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If ethics is driven by culture, what was the culture in international finance pre GFC?

It’s all very well to talk about ethics in the abstract. It’s relatively easy to theorise about what should or shouldn’t happen at any point. But business decisions happen in context. They are a product of the collision of the cultural norms that surround them, the rewards or sanctions that different choices incur, the moral compass that each person brings to the table, their ethical habits, appetite for risk and perhaps a sprinkling of schoolyard bravado.

In the fall out since the global financial crisis, many financial institutions have been under the spotlight for bonus structures that rewarded short term profit and work cultures that did little to shine a spotlight on aggressive behaviour that, in an environment of hyper-competitiveness, allowed unethical and sometimes illegal activity to go unsanctioned.

Moral decisions and ethical behaviour in such circumstances would be a challenge for the most cautious or the most saintly. But ‘saintly’ and ‘cautious’ were rarely on the job description.

It was about trying to put your elbow in the face of someone who was looking for the opportunity to put their elbow in your face.

Jim has worked in International Finance in Australia, the UK, Japan and in the US. He has seen the ‘before’ and ‘after’ of the global financial disaster and agreed to talk to us about the culture that has created so many headlines.

“The entire market was proud of the level of aggression. Everyone was aggressive but you would get ahead if you were just a little more aggressive than anyone else. It never crossed my mind that my behaviour would have any negative impact. It was about trying to put your elbow in the face of someone who was looking for the opportunity to put their elbow in your face.”

The idea of the ‘lone rogue trader’, the handful of Nick Leesons who fell from dizzyingly successful heights to be imprisoned then ostracised by the financial community for accruing enormous losses, has lost credibility. The change that is lapping at the skirts of the international finance industry, including in Australia, is a realisation that many problems may be systemic, not isolated to one institution or random rogue outliers.

“In the city of London there was great pride in the fact that the barrow boy trader ethos would take you a long way further than the enviable academic record,” he says.

According to Jim, the public scrutiny since the global financial crisis kicked off has set off a chain of cultural change. The question is, is it sufficient and is it fast enough?

“It has taken a while to have an impact, but the key message now is that individuals in banks have liability and that ‘acceptable market behavour’ is no longer enough to make something okay.”

And people aren’t just wary of having their own behaviour scrutinised: “If you overhear someone sitting next to you doing something risky, that’s enough for you to flag the behaviour, with the person or with someone else.”

“I feel nervous about even minor interactions,” says Jim. “It’s still a very competitive environment between major institutions with huge resources and a lot at stake. You are looking for every tiny edge to get a small competitive advantage.” And the boundaries aren’t always clear. “You might not be behaving in a bad way. It’s just not clearly bad. At the coal face, in the pressure of the moment I have sympathy for people who get confused about where the boundaries lie.”

“I was convinced that I wasn’t working outside an ethical boundary. With hindsight, down the track, I realise that wasn’t the case, but everyone operated that way and the behaviour didn’t seem as though it was wrong.”

Is the culture changing?

In May 2015 law firm Labaton Sucharow released a survey in collaboration with University of Notre Dame’s Mendoza College of Business. ‘The Street, The Bull and The Crisis’  surveyed 1200 financial services professionals based in the UK and US, to understand their views and practices with regard to workplace ethics.

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