EXECUTIVE SUMMARY Professional ethics is concerned with the personal and corporate standards of behaviour expected of individuals working in acknowledged professions. These ethical behaviours are of great importance when a business provides service to the public especially when their actions or inactions have consequences on the stakeholders. As a bank, GHF is a business which must be built on a foundation of trust in order to ensure its continued survival. Its customers and other stakeholders at large must believe that the bank is concerned about creating all-round value and is not just interested in pursuing the self-interest of a select group of individuals. Over the years, the bank has gone through a number of changes. While not bad in themselves, some of these changes have revealed lapses in corporate governance and internal control. Together with a declining ethical stance, the bank has generally fallen to a place of disrepute in the sight of its stakeholders and the public. While some of the negative image projected of the bank may not be based on facts, it is important to note that reputations are built on both facts and perceptions thus, it is important that a firm is viewed positively by society in order for it to survive. In order to rebuild the ethical standards of the bank and restore it back to its place of trust amongst its stakeholders, immediate actions must be taken to resolve the issues surrounding declining ethical standards, poor corporate governance and weak internal controls. These actions will basically revolve around the bank’s work team as an idea is only as good as the people who are available to implement it. In all, the bank must be ready to work hand in hand with it stakeholders to ensure that it once again rises to its place as a bank of the people. Changes have to be made and the Board must have the will implement those changes and be at the forefront of championing professionalism. TABLE OF CONTENTS Assignment Cover Sheet1 Executive Summary3 Table of Contents4 Introduction5 Analysis of the Problems Existing in GHF Bank5 Matters to be addressed by the Board of Directors8 Proposals for Rebuilding Ethical Standards to Restore Stakeholder Trust9 Recommendations and Conclusion 11 References12 INTRODUCTION The banking sector plays an important intermediary role in any market-oriented economy today by using various financial instruments to obtain surplus funds from those who have chosen to forgo current consumption and making those savings available to the deficit spending unit for the purpose of investment. As major stakeholders of a country’s financial assets, the banking sector is directly involved in the development of a nation’s economy in terms of growth and stability and it prevents large potential risk for financial and reputational losses. In order to avoid these risks, it is important that banks adopt ethical principles while carrying out their professional and corporate responsibilities to all stakeholders, as to promote trust and confidence in the banking industry. These ethical standards apply not only to the banking industry as a whole but also to individuals working within the industry as personal life values are reflected in work ethics. ANALYSIS OF THE PROBLEMS EXISTING IN GHF BANK A number of changes which the bank has embarked on and decisions which it has taken have currently led to a negative impact on the perception of customers and other stakeholders of the bank. While some of the criticisms against the bank are based on impressions, it is important to note that a bank’s reputation is not only built on facts but also on the perceptions that people outside the bank have of its services and operations. Some of the problems facing the bank include:
The bank recruited two senior executives who seem to have different personal values and business culture from the values and culture hitherto reflected by the bank. While the bank had previously conducted its business based on a traditional approach over the years, the new executives had a consequentialist approach to situations which focused only on benefiting a limited number of stakeholders. As a result, the executives brought in new methods aimed at improving the bank’s bottom-line and perceived image as a “boring and conservative” bank and were not ultimately concerned with core responsibilities or a sense of duty to others including the customers. This eventually led to a conflict of interest arising from self-interest. The marketing approach in selling the new products was not properly channeled and segmented on customers ‘needs’ and ‘affordability’ criteria. The on-boarding process for the new executives ought to have enabled a gradual or step-wise introduction of the new marketing strategies, where deviation from the traditional culture is gradual and almost unnoticeable.
Customer relationship managers received commission-based payments for each life insurance policy or interest rate product sold. Thus, they focused on selling more products in order to beef up their commissions and ignored their obligations to the customers which include full disclosure of all the pros and cons of the product being sold; and a full explanation of what the product entails including the pricing terms. This approach has resulted to customers becoming disgruntled with the bank’s services and has led to somewhat disbelief in their bankers. This will affect the bank’s ability to attract repeat business from affected customers or new business from prospective customers thus jeopardizing the possibility of long term sustainability of achieving sales targets and attracting business.
The bank failed to properly educate its customers on the features and pricing of its insurance products, thus, customers bought into products which they did not need or could not afford in the long run. In doing this, the bank was professionally negligent. This creates a run of confidence on the bank and probable disrepute making the customers believe that the bank does not consider their interests. A reasonable level of duty of care by the bank is necessary in boosting confidence and assurances from customers.
