Bankers' ethics put to the test

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Few professions rank as lowly as journalism on the scale of ethics - except, of course, banking. After another flurry of scandals and reputation-busting headlines, banks are beginning to do something about it.

According to the Giotto test, a questionnaire used to assess the integrity of people at work, my ethical profile is similar to that of investment bankers. I am allegedly hardworking and optimistic about the future. I am also apparently self-interested and engaged in hidden agendas.

Roger Steare, a business ethics consultant and one of the architects of the test, said senior bankers give similar results. Some of the least self-interested, most open and fair- minded people are found in compliance and human resources departments, said Steare. Compliance officers typically score 84, HR managers manage an average 77 and banking types are lucky to make 70.

Steare uses Giotto when teaching ethics courses in banks. Results remain confidential and are used to alert respondents to shortcomings, on the basis that people aware of the dangers are better placed to remedy them. He said:'It's a question of reawakening ethical behaviours. You can see the lights going on in people's heads.'

The notion that employers have a role in inspiring goodness is an increasingly popular one in investment banking. Last month, Citigroup revealed a five-point plan to improve the bank's respectability, including a documentary and discussion on shared responsibilities, and annual ethics training.

BNP Paribas employs ethics officers to help resolve conflicts of interest. Steare works with Dresdner Kleinwort Wasserstein to train senior staff in the principles of ethical leadership.

Craig Smith, dean of the full-time MBA programme at the London Business School, teaches ethics at leading Swiss and German banks in the City of London.

Attendees are first shown photographs of the prison cell occupied by Martha Stewart, the US lifestyle guru jailed for obstructing an inquiry into insider trading. They are then alerted to the benefits of behaving properly.

Citigroup, which slid down the league tables after a controversial bond trade on EuroMTS in August, is used as an example. Smith said: 'If Citigroup had a reputation like Goldman Sachs, it would perform better in the market.'

Steare also uses Citigroup as an example when working with fixed-income bankers. He said the disputed bond trade highlights the differences between legal and right. 'In compliance training everyone is taught what's legal, but most people don't even bother to ask what's right.'

Unlike illegality, right is not an absolute concept. Steare said ethical questions typically arise in dilemmas of right versus right. His students are asked to contemplate a situation in which their bank will lose a mandate unless they exaggerate its capabilities. If losing the mandate means colleagues will be made redundant, should they exaggerate or not?

Steare and Smith provide ethically challenged bankers with point-by-point procedures to help reach correct decisions. They include empathising with the other parties, contemplating the desired consequences, checking gut reactions and considering obligations.

Steare said you cannot teach people to do the right thing, but you can teach them to ask the right questions. His course takes only three hours, but the questions are inscribed on a small card that bankers can refer to in moments of dilemma. Most attendees carry the card months later, Steare said.

Managing directors in DrKW's equities department may well be among the carriers. In the past year, DrKW has put 180 directors and managing directors in its equities department through Steare's master class in principled leadership and ethical behaviour.

Andrew Pullman, a managing director of HR at the bank, said the aim was to help people negotiate the sometimes grey area between the theory of the UK Financial Services Authority rule book and the day-to-day practicalities of executing transactions in the capital markets business: 'It's about creating a culture where people know ethical standards are important and providing them with some useful decision-making techniques and tools to do the right thing and make the right judgment calls.'

Change is unlikely to be instantaneous. Jason Brueschke, chairman of the US-based International Business Ethics Institute and senior analyst at Pacific Growth Equities, a San Francisco investment bank, said US banks are several years into the new compliance regime initiated by Eliot Spitzer, the New York state attorney-general, but underlying issues remain. 'People must be taught to behave differently. Cultures are slow to change, and the larger the organisation the harder it is,' he said.

In 2002 the FSA released a discussion paper on ethics in banking. David Jackman, the paper's author and a former business ethics adviser at the regulator, is now a professor of business ethics at London Metropolitan University.

He is setting up a monthly ethics forum for the financial services industry, starting this May. Jackman said the forum is intended as a catalyst for change: 'It will bring together everyone with an interest in working out how to develop an ethical culture within firms.' When the FSA ran ethics courses at 4,000 (€5,800) a head three years ago, Jackman said the regulator had as many as 80 attendees. Following recent scandals, he said interest in the ethics forum could be greater still.

In the meantime, banks like Citigroup will have to effect an ethical transformation on their own. Given bankers' apparent lack of integrity under the Giotto test, this could be an uphill task.

Equipped with my unique insight into the banking mentality, I am prepared to assist. For a small bribe, of course.

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