Media Spotlight - The Ethical Executive By Robert Hoyk & Paul Hershey
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Ethics, or the lack thereof, have been at the heart of the financial crisis. Greed, the drive for innovative financial products and mortgages for borrowers who could ill-afford the repayments all had their part to play in the ensuing downturn.
Part of the reason there has been such public outrage over bankers’ bonuses and MPs’ allowances is that six-figure salaries and ridiculous claims for duck ponds and moat-
cleaning go against what is considered to be right and moral behaviour.
But what is it that drives culprits to act unethically? What sets individuals on the path of slicing and dicing assets in the bid for profit, lenders straying into product areas that are beyond their expertise and rogue brokers falsifying income on applications?
The Ethical Executive Avoiding The Traps Of The Unethical Workplace taps into the psychology behind what seems to the outside world to be inherently corrupt behaviour.
Authors Robert Hoyk and Paul Hersey instantly dispel the myth that unethical individuals are somehow predisposed to wrongdoing and argue that in fact every one of us is capable of acting immorally even if we believe we have sound ethical values to begin with.
Philip Zimbardo, known to all psychology students for his acclaimed study of prison life, sums it up.
“The line between good and evil is permeable and any one of us can move across it,” the authors quote him as saying. “We all have the capacity for love and evil - to be Mother Theresa or Hitler - it’s the situation that brings that out.”
The book describes 45 traps everyone can fall into which lead to unethical behaviour. Although first and foremost a book about ethics at work, The Ethical Executive offers some interesting parallels with the mess the financial services industry finds itself in.
Besides the obvious trap of acting immorally for money which is surprisingly relegated to number eight - clearly the traps aren’t ranked in order of importance - Hoyk and Hersey’s analysis of the influence of power also throws up some interesting comparisons with the mortgage market.
The theory goes that the more power a manager has, combined with a lack of empathy for junior workers, the easier it is for them to push for maximum cost savings and optimum profit. This leads to unrealistic expectations that in turn lead employees to take short cuts - that is, to act unethically.
What springs to mind is the ‘pile ‘em high, sell ‘em cheap’ sales approach engineered by former HBOS chief executive Andy Hornby. It’s easy to imagine that sales staff were forced to cut corners on assessing affordability.
Or perhaps the fear culture said to prevail at the Royal Bank of Scotland under the watchful eye of Sir Fred Goodwin as the ill-fated bank prioritised rapid growth above all else.
The Ethical Executive draws on psychological research in an accessible way without being wordy and academic. Don’t be put off by the vomit-inducing opening line - “you are one of the lucky ones, you picked up this book” - as the man who penned it only wrote the foreword, thank God.
The idea that knowing about ethical traps can help you avoid them needs to be filled out but this is a financial services must-read for the regulators and the regulated.
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