This article was first published in the October 2016 international edition of Accounting and Business magazine.

Most people in business behave ethically. Of course, there are bad apples and, because of the media, the stories of those who don’t behave ethically are given oxygen, which creates a false stereotype. 

But often, it’s not as simple as good versus evil. Research suggests that many individuals who behave badly are often unaware of the ethical implications of their behaviour. A study into ethics in banking and finance by Chartered Accountants Australia and New Zealand (CA ANZ) looked specifically at what it is that drives unethical behaviour and what we can do about it. Who better to ask about ethics than 705 bankers and financial practitioners around the world? 

We identified a range of factors that contribute to bankers behaving badly. In most instances, bad behaviour was found to be not a conscious choice, but was justified in a range of ways that allowed bankers to continue to believe in themselves as ethical people.

Personal bias

For example, personal bias allows decisions to be framed in a way that makes bad behaviour seem fine. This can be seen in confirmation bias, when boards apparently miss evidence that fails to back up their belief, and availability bias, in which only the easiest or most recent information is the evidence considered.

These personal biases came into play for the banker Tom Hayes, who was given an 11-year jail sentence by a UK court and ordered to pay £878,000 for manipulating the Libor interest rate on interbank loans. He justified his behaviour on the basis that ‘everybody was doing it’. This is a common form of bias, used to explain away unethical behaviour.

However, it is not just bias that can lead to unethical behaviour. The big bonus culture has been cited by experts as a driver of bad behaviour in the financial services sector. More specifically, experts point to misaligned incentives. 

A catalyst for unethical behaviour can be where large bonuses are awarded to individuals for certain outcomes irrespective of how those outcomes were achieved. This misalignment is reinforced when it is coupled with half-hearted censure for those who are caught doing the wrong thing. 

A good example of this in Australia is the personal financial adviser. Here, advisers sell financial products to clients and receive a commission from the product provider for doing so. At what point does the client’s best interest suffer? I personally believe that financial advisers should be paid to advise, and that the client should pay for these services. That makes for a clean transparent transaction, with no need for middlemen. 

So what can be done to address the situation? To start with, almost everyone views themselves as behaving ethically – even when they don’t. Our research highlights three factors – structural, individual and social – that can consciously or unconsciously encourage unethical behaviour. Across these three areas our survey found that greater accountability, a more diverse culture and training in decision-making processes were seen as the most effective ways to address the problem.

Training, incentives and leadership

This translates into a range of responses. First, the ethical capabilities of those working in banking and finance need to be better developed. Professional accountants have an extensive focus on ethics as part of their ongoing training, and the discipline of keeping such matters front of mind through regular training supports ethical behaviour in real-life situations. This type of training is about encouraging people to place less reliance on mental shortcuts when they are making decisions and helping to develop principled reasoning in which ethical considerations are part and parcel of cost-benefit calculations. It is also useful to encourage a clear expectation from the top that employees must always behave ethically and require them to undergo regular training that supports that expectation.

Second, the manner in which financial incentives such as bonuses are awarded needs to include ethical considerations when performance is being measured. This is particularly significant given that most incentive schemes in financial services are based exclusively on market and profit measures. The reputational risks of unethical behaviour are now well publicised, so there is a clear cost in not addressing these factors in incentive schemes. Also, of course, a purely financial focus can misalign personal and corporate interests in other ways, including corporate culture, health and staff turnover.

Finally, the leadership of an organisation needs to address ethics with an unwavering focus to help shift a corporate culture from one of benign neglect to a clear focus. This can be encouraged by initiatives such as ‘ethical moments’ to help shift decision framing to a more ethical mindset. This idea mimics some companies’ ‘safety moments’ (a brief safety talk about a specific subject at the beginning of a meeting or shift) and encourages employees to share ethically based decisions before every meeting. Getting employees to talk about ethics has been shown to increase ethical behaviour.


Ultimately what has clearly emerged from our research is that an ethical culture of accountability is vital. If this becomes dominant in banking and finance, it will create a virtuous circle in which incentives and structural solutions such as regulation become far less important. It may also help weaken some of the stereotypes that have only ever been true of a small proportion of people working in banking and finance. 

Lee White is CEO of Chartered Accountants ANZ