Executives within the financial services industry are struggling to cope with the notion that they should behave in an ethical matter.
In a new report entitled A Crisis of Culture, The Economist Intelligence Unit surveyed executives from asset managers, commercial banks, fund managers, private banks, investment banks, wealth managers and others within the industry.
The results were surprising, to say the least.
- 53% of financial services executives say adhering to ethical standards inhibits career progression at their firm.
- 53% also say strict codes of conduct would harm their firm’s competitiveness.
- 43% have had to introduce incentives to encourage ethical conduct.
- 96% nonetheless prefer to work for a firm with a good reputation on ethical conduct.
“The very fact that 53 percent of them think that being inflexible on ethical standards would hamper their career progression, that shows that ethical conduct is just not an actual fit with financial services as of yet,” Sara Mosavi, Research Editor at The Economist, told StreetID.
“Work needs to be done to make sure that incentives are correctly aligned, encourage ethical behavior and that career progression is matched with that, rather than risk-taking or taking part in activities that might not be ethical or good for the firm.”
With regard to the “codes of conduct” stat, Mosavi believes that financial services execs want to be good, ethical employees.
“But there are certain tensions in the industry — for example, a lot of them are stock exchange listed, so they are driven by short-term profits — and the basic tensions mean that ethics is not easily espoused within the financial services industry,” she said.
While the survey results did not necessarily reveal which firms or which sectors are the least ethical, Mosavi did find some interesting results.
- 65% from insurance and reinsurance firms DON’T think you need to be flexible on ethical standards for career progression — that’s compared to 71% of investment bankers who do.
- Similarly, 63% from insurance and reinsurance don’t think that ethical standards have an impact on competitiveness, compared to 32% of investment banking.
- Those from insurance and reinsurance are also the most confident that if they report unethical behavior they will have their firm’s full support.
“The survey found that about 2/5ths [of the companies surveyed] had introduced career and financial incentives,” said Mosavi. “I think there’s two ways of looking at that. It’s a positive thing because that means that maybe they are trying to make an effort to align incentives with good and ethical behavior.
“On the other hand, should incentives be there in the first place? Should this be just a basic expectation of somebody who works in the industry? Shouldn’t this be a basic expectation for which there is no reward?
“I think the industry is moving in the right direction, but I think it will be a few years [until] that becomes the norm, rather than something they’re aspiring to.”
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