What do you think of when you think of a professional? Perhaps you think of qualities such as advanced skills and specialist knowledge, or individuals working in the interest of the public who behave in an ethical manner. Possibly you imagine that a professional is an individual who upholds a code of ethics, such as the Chartered Institute of Securities and Investment's (CISI) Code of Conduct? That they would hold themselves to standards set out by their professional body, for example, the Financial Conduct Authority (FCA), and can be disciplined by that body if they fail to uphold said standards if they break the rules. Usually, we assume they hold positions of power and are able to do things that most other people are not able to. One cannot go to anyone and ask them for investment advice or asset management, you have to enlist the services of a qualified professional. We afford them certain benefits and in return, they are expected to act in the public interest and behave ethically and with integrity.
Today, when professionals do not act ethically or with integrity, the public backlash towards such scandals is significant. The collective failure of those working in the financial services industry in recent history has not been in-keeping with the social contract between professionals and the public and has led to a significant loss of trust. The efforts to restore such a loss of confidence suffered by the sector on a global scale cannot be understated and prove challenging. Upholding a standard of ethics and acting with integrity and striving to hold oneself to act not simply in accordance with regulatory requirements but instead act and react with principled behaviour is integral to success. Regrettably, examples of unethical behaviour in the financial services sector are all too easy to recall. Enron, Tyco, WorldCom and Parmalat may all be eminent examples drawn upon by professionals and academics alike when they discuss the manner in which a business should not conduct business. The named examples all have a common fate and a common flaw. They failed to make the simple observation that ignoring ethical standards is only sustainable for a short period of time and the likely outcome of falling short will be a public backlash if not criminal sanctions.
Only by acting ethically can a company prosper and look to have a place in tomorrow's world as well as today's. It is commonplace and even expected of high-quality staff to wish to work for an ethical employer. One need look no further than the Work Foundation's survey of 255 UK professionals in 2000 which indicates that there is increasing pressure on companies to become employers of choice as a way to recruit and retain the best talent to fully realise what is now expected of employers and rightly so. No less than 82% of people surveyed said they would not work for an organisation in whose values they did not believe. Some 59% said that they chose the company they work for because they believe in what it does and what it stands for. A further 85% of UK workers agree that knowing that the company they work for is engaged in activities that help to improve society would increase their loyalty to their company.
Customer retention is also essential when considering the long-term viability of a company. A research paper in 2002 showed that corporate ethical character makes a difference in the way that customers and other stakeholders identify with a company. The author argues that this connection is an emotional one when it comes to stakeholders and is not all about fiscal business measures. Besides retaining good staff and customers, how providers of finance and insurance rate an organisation is a major factor in determining the cost of each. What ratings agencies have developed, with varying degrees of success, are measures of risk - the lower the risk, the lower the capital cost. One study, using S&P and Barclays Bank data, has indicated that companies with an explicit ethics policy generally have a higher rating than those without one which in turn generates a significantly lower cost of capital.
Companies who act ethically and implement ethical policies and codes are consistently recorded as more admired by their peer group compared with those that are not explicit about ethics. In other words, maintaining a high standard of ethical behaviour is seen by many to be a critical element of a company's culture, reputation and success. It goes without saying, however, that leaders of businesses who pay more than lip service to maintain ethical standards do not need any assurance that their approach to the way they do business will enhance their profitability: they know it to be true. Indeed, having an ethics policy can be said to be one hallmark of a well-managed organisation, yet others still require convincing.
It is clear as a bell to those who pay attention, the age of Gordon Gekko is over. Bottom line, unethical behaviour is systemic, malignant and it is global. Like cancer, it is a disease and we have got to fight back. It is a bankrupt business model, it won't work. It is a disease and we have got to fight back. The only question is, how are we going to do that? How are we going to leverage the disease back into our favour?