Abstract
There may be no simple term or definition that may comprehensively explain what Ethics is, but it is interesting to note that it is one of the most critical and important component or we may say the umbrella that is essential for a business to sustain and grow. Ethical issues constitute a major history of why the institutions and organizations have failed to deliver or delivered a complete failure despite the fact that they have been doing good in terms of competency and expertise.
Banking industry is one of those organizations that have been facing such issues as there is a lot of trust worthiness required when dealing with financial instruments and the banking industry heavily relies on the fact that its customers consider them trust worthy enough to keep their money safe and can return them with associated profits as committed.
They also consider the health of the banking institute as the component of trust building and here comes the ethical point that the financial institutes or banks keep themselves clear to the customers about its financial health and position. This paper is about the essence of ethics itself and its necessity in the banking industry with a focus on the banking industry in the U.K.
This is a research proposal that undertakes the importance of ethical practices needed in the Banking industry in the U.K. and why more research is required in this respect as a need of new practices and new era in the developed banking industry.
Introduction
Downfall of any entity starts when it leaves following ethical practices, be it an organization, institution, industry or nation. Ethics constitute the pillars of any organization and form the basis of why any company or organization is operating.
It may be argued that organizations may require ethics as the part of their practices in the industry, but it may not be the essential or core part in any institution, specifically in the organizations that are involved due to businesses as business is carried out for the sake of profits and making money, rather than being decent and following ethical practices and putting up their cost in ensuring that the organization is following the right ethical path along with its employees.
However, this is an emerging realization that ethics is essential in organizations and businesses are surviving only by following ethical practices, be it voluntarily or forcibly as organizations involve so many stake holders in general and anybody affected from the unethical practices may cause a serious harm to the organization.
While talking about ethical practices and ethics in business, it plays most important role when it deals with the money and financing. Thus banking sector that is responsible for taking care of its customers’ money require a higher degree of trust worthiness towards its customers and in turn follow right ethical practices that can portray a reliable picture of the bank to its customers (OECD 2007).
Financial intuitions are most susceptible to the frauds or financial mishandling and thus require great deal of care in forming the policies, procedures and streamlining the system in order to ensure that no one may exploit the rules and find a way out towards any unethical practices that may result in the damage to the customers or to the organization itself as both the cases would ultimately cost the organization a great deal of effort in terms of money as well as reputation.
Banks dealing with the financial instruments need to take a great care of the systems following and ensuring that ethical codes are followed in the business. Nevertheless, ethics is not just about forgery and making money out of the business through wrong claims or maneuvering the clients, rather ethics is also about workplace practices.
Workplace harassment, demanding unfair favors, using wrong tactics to demand the rights, abusing people at work, using organizational property in extensive personal use, being biased towards someone, mishandling or hiding important information, playing with words and there may be so many that lie in the heading of ethical practices and require a consistent and robust approach to deal with in order to ensure that the organization is following the ethical practices and there are no or least loop holes for the buggers to play around with the rules and violating ethical practices that in turn damage the company’s reputation and costing money to the organization.
Banking industry needs to be addressed with the topic of ethics, being very sensitive to these unpracticed in terms of money that can multiply the effects of any unethical practice or mishandling of information by any individual in the bank.
Aim and Objectives
Ethics is now considered one of the most essential parts of any organization for the sustainability and growth as it reflects to its customers about the integrity of any industry or organization. Thus, ethical practices constitute the main portion of policies nowdays in the industries and organizations. Banking industry deals with the financing and monetary instruments and therefore requires a great deal of care when handling with the information and recording the transactions.
The U.K. financial sector has emerged and is established as a main industry of the region while handling a bulk of finance not from the local investors or customers, but also in international forum as well. Therefore, ethical practices influence the reputation of the industry that have the wide range of domains to be applied in the industry.
This research aims to capture the need of the ethics in the banking industry of the U.K. and reviews the literature focusing on the banking industry of the area with a slight overview of history that reflects majorly on the ethical issues (Peavler 2010).
The paper also develops few research questions that may be asserted as few main questions realizing the need of ethics in the banking industry in the U.K. and the need of more research in this domain.
Literature Review
Businesses and in particular banks carry ethical responsibilities while they do not carry only the limited liability by virtue of their actions as it can lead to something highly influential for not only the organization, but also for the stake holders involving public, investors and generally government as well.
Evidence that the ethical codes and ethical practices have become so important in today’s world and one of the factors that determine the reputation and stability of a company can be easily sought by observing that companies and organizations now growing and making good names in the industries work and invest heavily in the sector of social ethics or referred to as CSR (Corporate Social Responsibility) Companies who portray themselves and make efforts in the overall social benefit gain good name in the society and thus prosper more rapidly and sustain more firmly in the society, CSR being the part of ethical practices that is now considered a complementary responsibility of the business sector.
