Unethical conduct by employees of financial institutions can usually be traced back to improper incentives in the internal corporate structure, according to Gerhard Minnameier, Professor for Business Ethics and Business Education at the Goethe University Frankfurt, interviewed in the latest edition of the Faculty of Economics newsletter. "If one looks at the high-profile fraud cases, then the internal rules were formally contravened, but informally virtually everyone did it like that." At an informal level it may be unclear to the individual which rules actually apply. Since employees are always striving for recognition, their behaviour ultimately depends on what companies recognise: a hard-earned position in a competitive hierarchy or contributions to the company's success.
In order to change the behaviour of the employees, companies have to create a culture which is based on a collaborative approach for the benefit of the company, according to Minnameier. In addition to selecting suitable employees, the key thing in this regard is to create structures which promote a sense of teamwork and which ensure that individuals do not exploit the cooperative nature of their colleagues. "We are familiar with this problem from game theory or the prisoner's dilemma: if some people behave in a cooperative manner but no mechanisms are in place to protect them, then it can be advantageous for others not to cooperate", Minnameier explains. So an employer who wants to create a collaborative environment also has to ensure that "black sheep" stand out and/or don't have any incentives to corrupt the morals of the rest.
On the other hand, according to Minnameier, establishing a code of ethics which doesn't reflect the factual, actual criteria used to evaluate the actions of the individual is not very productive. At best, such a code of ethics could serve to remind the employees of the moral principles. However, the effect does not tend to last very long and it cannot be repeated endlessly.
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