Institutions and industries from Congress to the news media have fallen sharply in public favor. Some are reforming fast. Others remain stuck in old habits.
Since 2008, confidence in banks has dropped by half. Only a fifth of Americans now trust them. And that’s two years after Washington passed the toughest regulations on the financial industry since the Depression.
More regulations can do only so much for reform, as can the public shaming of bank executives in hearings on Capitol Hill. The most lasting reform lies in the financial industry itself making sure that it operates with a culture of integrity.
That’s not easy unless top executives know how much their workers actually put such qualities as honesty and service to clients above personal gain. Hiring practices often look first for performance, knowledge, and loyalty. Well-written codes of ethical conduct are often ignored, as is reckless risk-taking.
Surprisingly, 94 percent of American and British senior executives in the industry say they are willing to report wrongdoing at work, according to a survey released last week by the whistle-blower law firm Labaton Sucharow. And 86 percent say they put their clients first.
That’s a good base for the industry to build on – because the rest of the survey isn’t very encouraging.
A quarter of the 500 professionals surveyed said they may need to engage in unethical or illegal conduct in order to be successful. A similar percentage have seen wrongdoing in the workplace. Only about half say they would not commit the crime of insider trading if they could make $10 million and get away with it.
Such poll figures seem bleak. “When misconduct is common and accepted by financial services professionals, the integrity of our entire financial system is at risk,” said Jordan Thomas, a partner at Labaton Sucharow.
The survey also helps explain why Barclays, and perhaps other banks, so cavalierly cheated in reporting the data on creditworthiness that sets interest rates for world markets each day. Or why employees at London-based HSBC, Europe’s biggest bank, allowed drug cartels, terrorists, and other criminals to launder money through its system.
Are the professionals in this industry always to blame? The survey reveals that a third of them feel pressure through bonus or compensation plans to violate the law or engage in unethical conduct. Only a quarter have faith that they will be protected if they blow the whistle on wrongdoing.
Banks need to place character reform – and ways to reinforce it – at the top of their priorities. Simply raising the fear of punishment or adding an army of regulators isn’t enough. Renewing the public’s trust means first making sure that bank workers are trustworthy.