Trust. That one little word sums up a huge challenge facing the finance sector. The sheer number of serious scandals in the industry mean that five years on from the onset of the financial crisis, trust in banks and other finance companies has fallen to 50% among the informed public globally and 29% in the UK, claims the latest Edelman trust survey.
How can trust be rebuilt? While there’s no simple solution, ensuring ethical behaviour is crucial. The message from markets and government is clear: financial institutions must put integrity at the heart of their business models. “The industry needs to create a new era of professionalism and do more to integrate integrity into its business,” says Iain Coke, head of ICAEW’s Financial Services Faculty.
The Institute’s Market Foundations initiative has long been looking into the issue of integrity. It recently released the results of research – an online survey of about 1,500 respondents and 94 interviews with professionals from 15 organisations – to examine what integrity is and how it can be encouraged.
There needs to be real commitment and active participation from the top, ensuring the highest professional and ethical standards permeate down
The research considered the characteristics associated with integrity, the factors that influence decision-making, how organisations promote ethical behaviour and what finance professionals can do to promote ethical behaviour. Its findings confirmed the view that organisational leaders need to set the tone, demonstrating ethical values and leadership behaviours for others to follow.
“There needs to be real commitment and active participation from the top, ensuring the highest professional and ethical standards permeate down,” says Annelie Green, head of leadership and professional development at ICAEW. “Without this you can’t make the messages congruent within an organisation.”
The second main research finding was that leaders need to address areas of ethical weakness in organisations, such as reward, control and risk management systems. The third was that leaders should provide genuinely confidential and open advice and act as ethical mentors.
These key findings – leaders setting the tone, changing organisations and mentoring others – form the pillars of the new ICAEW Valuing Integrity Programme (VIP). Building on these pillars, the programme aims to help finance leaders drive change and create a culture of openness and ethical decision-making to rebuild trust.
Taking its cue from the research findings, VIP’s starting point is that ethical values in organisations are developed through values-based leadership, with intra-organisation relationships based on shared, strongly internalised values that are advocated and acted upon by the leader.
“Leaders influence ethical values through their personal behaviour as well as through the organisation’s systems and policies and influencing others as trusted advisers,” says Jonathan Levy, head of markets and product development at ICAEW. “VIP’s focus is very much on what you do to support people and to drive values.”
The question of why people who consider themselves to be ethical don’t always act with integrity is a central part of the first of three days of workshops in the programme. The first workshop starts by making participants aware of the biases and psychological processes that can lead to unethical behaviour, and to learn how to safeguard themselves from these biases, which can lead to poor decision-making.
This session splits the psychological obstacles to workplace integrity into two categories: outside-in and inside-out. Outside-in centres on people as social animals affected by those around them and their external environments. “As a result, we tend to function in a way that’s less directed by our own moral compasses than we think,” says workshop facilitator Celia Moore, assistant professor at the London Business School. “We do whatever other people around us are doing; we do what people in authority tell us to do; we tend not to speak up if we see things that make us uncomfortable.”
Inside-out deals with cognitive biases. “We tend to believe strongly in our own morality, which means we have the blinkers on when it comes to any deviation from true north that we may be engaged in,” Moore says. “We’re very good at tricking ourselves into believing that we were doing the right thing all along.”
The second day’s workshop focuses on the organisation and how participants can drive the integrity agenda from within their company.
Reviewing the organisational environments that affect decision-making turns discussion to hard and soft pitfalls. Hard pitfalls involve goals and incentives. The challenge here is less about an incentive system and more about the fact that having a goal will focus attention to such a degree that anything outside the goal is disregarded. “I want people to take a close look at the goals that are set for them and their organisations, and then to understand what dysfunctions they might be causing,” Moore says.
Soft pitfalls are to do with culture and acceptable practices. Most organisations have good formal policies and procedures for maintaining an ethical culture – Enron famously had a robustly written code of conduct. “But the reality of the work environment can be very different,” Moore points out.
The workshops aim to create what she calls a safer space in which to explore such sensitive ideas (Chatham House Rule applies) and to encourage participants to see themselves, their contexts and their actions with more open eyes. “One of the obstacles in the past has been that people think they know what’s wrong; that if they can get the incentives right then everything will be okay. We need to see our actions with more open eyes and be able to admit to ourselves what are the dysfunctional motivations we’re operating under.”
The third workshop applies what has been learned in the other sessions by focusing on delegates’ leadership strategies to engage the wider business and embed integrity into the fabric of day-to-day decision-making.
A key feature of each of the first two workshop days is an application session in which participants take examples from their working lives. The first session includes strategies and role-playing to prepare participants to exercise influence in their organisations, while in the second they develop strategies to drive the integrity agenda. The sessions help to reinforce lessons and help participants learn to speak up. “People’s moral compasses are usually active. A little alarm bell goes off when we are engaging in practices not consistent with our values. But often we don’t speak up because we’re not good at going against the grain,” Moore says.
While the first and second workshops cover practice from the participant’s perspective, the third is about mentoring others. As Moore says: “It’s hard to be a model for others until you’ve figured out your own needs and strengths.”
The lessons from all three are reinforced in peer-group coaching sessions at which participants revisit the personal leadership strategies they’ve developed, learn from post-implementation lessons and refine their plans.
By getting participants to understand their integrity agenda and how to deal with obstacles to it, the VIP aims to make people more aware of how they can be swayed from making ethical decisions, how they can protect themselves from poor decision-making and how they can help others act with integrity. While aimed at the finance sector, Green says ICAEW is seeing interest from outside the industry. “The issues of trust, values and integrity apply to all businesses,” she says.
“There’s been a groundswell of interest in making positive change in the last two years,” says Moore. “We can make a real difference in creating more sustainable, high social value organisations. VIP’s goal is to create a space where people can learn to lead finance organisations this way.”
The Valuing Integrity Programme can be taken either as an open programme, with participants hailing from different organisations, or conducted in-house. More details are available from the leadership development page in the qualifications and programmes section of the ICAEW website.
To find out more, contact ICAEW senior professional development manager, leadership, Marc Jerrard at firstname.lastname@example.org