The consequences of the actions in a banking sector can widespread and impact the economical conditions of the region or all of its stakeholders that may be spread over regions as well. Especially in the case of the banking industry in the U.K. where investors, politicians and general people like to keep their money may have highly spread effects and thus the ethical practices in the banking industry of the U.K may be of much greater concern for people (Green 1989).
Indeed bankers need to make their profile as the most trustworthy people since they are directly concerned with the people’s money. Financial matters need to bear maximum amount of trust and that follows ethical behaviors and values to be followed. Little misunderstanding or unethical issues pertaining to an individual employee may result in bull whip effect of the damages to the customer as well as to the bank as well.
Bankers are trusted and given stewardship for the people’s money, to look after it and lend their money to the responsible organizations or investors that would be utilized for the common good or social betterment rather than in any unethical or illegal activity. There are risks involved always when dealing with the financial instruments. Especially in the market of the United Kingdom where there are major investments by stakeholders that relate not only locally, but also from the foreigners and any mishap in the banking sector can result in major humiliation or lack of trustworthiness of the banking industry of the country.
Ethical issues related to the banking sector may involve investing the customers’ money into activities without analyzing or exhaustively going through the purpose of the investment that may be unethical and in turn may be damaging the interest of the real investors that are the people who deposit their money in the banks.
Infact the care that the money of the depositors who are the investors into the bank should be used in a way that depositors allow to the bank virtually is a part where ethics come into its specific major role in a banking industry and therefore it is necessary that banks do such investments with the consensus of the depositors or make their goals and purposes with these investments open to the depositors and all other stakeholders or shareholders of the financing cycle (Green 1989).
The rationale behind the concept of ethics while dealing with the money of the depositors or investors in the financial institution that is bank comes from the fact that the money belonging to the owner should have the right to say where his or her money should be used and in what way. However, there always can be complications; for instance, if a depositor wants the bank to invest into some unethical or illegal matters that can harm the society, it does not mean that the bank has got the ethical authority to invest it into that illegal matter.
Therefore, it must be always noted that ethics is neither absolute term nor it should be looked into as a perfect go. There may be trade offs depending upon the perception and acceptance of the overall society (Megan 2009).
There are several theories that try to define the concept of ethics including utilitarianism and relativism in ethics, however there can be no simple way in which one can say that these ethical values must be used in this organization or in the banking industry, but in general context the ways in which the overall society is not impacted adversely from any act in either short run or long run is considered a social ethical way.
Thus, while talking about the banking industry of the United Kingdom; ethical ways play an important part as evident from the incidences and scandals that follow in the banking industry causing major reputation issues to the banks. Thus, ethical values may be against someone’s personal interests in the bank and there may be political implications; however the ethical way of dealing with the money is most essential for the banks in order to survive with their reputation and continue growing (IVORY 2009).
Methodology
There are several ways in which the topic can be approached, however the structural approach staring from the fact that what is ethics actually and how does it account generally in any society is of prime concern. With the complexity of the core idea of ethics itself, it is necessary to grasp a little firmer about the concept and how can it be referred to different situations when talking about dealings in the organization. Business ethics is the term that is usually used in order to define the ethical values that correlate the practices of an organization with the basic codes of conducts.
Therefore, literature related to the concept of ethics in general was reviewed and articles were went through in order to gain an insight of how the banking sector operates with the ethical issues along with and how much is it important specifically for the banking industry to take care of the ethical values. Thus majorly the literature review and articles pertaining to the concept of ethics and extending it to the banking ethics serve a better purpose of looking into the research topic.
Also, the sites that are related to the scandals and issues faced by the banking industry in the United Kingdom was gone through so that it can be analyzed that how ethics is implemented in the system for banking industry in the United Kingdom and how adversely it can influence a bank’s reputation if it fails to follow an ethical way of dealing with the money of the people or if they try to hide some information from its stake holders that they should be sharing with.
Few sample research questions were also developed in order to get an insight of the problem in a more systematic and structured way. These questions were not actually asked from the group of people, rather they were kept in consideration while reviewing or analyzing the article, publication or literature related to the ethics in the banking industry. These include,
- Is there any absolute definition of ethics?
- Do businesses really need to be ethical rather than profit making?
- Is there any major impact in general if ethical values are not followed in banking industry?
- Who can suffer if the unethical way of dealing with the money in banking industry happens?
- Are there any examples in the banking industry in the United Kingdom that elaborates the importance of ethics in the banking sector?
Analysis and Findings
It is very important to be clear about the concept of Ethics itself before this term is taken into the context of the banking industry in the United Kingdom. Ethics cannot be defined in the absolute terms or definition as different researchers and scholars at different times tried to define it in different terms in an effort to envelop every aspect of ethics acceptable to everyone.
