Banking on Ethics – Ethical
Skills in the Banking Industry
Shaping up to Global Banking
BANKSETA Conference 20-21 May 2003
Gallagher Estate, Midrand
Willem A. Landman
Ethics Institute of South Africa (EthicSA)
willem@ethicsa.com
www.ethicsa.org
© 2003 Ethics Institute of South Africa (EthicSA)
Outline
Ethics education and training in banking
Ethics – the discipline
Ethics in
the bank
Ethics and
individual skills
Ethics in
banking
20-21 May 2003
Ethics in
business
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Ethics – the discipline

What is an ethical choice?

Choosing values-driven actions
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
Choosing right over wrong

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
Respecting moral/legal rights
Discharging moral/legal obligations
Choosing good over bad

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
Understanding and adopting core values
Living core values in practice
Solving ethical dilemmas
Promoting good consequences
Avoiding and minimising bad consequences
Choosing fair over unfair

Impartially balancing interests
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Ethics and individual skills
1. Ethical competence is an acquired reasoning skill
Ethics in all human choice
Ethical competence
Ethical skills education and training
Integrated ethics curriculum
Case-based ethical reasoning skills methodology
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Ethics and individual skills

2. Ethical reasoning model
The ethical problem: Formulate
 Information: Gather
 Options: Analyse all reasonable options, choices,

actions in the circumstances

Ethical assessment:


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Assess the ethics of each option in the light of values –
what is right, good, and fair
Weigh different options
Choose the most ethical option
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Ethics and individual skills

3. Ethics Quick Test for individuals


Is it legal?
What does my (industry, company) Code of
Ethics say about this option?

How would it look in tomorrow’s newspaper?

Does it comply with the Golden Rule?

How does it make me feel when I tell my family
over dinner?
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Ethics and individual skills

4. Case scenario

ABC Bank, an investment institution, owns Research
Horizons, a company that offers, as one of its
services, in-depth research on the value of
companies’ shares. ABC’s CEO puts pressure on the
star analyst at Research Horizons to give Gauteng
Building, a huge construction company, a favourable
rating. ABC’s CEO is able to exert this pressure
because he sits on Research Horizon’s Board of
Directors. He wants to attract lucrative banking
business for ABC Bank from Gauteng Building.
Why did ABC’s CEO act unethically (fraudulently)? What values
are at issue? Why does ethics matter in this case? (Apply the
ethical reasoning model and the Ethics Quick Test.)
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Ethics and individual skills

5. BANKSETA education and training

BANKSETA skills development commitment

BANKSETA Constitution
• Develop and implement skills plan
• Establish learnerships and allocate grants
• Monitor education and training in the banking sector

BANKSETA Newsletter (September 2003)
• Ideal outcome of banking learnership programme – “Skilled
learners who can face challenges in the workplace”

“Ethical challenges in the workplace constitute a
major ethical risk area”
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Ethics and individual skills

5. BANKSETA education and training

“Address ethical risks in skills training”

Ethics training objectives
•
•
•
•

Ethical understanding and reasoning skills
Ethical conduct by individuals in the workplace
Ethical culture in the workplace
Individuals, industry, and institutions knowing and doing
what is ethical
How?
• Make ethics (values, norms, standards, principles) central
– ethics as the constant background condition for all skills training
• Integrate ethical skills training
– In all courses, modules, or tasks
– With other capacities or skills – reasoning competence;
emotional intelligence; interpersonal/communication skills; legal
and other technical skills
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Ethics in business

1. Why be ethical in business?

Doing the right thing because it is right
Legal imperative – penalties attach to wrongdoing
 Societal imperative – reputation
 Pragmatic imperative – good for business; easier to attract

business, joint ventures, and direct foreign investment

Change imperative – enables one to reason through new
choices where no policies and procedures are in place, e.g.
internet use, e-mail use, or any new technology
Multinational imperative – business across borders
 Global imperative – special interest groups and media


Acknowledgement: Frank Navran, Principal Consultant, Ethics Resource Center (ERC), Washington,
DC
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Ethics in business

2. Does it pay to be ethical in
business?

Clients, strategic partners, and investors are
prepared to pay a premium for or to a company
they have good reason to trust
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
Acting ethically communicates trustworthiness
“Trust” = “the residue of promises fulfilled”
Consider acting unethically: the risks and losses
of unethical practices (“crime does not pay”)