While the closure of economically unsustainable branches is not an issue in itself, the process surrounding the closure and the fallouts from the closure has led to a number of issues. A number of employees were rendered redundant and paid only the basic severance fees. This could have a negative impact on the bank’s reputation in terms of staff welfare and also affect the attitude of other staff currently working in the bank or new staff which the bank may wish to employ in the future. Additionally, the uprising being championed by the bank’s union could lead to disruption of services even in other branch locations. The bank also failed to make adequate alternative arrangements to meet the banking needs of their customers of the closed branches. This poses a reputational risk to the bank in terms of service delivery. In all, the bank failed to take its stakeholders, notably its customers and employees, into consideration when taking the decision to close the rural branches. Thus, it failed to balance its needs to make profits with its corporate social responsibilities to its staff and customers. This failure led to a negative reputation for the bank.
While there could be a need to sell a product to a customer because he may actually need it, it is important that the sales techniques being used by the bank should be based on a sense of duty to serve the customer. Fear / high-pressure techniques which forces customers into buying products that they do not need, albeit under duress, are ethically wrong and often bring about one-off sales. They also discourage customers from using any other product or service offered by the bank, as there may exist the fear that such a product could further harm them financially.
The bank awarded “across the board” salary increases for executives even in the face of declining profitability, reputation and low growth levels. The effect of this is heightened when the minimum payoff made to redundant staff from the closed branches is brought into view. This remuneration scheme has been made possible as a result of failure of the bank’s corporate governance. Remuneration strategies and policies have been formulated by focusing on the needs of a small subset of the bank’s stakeholders (the executives) at the expense of the majority. As a consequence, the bank has earned itself a negative image in the sight of its stakeholders, the media and public.
The banking business is one that is founded on a bedrock of trust and reputation. With negative media image relating to the bank’s processes, current and prospective stakeholders will begin to have a negative perception of the bank. While this perception may not be based on facts, it is important to note that reputations have been built or marred over the years by the perceptions of individuals towards organizations.
The bank could face possible litigation from its proposed replacement of executive officers. This could lead to reputational disrepute especially in the face of an already negative media image. It could also have financial consequences.
There is little or no existing feedback mechanism or strategy that would have enabled the bank notice the declining reputation and growth early enough, before it becomes clearly public knowledge and more difficult challenge to handle. MATTERS TO BE ADDRESSED BY THE BOARD OF DIRECTORS In light of the problems analyzed above, a number of issues have to be addressed in order to lay the foundation for rebuilding the bank’s ethical standards and restoring stakeholder trust. These include:
Also of importance is the building of technical competence in customer service personnel in other to enhance their professionalism.
PROPOSALS FOR REBUILDING ETHICAL STANDARDS TO RESTORE STAKEHOLDER TRUST In order to rebuild ethical standards and restore trust in the bank, a number of recommendations are proposed including:
RECOMMENDATIONS AND CONCLUSION The challenges faced by the bank have mainly being as a result of a failure of corporate governance, internal control and poor ethical values. Professionalism requires that corporations and the individuals working in them live by values. Thus, it is important that the bank follows the proposals that have been set forth in this report. The impact of these proposals should be reviewed quarterly to give room for an assessment of the bank’s progress and opportunities to make amendments if needed. It is of utmost importance that all staff of the bank be carried along in this transformation process as the only thing better than a great idea is the people who will implement it. REFERENCES Sachdev, A. (2014, June 29). “Is Corporate Tax Loophole Unpatriotic?”, Chicago Tribune. Retrieved from https://www.chicagotribune.com Professionalism, Ethics and Regulation (2013). London, UK: BPP Learning Media Kelechi-Uloh, Nneoma – 500375529 Professional Ethics & Regulation 2013141 of 11 Assignment Cover Sheet Version 1 1/9/10
 Based on the Teleological Approach to Ethics  The Stakeholder Approach to Professional Ethics. Note also the case of the USA based Company ‘Walgreen’ in its Corporate Tax Loophole Dilemma reported by the Chicago Tribune (Sachdev, A., 2014).  Refer to the reputational damage suffered by Arthur Andersen as a result of its relationship with one of its clients, Enron.
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