However, unfortunately, there is no simple way to define it at which all researchers or scholars agree. However, in general when talking about business ethics, it relates to the core values of the organization that tend to generate such activities that can be in the betterment of the overall society following the basic moral laws, while avoiding and gripping all such activities that may cause disharmony in the society.
Business ethics holds the organizations in a set of system or framework that binds them to act as a social responsible person in the society as corporations and businesses are considered to be an entity as individual who have to contribute towards the betterment of the society. While talking about the banking sector, the importance of ethics grows larger and magnifies in terms of the impact.
As there are many stake holders of the finances in the banking industry that may involve the depositors at first place, investors, borrowers, government and other customers that may get severe negative impacts in the case the bank follows unethical practices and dealings with the people’s finances and ending up into some loss or disharmony in the society (Green 1989).
Since banks are dealings with the people’s money and there are great deals of risks involve in every transaction that as to be taken care by the bank personnel as it is the cause why the depositors deposit their money trusting the bank would take care of their money investing it into the right way and returning them when required or on the terms promised by the bank.
Accounting has many ways to play with and therefore as responsible banking sector in the United Kingdom, many accounting principles and rules have been setup in order to ensure that the system is not betrayed or screwed by the individuals keeping some interest in disharmony or gaining personal monetary benefits.
Since in the United Kingdom, there is an array of recognized banks including Royal Banks of Scotland, HSBC, Standard Chartered, Barclays and there is a huge amount of money that the banking sector of the United Kingdom deals with, it refers to the more importance of the ethics in the banking industry of the United Kingdom.
Ethics has not just to do with workplace manners and keeping good relationship with the colleagues and strictly observing equally respectable environment for everyone regardless of the gender, race, nationality or any other belonging, rather this only constitutes the internal mode of ethics in the banking industry. While talking about the banking sector in the U.K. there is an utmost importance that the major portion of ethical values that should be observed is towards the external customers of the banks.
Failure to this may lead to adverse outcomes to the banks as well as to the stakeholders that are widespread especially in case of the banking sector of the United Kingdom where people from around the world deposit money and rely on the financial system and policies of the banks. Such a scandal include where bank of England was sued by creditors for 1 million GBP.
There were thousands of depositors who lost their money with BCCI as a consequence of the fraud and money laundering damaging completely the image of the bank (BBC News 2004).
Similarly Barclays bank that has got its renowned name across the United Kingdom and internationally lost its high level reputation when it was revealed that they charge to their customers unnecessary extra amount and draw unjustified profits out of them (Cyncurry N.D).
There may be many debates on whether the ways were ethical or not, however in general sense, banking industry in the United Kingdom envelopes a large amount of stake holders and therefore it is important for this sector in the region to observe ethical practices related to banking and closely monitor the implementation ensuring and loop holes or way around are completely stopped from happening over that may cause huge financial and reputation losses to the bank and the stake holders as well (Egbujo 2007).
Conclusion and Recommendation
A bank’s record keeping and booking its accounts and its publication in an ethical way ensure its reputation and sustain its long-term operable. Banks without setting their rules and procedures in accordance with the ethical guidelines or does not give consideration to ethics in the business heavily carry the risks of defaulting or major cost implications that can damage the bank’s reputations and ultimately customers.
Therefore, it is of utmost importance that the companies especially bank industry give special consideration to the business ethics and ensure that their systems are built as per the requirement of the ethical codes and conducts outlined by the company itself. These ethical codes and conducts must be framed very precisely without leaving ambiguities in the implementation phase and stating the clear vision of the company towards business ethics and ethical practices. Such policies must be aligned with the common interest of all the stakeholders and must hold ‘right’ benefit for all the parties.
United Kingdom being a place where investors from around the globe come and deposit their money in the banks, the responsibility of business and banking ethics lie more heavily on the banking industry there in order to avoid any major defames or defaults to the market that would eventually impose greater risk to the overall economy.
Also, there may be more primary research conducted in order to grasp the current ethical situation in the banking industry that may reveal what measures can be taken in order to ensure that the ethical practices are brought in place in this sensitive sector of the United Kingdom.
References
BBC News 2004, Britain’s biggest banking scandal. Web.
Cyncurry N.D, Banking Scandal in UK, but Chancellor says no-ones to blame for the ‘scam’. Web.
Egbujo, A 2007, Barclays bank scandal exposed. Web.
Green, CF 1989, ‘The First European Business Ethics Conference’, Journal of Business Ethics, vol 1, no. 99, pp. 631-634. Web.
IVORY 2009, Finance and Accounting Topics. Web.
Megan 2009. Web.
OECD 2007, The Oecd Guidelines For Multinational Enterprises And The Financial Sector. Web.
Peavler, R 2010, Financial Ethics will Increase the Profitability of your Business. Web.