Belonging and ethics: UBS rogue trader seeks to reform finance sector

Just a week after FRC report ‘Culture and the role of the board’, here’s a valuable perspective on the consequences – for institutions, individuals and markets – of a serious breakdown in ethics.

The BBC’s Economics Editor Kamal Ahmed has a very interesting interview with Kweku Adoboli

“The London trader who lost the Swiss bank UBS £1.4bn ($1.9bn) has apologised and said that banking has not done enough to regain the public’s trust.”

In his first broadcast interview, Adoboli told the BBC that banking is still rife with conflicts of interest. Now he wants to help the finance sector to reform by sharing his experiences.

This is an important case, not only for banking and finance, but for any business leaders committed to ensuring a culture of ethics. It is the responsibility of Directors to set the culture both in principle and by example, to hold everybody accountable, and to build a shared sense of belonging around the company’s ethos.

Adoboli is one of a very few fraudulent bankers who has been sent to prison. At his trial he apologised and acknowledged his crime. He also emphasised the intense pressure from bosses to continue to make huge sums – and that others knew perfectly well how he gained  ‘high yield’ from his record deals: in a culture of money over everything, ethics and values didn’t get much of a look-in. Others testified that he worked alone and no-one else knew. 

Now free from jail, unable to work having served time, he is speaking – for free – at banking conferences about ethics and compliance. 

There is much to learn from the critical belonging challenges in this story.

A sense of belonging is pivotal for people to uphold ethics. Our sense of belonging to a group is profound, intuitive, and will guide our decisions more strongly than the rule book. We uphold the shared values of the group more than the fine words around the walls of a grand office building (as we commented in a recent article)

That’s why a culture of commitment beats one of compliance.

People will do the right thing because they want to, not just because they have to. 

Because they value the group they are part of. Organisations need to ensure that the commitment is to the whole organisation, not just one small team.

Whereas compliance can mean people comply with their team and don’t challenge others around them; or that they skirt the edges of the law, doing whatever they can get away with.

Do employees feel they belong to the institution and want to uphold its stated ethics and values? 

Or do they more feel they belong to a super-tribe of bankers with its own unwritten but powerfully dominant ethics and values?

If they feel more part of a small, competitive team, than of the whole organisation, then they will intuitively follow the values of that team. 

Are they accountable for how they make money? 

Or ultimately, will ‘show me the money‘ – more and more of it – always trump ethics? 

It’s interesting to note that the mutual societies, and credit unions – arguably with a much stronger sense of belonging both for employees and customers –  have been largely unaffected by all the ethical scandals. Compared with the many billions of pounds of regulatory fines paid by the major banks, a big building society we spoke with recently had been fined: zero.

If they are appreciated and rewarded only for their revenue and never for upholding the company’s stated ethos, then that’s the behaviour they will repeat.

Is it OK to challenge people’s behaviour, is this a culture of candour and accountability?

Individual or collective accountability? Is it the apple or the barrel?

In another twist of belonging, Adoboli is fighting the deportation order, having lived in the UK since he was 12 “as he is as “British in culture” as anyone living in the UK and could help the finance sector to reform by sharing his experiences”

He has a point. Where we are born can have less influence on our sense of belonging than the culture in which we grow up and shape our identity.

The institutions that take his advice on how to reform may well find a fast-track to establishing the ‘culture of ethics’ they have all promised to the regulators. 

There’s a good precedent in the benefits of poacher-turned-gamekeeper from the brilliant young hackers, atoned of their crimes, now advising both the US and UK authorities on how to reinforce cyber-security.

Adoboli knows all the twists and turns of the system, the handy portals, the discrete slush funds, the invisibility cloaks of cyber-deals: how to set the traps, and therefore how to defuse or prevent them.

It is possible he was working alone, but seems more likely that others knew. Perhaps they delighted in his wins and the appreciation stoked his maverick gifts?  Perhaps his desire to belong motivated him to be the best at the games played around him? Whatever: all individuals are affected by the culture around them, and he is a product of the banking culture.

As Dame Minouche Shafik, Deputy Governor of the Bank of England, said last year:

“It is not just a few bad apples, it is actually the barrel in which they are operating, and we need to fix the barrel as well as track down the bad apples.”

What can you do to avoid this?

So what can banks – and any organisations – do to keep the barrel clean and protect themselves from ethical breakdown?

With ethics there are no quick wins. At Belonging Space we help companies with deep long-term programmes to achieve this.

Here’s a starter for five:

1. Establish your overall ethos and a clear set of principles.
2. Share this widely, so no-one can be in doubt about the ‘right thing to do’ or the wrong thing.
3. Provide guidelines as well as rules, so as to enable people to navigate the grey areas, and feel confident with making and sharing tricky ethical decisions.
4. Nurture a culture of commitment more than compliance: people will do the right thing because they want to, not just because they have to.
5. Be aware of how your culture helps or harms your business. For example, does the camaraderie of tight-knit teams support the organisation’s ethos or subvert it?

For a quick look at whether your culture is helping or harming your business, take our Belonging Space Challenge here.