Enron, Andersen, Worldcom
Leisurenet, Regal
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Ethics in business

3. How is business ethics related to
corporate governance/King II?




Ethics is not a component of corporate governance
Ethics is the context in which corporate governance is
located (ethics of directors’ duties, auditing, etc)
Good corporate governance is about doing business ethically
(respecting core values) in every organisational function
and individual action.
Ethics is not…
 A separate silo
 An optional add-on
 An afterthought
 Window-dressing
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Ethics in banking

1. Institutionalising ethics


Identify ethical risk – stakeholder analysis
Codify ethics in a Code of Ethics – formulate and reformulate



Codify values – Values statement (core values)
Codify conduct – Code of Conduct (policies and procedures)
Explicitly connect values and conduct

Values without action are empty (translate values into policies,
procedures, rules)

Conduct uninformed by values is blind (base policies and
procedures in values)
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Ethics in banking
2. Approaches to institutionalising ethics
Compliance approach
Values approach
Integrated approach
Rule-based (emphasis)
Values-based (emphasis)
Balances values and rules
Prevent unethical conduct
Promote ethical behaviour
Both - promoting ethical
conduct, without tolerating
unethical conduct (e.g.
zero tolerance)
External enforcement
Formal accountability
Internal commitment
Personal responsibility
Internal commitment, but
with external enforcement
structures in place
Without grounding in
values, compliant conduct
is blind (undirected,
directionless, goalless)
Without compliant
conduct, verbal/internal
commitment to values is
empty (without content,
hollow)
Challenge is to ground
compliance explicitly in
values and ideals (all
structures, policies,
procedures, actions)
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Ethics in banking

3. Universal values (standards,
principles) driving an ethical
banking industry
Integrity and trust
 Transparency
 Reliability, accountability, and responsibility
 Honesty and truthfulness
 Consistency and fairness

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Ethics in banking

4. Case scenario


Thandi saves her first R200. She goes to the nearest
branch of Popular Savings Bank, believing her
savings would not only be safe, but also grow. Some
months later, she inquires about her savings, only to
discover she was now the owner of a mere R120,
although she had not withdrawn any funds. She asks
for an explanation, and is told that it was due to
banking charges, clearly set out in Popular Savings
Bank’s promotional literature for that type of
account.
What is the ethical issue? What ethical values are at issue?
How should such a situation be managed? (Apply the ethical
reasoning model and the Ethics Quick Test.)
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Ethics in banking

5. Case scenario


Foreign investments stream into South Africa
following the strengthening of the rand and high
interest rates. Bank XYZ receives a large US dollar
deposit. Upon reviewing documentation, a senior
bank official suspects that the deposited funds
have questionable origins. However, she has no
firm proof, while Bank XYZ is formally in
compliance with all legal requirements.
What should the senior official do? What is the ethical
issue? Is it a local or global ethical issue? (Apply the ethical
reasoning model and the Ethics Quick Test.)
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Ethics in the bank

1. Organisational ethics management
following King II



BANKSETA
Banking institutions
2. Purpose of ethics management

Effective ethical compliance



Formal – having a Code of Ethics
Effective – integrating the Code (induction, training,
enforcement, reporting, external auditing)
Ethical culture – “the way things are done here”
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Ethics in the bank

3. Why build an ethical organisational
culture?

It is the right thing to do
Regulations require it
 Society demands it
 Our stakeholders deserve it
 Our strategic partners expect it
 Special interest groups and the media are

watching us
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Ethics in the bank

4. Five components of ethics
management
• A Total Ethics Management Programme, following the US
Federal Sentencing Guidelines for Organisations (FSGO)
(1991) and King II (2002)
Stage I:
Formulate goals and commitments
Stage II:
Diagnose ethical risk
Stage III:
Codify values and rules
Educate and train in ethics
Create ethics sustainability structures
– monitor, report, enforce, guide, external
Stage IV:
Stage V:
audit
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Ethics in the bank

5. How is South Africa’s corporate
ethics?

Index 1: Effective Ethical Compliance Index
 57%

Index 2: Perceived Ethical Conduct Index
 76%
• EthicSA Research Report No 3: Corporate Ethics Indicator:
Report on the Business Ethics South Africa (BESA) Survey
conducted by EthicSA in 2002
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