Ignoring personal moral compass: factors shaping bankers’ decisions
| DOI | https://doi.org/10.1108/JFRC-12-2017-0110 |
| Pages | 357-379 |
| Published date | 08 July 2019 |
| Date | 08 July 2019 |
| Author | Mouhamed El Bachire Thiam,Jonathan Liu,John Aston |
Ignoring personal moral compass:
factors shaping bankers’decisions
Mouhamed El Bachire Thiam
School of Business and Technology, University of Gloucestershire,
Cheltenham, UK
Jonathan Liu
Regents University, London,UK, and
John Aston
Brunel University, London, UK
Abstract
Purpose –The purpose of this paper is to increase our understanding of the challenges the banking
industry continues to face from an ethics standpoint more than a decade after the credit crisis. Since
2007, there has been renewed interest in the way professional ethics is integrated within the banking
culture. With a public that has become more sensitive towards ethical and corporate governance
failures, the banking industry has been at the receiving end of strong ethical criticism. Yet, in spite of
the regulatory response to the crisis, ethics is still a major issue in an industry where the corporate
governance systems implemented by companies have failed to control employee behaviours, even in
institutions branding themselves as ethical banks.
Design/methodology/approach –This paper studies factors inside and around institutions in the
banking industry that impact the moralanomie in bankers’professional environment. This paper applies an
ordinary least square regression analysis, preceded by exploratory and confirmatoryfactor analysis, to test
the hypothesisedrelations between anomie and the factors proposed.
Findings –The results show that long-termorientation, strategic aggressiveness and competitiveintensity
do have an influence on anomie. These results arecompared to previous research applied in non-financial
industries and prompt the strengthening of corporate governance systems in financial companies with
aggressivecorporate cultures.
Originality/value –The paper thereforeintroduces the factors that lead bankersto ignore the morals they
gained from society and provide a better understanding of the reasons behind the deviant behaviours that
caused the crisis a decade ago. It representsa crucial first step for future policymaking that fills an important
gap in the financial regulationliterature. Indeed, the lack of understanding of the factors dictatingbehaviours
in the industrymeant that regulatory changes in the past decade have mostly focussedon technical aspects of
the problem (e.g. new capital structure requirements) and produced few answers to address the ethical
challenges.
Keywords Ethical culture, Competitive intensity, Anomie, Bankers’behaviour, Long-term strategy,
Strategic aggressiveness
Paper type Research paper
Introduction
Corporate governance plays a crucial role in the direction businesses take, as well as
the ways in which they operate and are controlled. Through its principles, it seeks to
guard against conflict of interest and misuse of assets and protects the interests of
shareholders, as well as those of other stakeholders. To achieve this goal, the board of
directors counts among its remit setting the long-term strategy, purpose and vision of
Bankers’
decisions
357
Received5 December 2017
Revised27 May 2018
27July 2018
Accepted4 October 2018
Journalof Financial Regulation
andCompliance
Vol.27 No. 3, 2019
pp. 357-379
© Emerald Publishing Limited
1358-1988
DOI 10.1108/JFRC-12-2017-0110
The current issue and full text archive of this journal is available on Emerald Insight at:
www.emeraldinsight.com/1358-1988.htm
the company; formulating and implementing a governance structure, system of
accountability and control procedures; ensuring the legal and regulatory standards
are met; and setting operational standards and values –including ethical and
corporate social standards. The failure to set up an effective corporate governance
system often leads to great consequences, including agency costs for significant loss
of trust and reputation owing to, for example, the presence of anomie and ethical
failures.
Anomie is a phenomenon that is consistentlyobservedinenvironmentsthat
experience ethical failures (Mansfield, 2004). It is defined as the absence or disregard
of moral value in a social setting (that creates a moral vacuum), causing people to be
disconnected from society and its moral principles during decision-making
(Tsahuridu, 2006). Anomie in the corporate environment is linked to the deterioration
of moral standards in an organisation where employees are strongly incentivised or
pressured to replace societal values with financial value as their decision-making
compass (Himmelfarb, 1996;Lindholm, 1997).
Considering the incentives and pressures to perform at work, the importance of this
study is to provide an understandingof the factors leading to anomie to prevent or minimise
the anomie risk in the firm and support directors in their roles when formulating an
adequate corporate governance system. Such knowledge will provide an opportunity to
strengthen governance policies in organisations and provide better guidance for future
regulatory changes.
Furthermore, in spite of the growing number of publications on anomie at work, not
many studies use an industry-specific approach. Considering that industries differ in
characteristics, in structure and in terms of factors influencing their dynamics, as well
as their exposure levels, applying an industry-specific approach to the study of anomie
would result in an output that is more relevant for decision-makers and regulators in
the industry concerned.
While providing a reminder of the ethical challenges in the banking industry, the
recent decade has reinforced the perception that anomie is entrenched in the industry
and that the corporate governance systems implemented by banks are not adequate.
Considering the significant influence of the banking industry on our economies and the
great pressure it is under to perform economically, it is important that normative
controls are kept in place and respected to avoid crises caused by industry-wide
anomie. However, in spite of the public indignation following the economic crisis and
its ethical scandals and in spite of the fines that are repeatedly issued in the industry,
the governance systems and control procedures in the banking industry have still not
been successful in their purpose of ensuring firm-wide adoption of the values and
standards publicised in their respective annual reports and codes of ethics. As a
consequence, 10 years after the banking failures, evidence in the finesissuedbythe
Financial Conduct Authority (FCA) –the UK banking regulator –over the years shows
that governance policies have not been conducive to ethical business practices in the
industry.
In this paper, the relationships in the UK banking industry between anomie and
each of the factors –strategic aggressiveness, competitor orientation, competitive
intensity, long-term orientation and client vulnerability –are examined. The study
builds on different previous studies on anomie in the workplace as four of the factors
studied are derived from the literature. These four factors are strategic
aggressiveness, competitor orientation, competitive intensity and long-term
orientation. This research, applied in the banking industry, therefore, also allows for
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