A moral compass versus the wild, wild west

A bunch of financial traders in Singapore has just departed, been demoted, or been denied their bonus. So far, nothing new–it’s more of the same, and once again RBS in the firing line. [1]

What’s particularly revealing about this latest exercise in closing yet another stable door after a bolted horse, is the renegade traders had not successfully manipulated interests rates. It seems, they tried to do so and were branded by the authorities, not so much as breaking the rules as lacking “professional ethics.”

What you may fairly ask, are the professional ethics of a financial trader? Or rather don’t ask, since you will probably not entirely like the answer.

The recently departed head of Barclays Bob Diamond may have been ‘physically sick’ when he read the by-now infamous incriminating emails between traders bragging about fixing interest rates.[2]

But he’s departed because of widespread doubts about his own ethics as head of one of the UK’s largest, and respected financial institutions.

That leaders must develop “a strong moral compass” is one of two overarching principles in how to run a successful, responsible business.[3] One cannot assume that every leader has a fully developed moral compass. This is one reason why companies like Maynard Leigh for example, often work with top managers to help them sharpen up their awareness about values, and how to articulate their ethical message.

The other overarching principle is that codes, regulations and formal procedures never guarantee a business or its employees will consistently act in a responsible way. No matter how tough the compliance regime, it can never be sufficiently comprehensive, nor implemented stringently enough to ensure ethical performance.

For day-to day purposes, the reams of guidance, codes, documentation, and formal procedure are more akin to propaganda or a PR fig leaf. While they make the organisation look ethical, they do so without making a huge difference to real people’s actual behaviour.

What then will make a difference? Almost certainly it will be some version of the engagement model, in which stakeholders, particularly employees come to feel: valued, involved, developed and inspired (VIDI).

Ethical engagement is a relatively new term. It has yet to penetrate much of the thinking in most companies. Global studies of employee attitudes for example show only about 3% of employees interviewed feel they are ethically engaged—that is fully motivated to speak up and be active around ethical issues.

That the codes, rules and regulations are never enough was made all too clear last week, when the integrity of the benchmarks used in financial markets was called into question. The Financial Conduct Authority, Britain’s markets supervisor, is considering opening a probe into potential manipulation of the rates. No wonder an insider calls this part of the market “like the wild west.” But as we now know, even the Wild West was eventually tamed.



[1] Treanor, J, Singapore is Focus for Latest Rate-Rigging Scandal, Guardian 15th June 2013

[3] See for example Leading the Way, by Andrew Leigh and Michael Maynard, Pearson Education, 2012.

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