importance of being good. (cover story)’, Banker, 152, 914, p. 16
Schwartz, MS 2002, ‘A Code of Ethics for Corporate Code of Ethics’, Journal Of Business Ethics, 41, 1/2, pp. 27-43
‘Something’s Rotten in Banking–and It’s Not Just Barclays’ 2012, Bloomberg Businessweek, 4287, p. 8