The Bank CEO's Role in Defining Ethical Integrity
Based on a thorough review of existing literature of the role of ethics in the banking industry, the role of the CEO as the ethical leader of their organization is next discussion. Based on the concepts presented in the paper to this point as the foundation, these key points provide insights into how CEOs and senior management actively shape the ethical standards of the organizations they manage on behalf of shareholders.
Risk Management Is a CEOs' Ethical Responsibility combination of forces -- changing regulatory expectations that open companies up to intense levels of examination, heightened stakeholder sensitivity to and scrutiny of corporate behavior, and the severity of punishment by financial markets for corporate missteps -- push reputation and ethics management onto the CEOs' and senior managements' agenda. The paradox CEOs face is when to risk the reputation and brand of the company and engage in risky decisions for the sake of incremental gain or to realize greater cost savings. There are few positions in any industry that have such a direct interrelationship between ethics and brand performance, and also the long-term stability of their clients' financial conditions and the broader condition of the general economy (Rutberg, 2008)
CEOs in Banks and Subprime Mortgage Lenders Share No Common Definition of Risk
Startling from the research is the finding that there is no single definition of safety risk in any of the ethical analyses completed of the financial services industry, yet there is an abundance of research on Corporate Social Responsibility (CSR) initiatives and programs. In conjunction with the lack of definition for subprime borrower risk, there is no consensus on a definition for reputation and broader ethics risk, but industry participants agree that it is broader than legal, compliance, and regulatory risk that arise from a lack of congruence between ethics standards each company espouses in their CSR initiatives. A common meaning of reputation risk would improve companies' ability to identify, assess, and mitigate risks that can potentially generate negative stakeholder reaction. This lack of ethical standard definition on the part of banks and specifically subprime mortgage lenders translates into why Option One Mortgage could lend to many customers who could not verify their income (Churchill, 2007) while Countrywide Home Loans often lied to existing customers and told them a home equity credit line had been approved and they just had to sign for it (Cassling, 2008). In a few cases Countrywide representative signed up homeowners for these equity lines and then sent them the paperwork saying it was a perk of their existing loan package, which not surprisingly led to many lawsuits today (Cassling, 2008). There are many more examples of this type of behavior yet it is all tied back to the ethical lapse of CEOs and senior management which redefined the culture of these companies to adopt a more unethical stance on illegal transactions.
The Future of Banking and Mortgage Lending Includes Compliance Management Officers
As has been the case with publicly-held corporations that are held to the standards of the Sarbanes-Oxley Act, a comparable set of regulations will eventually be needed to ensure the ethical violations so pervasive in the subprime mortgage industry are not repeated. The baseline metrics of performance for this industry need to also be re-evaluated (Verschoor, 2007) with the Chief Compliance Officer being at the same level as the CEO, reporting to the Board of Directors on all matters pertaining to auditing, reporting and management of the business. Any company governed by the Sarbanes-Oxley Act has since 2002 been engaging in the same approach to regulating and enforcing ethics throughout their organizations.
The role of Compliance and Ethics Officers in the banking and financial services industry will also be noteworthy for the growing authority to evaluate each process in their companies, from loan origination and client screening to the actual packaging of loans for resale as investment programs for institutional investors. Further, their role is to sensitize the business to key reputation risks and instill and create escalation processes that reduce the effort required of loan origination, branch sales and services development managers to recognize and report threats and build accountability into each process. This continues to be critical for the development of ethical guidelines that give banks and subprime mortgage lenders the means to stay in compliance to an increasingly high level of government regulations across nearly sixty different nations looking to increase banking accountability, auditability and transparency (Schwendimann, 2007).
Financial institutions, banks and increasingly government treasuries are and will increasingly relying on compliance management officers as part of their executive management teams, reporting directly into the board of directors of their organizations and governments. The...
Countrywide Financial Corporation and the Subprime Mortgage Debacle In 2006, the world discovered that Countrywide Financial and other lenders had been promoting mortgages practices that were not impractical, they were criminal. Countrywide was one of a number of corporations (but the one with the largest number of questionable mortgages) which followed the lead of a then recent push by the government to provide incentives to companies that offered a greater number
He defined the ideals that people share about how people ought to behave a "categorical imperative" - a transcendent concept of "rightness of action." No one would want to be taken advantage of the way Countrywide did, and under no circumstances did they themselves believe their actions were "right." Egoism or self-interest ethics may explain the Countrywide rationale, after all, they were acting to advance own interests, over all else.
Countrywide Accounting Fraud In the year 1969, David Loeb moved to NY from Virginia to begin a home loan and advance organization named as "United Mortgage Servicing." He was joined by his trusted aide Angelo Mozilo. Both shared common dreams of big money and making their presence felt across the nation. The sole owner of the firm, David Loeb had to, under pressure of work, circumstances and colleagues part with half
Financial Plan and Conclusion 1. Financial Plan A total of 39,500 will be committed in startup costs. The specific startup items have been described in table 1. Essentially, the flagship startup components are: lighting and studio/sound equipment, opening inventory, operating capital, fees and permits, and FFE. Lighting and studio/sound equipment are inclusive of 8 speakers, 2 amplifiers, 2 cd decks, 2 microphones, 2 switchers, 3 wash moving head lights, 1 LED DJ
Improvements in Integrity, Financial Accountability, Ethical Conduct and Corporate Responsibilities under the Sarbanes-Oxley Act of 2002 We passed Sarbanes-Oxley in the wake of the Enron scandal to try to root out financial and accounting irregularities. How could similar irregularities occur at Lehman Brothers? History has a way of constantly repeating itself. -- Joseph Grant 2010 The high-profile corporate shenanigans by Enron and Lehman Brothers have made it clear that tough legislation was
Estimation Techniques of Financial Crisis The unquestionable ethical conducts within the corporate circle had been the major factor that led to 2008/2009 financial crisis. By studying the root causes of the crisis, it has been revealed that bad conducts among the CEOs of Bear Stearns, Lehman Brothers, Citigroup and Countrywide Financial have been the primary factors leading to 2008/2009 financial crisis. Objective of this paper is to argue that the CEOs of
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