About our Contributors
ICS Group is a regulatory compliance consulting firm specializing in providing compliance support to the financial services and insurance industries. We help our clients comply with regulatory requirements and industry standards. Our clients include: registered investment advisers, private equity funds, hedge funds, mutual funds, broker-dealers, insurance companies and state pension plans. Our team of highly experienced compliance professionals know from first-hand experience what regulators are looking for, the industry standards that apply, and how to develop and implement cost-effective business-oriented solutions.
Despite mounting regulations, pressure on corporate leadership to run a compliant and ethical organization, and headline-making consequences of corporate misconduct, unethical behavior seems to persist within the financial industry. A survey of the US and UK financial services industries conducted by the University of Notre Dame and Labaton Sucharow LLP concluded, “Numerous individuals continue to believe that engaging in illegal or unethical activity is part and parcel of succeeding in this highly competitive field. With legal and regulatory sanctions coming out on almost a daily basis, the industry has a long way to go to regain the confidence of the public.” Past scandals have shown that when employees act unethically, heavy fines and litigation against the corporation are likely to follow. Ethical issues could also mean the loss of credibility and the resulting loss of investors.
In August 2016, it was revealed that employees at Wells Fargo, one of the most respected banking institutions in the country, succumbed to the belief that success was contingent upon unethical and illegal behavior. Since 2011, 5,300 employees opened 2,000,000 unauthorized accounts and credit cards in its customers’ names stealing their cash and trashing their credit scores in the process. Consequently, those employees were fired, the CEO resigned, banking relationships have been halted, and Wells Fargo paid $185 million in regulatory fines. This incident further demonstrated that incentive systems can pose ethical dilemmas as employees admitted to engaging in the unethical behavior to reach virtually impossible sales goals set by the company.
Rather than attempting to challenge the belief that engaging in illegal and unethical behavior is a requirement for success, firms should focus on how their financial goals and employee expectations affect employee behaviors. Are they fostering or hindering a culture of compliance?
Creating a Culture of Integrity
The first step in developing an organization that encourages integrity in all of its employees is to assess the ethical climate at your firm currently. At the most basic level, ethics is about behaviors and values. Doing the right thing is enhanced when management establishes and embraces a set of virtuous values, aligns its actions and performance objectives with those values, and specifies a set of behavioral standards. It is vitally important for management to “walk the walk”, because “tone at the top” also matters.
To assess your firm’s ethical culture, ask your management staff to complete (individually) the Ethical Behavior Enhancement Checklist. Encourage each manage to be candid since this checklist is self-directed and is intended to help you increase the presence of proactive ethical organizational behavior in your enterprise. In reviewing your responses to the checklist, you are encouraged to identify the areas of greatest opportunity for improvement and begin a program of change in these areas.
Celebrate Compliance and Ethics
In addition to espousing a set of virtuous values and aligning your actions with those values, you can also encourage ethical behavior in your firm by using external motivation through the use of fun activities and rewards for employees. The following are some helpful ideas:
ICSGroup conducts customized compliance and ethics training for our clients and we also provide real time guidance on navigating the ethical landscape. We have an “open door policy” and encourage our clients to call us to discuss perceived ethical dilemmas. For more information about our services related to compliance and ethics or for a free consultation regarding an ethical issue, contact us today.