At the recent Financial Conduct Authority March 2018 meeting in London, Ethical Systems Executive Director Azish Filabi and collaborator Celia Moore participated in panels featuring fellow experts discussing current, pressing issues in regards to culture, regulation, ethics and compliance in the financial sector.

Goal setting is often a subject of discussion about behavioral ethics and internal programs.  We’ve seen in recent cases such as at Wells Fargo and Volkswagen how cheating and lying become the norm when performance goals are not reasonably achievable.  Recent evidence in a paper by Niki den Nieuwenboer, João da Cunha, and ES collaborator Linda Treviño shows the internal dynamics and processes that lead directly to cheating behaviors.  

The researchers, one of which was embedded inside the company, observed managers and sales staff over 15 months at a large (10,000 employees) telecommunications company.  The company had established goals for its desk sales teams designed to motivate productivity, including a target for sales as well as sales-related work, such as making cold calls to customers, and gathering information about potential customers, among other planning activities.

There are two new resources on the Governance and Culture Reform site of the Federal Reserve Bank of NY that highlight the regulatory trends with respect to managing culture in financial services firms. 

The first is a transcript from an event at Thomson Reuters on February 7, 2018, which was a moderated discussion among Bill Dudley (President of the NY Fed), Bill Rhodes (WR Rhodes Global Advisors), and Ellen Alemany  (Chairwoman and CEO of CIT Group), moderated by Rob Cox (Reuters News).  The panelists covered a wide array of matters relating to the topic of Banking Culture:  Still room for reform?

Dudley highlighted that while some progress has been made, there’s still much room for improvement.  For example, the NY Fed has proposed a banking registry to keep track of whether employees have left their jobs for reasons of fraud or other misconduct.  This would address the so called “rolling bad apples” problem, whereby companies may inadvertently hire a rogue employee of another firm because employment law discourages employers from sharing potentially derogatory information about former employees.  He mentions that the U.K. has perhaps made more progress on this matter, having already established a similar registry.