Unethical Issues in the Banking Industry

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Tiffany Pace
Timothy McAlister
MSD 113 – Business Ethics
Research Paper
3/11/10

Unethical Issues in the Banking Industry
Ethical issues in banking are currently receiving a great deal of attention, and those who manage these organizations seem to be under constant public scrutiny. This paper presents and discusses the certain ethical issues and concerns with banking managers. Suggestions for enhancing the degree of ethicalness in organizational practices and decision behaviors’ have also been attempted.

Ethical issues in banking and financial service organizations are currently receiving a great deal of attention the world over. With the financial markets in most countries now opening up further through deregulation, arid technology fast replacing face-to- face contact, there may a rise new problems and issues pertaining to organizational ethics. The variety of changes and challenges brought about by the continuing trends towards liberalization, greater autonomy to organizations, more emphasis on profit and intensifying competition are beginning to have their impact on organizational dynamics and performance.

Banks provide "credit". The word “credit" has its origin in the Latin word for “trust", and it is "credit", rather than loans, which is fundamental to the success of financial service organizations. Through their objectives, intentions and actions related to lending money, investment decisions or those concerning personnel policies, practices and other transactions, bank executives affect the lives of a large part of society. As such, the degree of their moral sensitivity, their leadership role as "value shaper” and commitment for institutionalizing their organizations' operational and continuing concern for sound professionalism and ethical integrity becomes important. TABLE 3

Managers' perceptions of superiors differentiating between ethical behaviors’

1. If a manager in my organization is discovered to have engaged in unethical behaviors that result primarily in PERSONAL GAIN (rather than corporate gain) he/she will be promptly reprimanded Agree Partly Agree Undecided Partly Disagree Disagree Mean 67.8 17.8 5.6 6.7 2.2 1.58

2. If a manager in my organization is discovered to have engaged in unethical behavior that results primarily in CORPORATE GAIN(rather than persona gain) he/she will be promptly reprimanded Agree Partly Agree Undecided Partly Disagree Disagree Mean 28.4 22.2 25.9 11.1 12.3 2.57

As is clear from the findings contained in Table 3, Managers perceived their superiors differentiating between ethical behaviors’ resulting in personal gains to employees and those leading to the improved bottom-line of the organization. 85% respondents agreed with the view that if any manager derived a personal benefit by resorting to unfair means, he or she would be promptly reprimanded, whereas in case of a similar action resulting in Sortie corporate gain, only 50.6% of them thought it would lead to any punishment by their superiors. Thus, the senior level functionaries were perceived by many as indifferent to the ethical aspects of the ways and means used by lower level managers for achieving organizational objectives.

The activity of padding up of expense accounts, being in the nature of embezzlement on a small scale, has been one of the more common issues included in ethical surveys of managers. The practice of unfairly benefiting oneself in this manner is perceived to be widely prevalent in business organizations. The common practice of giving and receiving gifts to and from those with whom managers regularly do business may or may not be ethical. If a person does not give favored treatment to those from whom he or she accepts gifts and is not prejudiced against those who fail to give, no actual conflict of interest is created.

However, in...
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