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...
Therefore, corporations have had to change their viewpoints and start looking at the long-term consequences of their behavior, as well as looking at the bottom line. Businesses also have to be concerned because consumers have also become aware of environmental concerns, and many consumers are demanding earth-friendly products and have shown a willingness to pay more money to competitors who observe environmentally-friendly practices. Interestingly enough, this demand has given rise
The most significant purposes comprise: persuading actions of the members of a culture, resolving disagreements inside the culture, upholding significant social values, and providing a way for social change (Meiners, Ringleb and Edwards, 2009). Canadians are recognized for their logic of fair play, their admiration for working people, and for their devotion to the rule of law. These principles are reflected in the legal system governing Canada's businesses (Phillips,
For instance, the APA places a great deal of emphasis on competence. According to Kaslow et al. "Competence is a common a term in psychology today, as it is in other health professions (Joint Commission on Accreditation of Healthcare Organizations, 2000). Educational programs are expected to produce competence, professional credentialing bodies are required to certify individuals as competent, policymakers laud competence, and consumers demand it (Hoge et al., 2005). As
Ethics Case Study This report presents an analysis of the ethical challenges faced by two organizations -- one in the not-for-profit sector named Susan G. Komen for the Cure and one in the for-profit sector named The Lubrizol Corporation. A brief background of the two organizations is provided which also includes a description of the ethical challenge. Several alternatives for each organization are discussed along with implications for various stakeholders. Out
Any effort that detracts from that objective -- unless that effort is explicitly authorized by the shareholders -- is therefore a breach of duty. The managers of the Company must therefore have the objective of upholding their duty to the shareholders, within the confines of the law. BP will therefore not be providing research funding, compensation or any other form of assistance to the fishermen, without judicial or regulatory
Ethics with Character: Virtues and the Ethical Social Worker -- Paul Adams Professor Paul Adams of the University of Hawaii's Myron B. Thompson School of Social Work in this peer-reviewed article explores those aspects of social work that "…are not primarily about identifying and resolving dilemmas" (Adams, 2009, p. 83). Adams delves into the "ethical tradition" -- and the potential therein -- that had its roots in "the virtues and character"
Our semester plans gives you unlimited, unrestricted access to our entire library of resources —writing tools, guides, example essays, tutorials, class notes, and more.
Get Started Now