In a new Marist Poll commissioned by the Knights of Columbus, 76% of Americans and 58% of corporate executives graded corporate ethics a failing score of D or worse. It seems that Americans believe that personal financial gain and career advancement is more of a motivator for corporate decisions than concern for the public good or the welfare of employees, shareholders, and customers.
No less than the Chairman of the Financial Services Authority (“FSA”) in the United Kingdom, Lord Turner, allegedly accused Britain’s current Prime Minister, Gordon Brown, of “political pressure” to apply a light touch to regulatory oversight leading to the collapse of that country’s largest banks. As Chancellor of the Exchequer, Mr. Gordon Brown oversaw the FSA prior to becoming Prime Minister. The now famous Moore Memo, Paul Moore of HBOS, has led to the resignation of Sir James Crosby, the deputy chairman of the FSA.
Similarly, the Securities and Exchange Commission has been accused of regulatory neglect during the tenure of former Chairman Christopher Cox. Chairman Cox allegedly set up hurdles for the agency’s commissioners which hindered their ability to expeditiously bring enforcement cases.
What does this have to do with ethics?
The recent and still current banking crisis may be directly linked to a systemic failure of corporate ethics. Mr. Paul Moore described the dilemma in his testimony to the UK’s Treasury Select Committee:
“In simple terms this crisis was caused, not because many bright people did not see it coming, but because there has been a completely inadequate “separation” and “balance of powers” between the executive and all those accountable for overseeing their actions and “reining them in” i.e. internal control functions such as finance, risk, compliance and internal audit, non-executive Chairmen and Directors, external auditors, The FSA, shareholders and politicians.”
Restoring fundamental principles of fiduciary responsibility, the prudent man rule, may in fact be the tools that financial institutions and corporations need to repair trust in the marketplace.
Adam Smith wrote in The Wealth of Nations:
“In the midst of all the exactions of government, capital has been silently and gradually accumulated by the private frugality and good conduct of individuals, by their universal, continual, and uninterrupted effort to better their own condition. It is this effort, protected by law and allowed by liberty to exert itself in the manner that is most advantageous, which has maintained the progress of England towards opulence and improvement in almost all former times…”
A return to good governance, corporate and private ethics, and appropriate regulation and internal controls may be the remedy to the current crisis.
This article was contributed by CCI featured columnist James Bone, the former Chief Compliance and Operational Risk Officer for Fidelity Investments.
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James Bone’s career has spanned 29 years of management, financial services and regulatory compliance risk experience with Frito-Lay, Inc., Abbot Labs, Merrill Lynch, and Fidelity Investments. James founded Global Compliance Associates, LLC and TheGRCBlueBook in 2009 to consult with global professional services firms, private equity investors, and risk and compliance professionals seeking insights in governance, risk and compliance (“GRC”) leading practices and best in class vendors.
James is a frequent speaker at industry conferences and contributing writer for Compliance Week and Corporate Compliance Insights and serves as faculty presenter and independent consultant for several global consulting firms specializing in governance, risk and compliance, IT compliance and the GRC vendor market. James created TheGRCBlueBook.com to provide risk and compliance professionals with transparency into the GRC vendor marketplace by creating a forum for writing reviews on GRC products and sharing success stories on the risk practices that are most effective.
James is currently attending Harvard Extension School for a Master of Arts in Management with an emphasis in accounting and finance. James received an honorary PhD in Letters from Drury University in Springfield, Missouri and is a member of the Breech Business School Hall of Fame as well as the Missouri Sports Hall of Fame. Having graduated from the Boston University Graduate School of Education, James received his M.Ed. in Management and Organizational Design in 1997 and a Bachelor of Arts in Business Administration from Drury University in 1980.