If, when presented with a morally dubious scenario, you ask how you might appear to do the right thing, rather than genuinely taking the more ethical track, the chances are that you’re not going to last long in the banking sector of the future.
Banks, particularly investment banks, are going through a culture shift where a repentant focus on ethics is the order of the day. Ethics isn’t just about staying within the confines of the law, but should be embedded within the culture of the organisation. The sort of traders involved in the Barclays Libor scandal, dubbing one another “big boy” and promising bottles of Bollinger for compliance in rate fixing, will soon look like the dinosaurs of yesteryear.
“Twenty five years’ ago, it was common for comedians in Britain to roll out crude, sexist and racist jokes – these people were on primetime television. Now, it’s both uncomfortable and unacceptable,” said Professor Paul Palmer, associate dean in Ethics at Cass Business School, who works with the banks on their policies. “Those who play lip-service to ethics in banking will be increasingly marginalised in the future and sooner or later will be pushed out.”
Some recent public appearances certainly give the impression of banks attempting to repair their image after countless scandals. Clutching a copy of the Salz Review on stage at the London Business School Leadership Summit in May, Barclays non-executive director Tim Breedon repeated the mantra of “new culture under dynamic leadership”, while other panel members spoke of the need for “social intelligence and empathy” in the bankers of the future.
Meanwhile, speaking at the Future of Finance event in Oxford last week, Anthony Belchambers, chief executive of the Futures & Options Association, said that ethical behaviour has to “go with the grain of running a business” and that banks “are trying to rebuild their culture, but that doesn’t come across very well in the press”.
Part of the problem of assessing someone’s moral compass during the recruitment process is that given an obvious ethical dilemma, most people will game the process to give an answer the interviewer wants to hear. It’s a similar scenario with the CISI diploma in ethics – it’s easy to give the right response, but what happens in a real life scenario with pressures and politics entered into the equation?
At a graduate level, investment banks are still taking an obvious, but open, line of questioning. Candidates are faced with questions like ‘What do you think of banking bonuses?’ or ‘Describe an ethical dilemma and how you handled it’.
One graduate recruiter at a bulge bracket bank, said: “We want trustworthy people and part of that is questioning their motivations for being a banker. The industry has changed; you still work the same hours but for less money, regulations are more intense and pay is not going up any time soon. If you’re only driven by money and personal gain, you’re not going to fit in.”
Citi's EMEA graduate recruitment team in London said that they look to test recruits on the impact their work "can have on others, the organisation and the industry.".
"Interview questions will not just ask people how they have done things in the past, as this tends to encourage scripted answers, but encourages graduates to think on their feet and provide specific details about their approach, and this is difficult to falsify. We have also developed our assessing training to ensure these are used effectively," they said.
Professor Binna Kandola, senior partner at business psychologists Pearn Kandola, said that at one point he worked with investment banks to introduce role play scenarios where actors would play clients coming in from out of town and demanding certain types of ‘entertainment’. It was a fine balancing act between keeping clients happy and tumbling into questionable behaviour. Taking them out for dinner was fine, other more expensive – or more scurrilous – entertainment was frowned upon.
“With recruitment budgets cut, this sort of thing has become less common. However, testing for ethics needs to be embedded in the recruitment process and time in employment, rather than a box-ticking exercise,” he said. “Many of the recent scandals have been a problem with culture, not just a few rogue individuals. The whole barrel was rotten, not a few apples.”
In theory, Goldman Sachs has come up with a novel way of improving the ethics of its employees – tying it to bonuses. The bank will reward good behaviour, by linking bonuses and promotions to employees’ ability to protect its reputation. Barclays has told bankers to sign up to its new ethical standards, or leave the firm.
While Kandola thinks that hitting bankers in their pockets will help, the process needs to be applied in the right way, he said. “Questioning how performance was achieved, rather than just how targets were met will help improve ethical standards. However, it has to form a key part of the assessment process, not just establishing whether someone effectively conformed to the rule book.”
A rigid set of ethical rules to learn off by heart and conform to is not the way to go. Palmer cites the ethical code for solicitors that runs into 16,000 words. “It can get ridiculous,” he said. “Moral behaviour should be part of an organisation’s culture, easily digestible aspirational standards, not long legalistic documents.”
Fundamentally, times are changing, said Kandola. There was a time when the aggressive and expansionary Fred Goodwin was heralded as the archetypal banking chief executive for others to model themselves on. Banking leadership needs to set the example for those lower down the career ladder in the future, and these means empathy and ethics, he said.