Business Ethics in Banking - Case Study Example

Personal Ethics Action Plan (PEAP) The Problem Ben Garrison is having a challenge with the new ethical policies at his office. He believes that if something is legal, it is also ethical. He is promoting "business as usual" in the way that he does business with customers. He is the senior loan officer and has been with the company for ten years. Shelby Grant is a new hire and this is her first job out of college. She too has challenges with ethical policies, but she has he own set of values. Ben has presented Shelby with two ethical dilemmas: The first one involves taking money from a potential loan. A rancher will pay the bank's way to come to his ranch to see what he is doing in order to decide on whether the loan will be granted. The second dilemma involves the coercion of bank customers in order to provide prizes for a bank fundraiser. Both of these issues create an ethical dilemma for Shelby and she is not sure what to do. She is afraid that if she does not do what Ben tells her that she will lose her job. Still, she is uncomfortable with doing what has been asked. Shelby must rely on the bank policies to tell her what to do. Input Shelby Grant is a recent graduate of college and this is her first job. Ben Garrison is the Senior Loan Officer who has been at the bank for 10 years. Ben is not happy with the fact that his bank, First National Federal Bank, has decided to adopt a new ethical policy. Ben does not understand the emphasis on ethics and feels that as long as he stays within the law, he is being ethical. Shelby understands her own personal ethics and this is where she questions Ben. She questions the ethical aspects of the assignments she has been given by Ben. Shelby has to decide whether it is ethical to let the rancher pay for her expenses and whether she should go to her clients to make them donate prizes for the fundraiser picnic. Shelby feels she needs to keep this job, but she does not feel that she is being told to do the right things by Ben. In one sense, Shelby could do exactly what Ben says without question. If she does, he will expect her to do this all the time. If what she is doing in either case is against bank policy, she could be fired; if she does not listen to Ben, she could also be fired. The case study implies that Ben is her boss, but it is not clear whether he is, and whether he has firing power. She may have to discuss this with the person who hired her to see what the repercussions of not following these orders may be. Ben may be resistant to any changes and he may not be open to changing what he has always seen as what needs to be done. Both situations are grey areas and the only way to settle them would be to check bank policy on them. Shelby and Ben must also think of the big picture. Is Mr. Whitton expecting that this loan is already approved? Is this why he is paying their way up to the ranch? If so, this could be seen as a bribe. If Shelby calls her clients, how far is she supposed to go in order to get the prizes? Shelby thinks that she is to push her customers (who already have loans) to donate prizes; her role in this needs to be clarified. They must also think about how their actions can be perceived by their customers. A large issue for Ben is change. Duska (2005) suggested that change was important in the banking industry. He gives an example that banking financial services re always going through change because of new financial techniques and services. This means that there are a variety of changes considered in banking, especially when there are many differences that have happened. Some of the changes involved have to do with global issues like 9/11 and other terrorist attacks. Ben will need to face the fact that he will have to accept change. Solution The best solutions in this situation are: 1. To review the bank policies about these two issues and talk more with Ben about the findings. 2. Do what Ben has told her to do without question. 3. Define her own ethics and stick with them. Solution 1: SWOT Strengths: This is the best possible answer because it would put everyone on the same playing ground. Rationale: Whenever you work for a company, it is important to understand the policies that govern the job. Duska (2005) suggests that financial services must "do good and avoid harm" (p. 19). The best way to do this is to understand what the company wants. Shelby is also a new employee and must find her way in order to understand what she must do. She is also young and just starting out so it would be easier to find another job if she needs to and will have already acquired experience. Weaknesses: The fact that Shelby is fairly new also works as a weakness because she is not sure how to stand up to Ben. She does not know the territory or what to expect without knowing the policies. Ben can put her into situations that can hurt her job. She also seems to have a need to fit in instead of using good judgment in this situation. Opportunities: Shelby has the opportunity to become an ethical loan officer when she knows the policies. She could help other loan officers understand the policies. If she needed a new job, she would have an ethical baseline. Rationale: An article in "Compliance Action" Suggests that people in banking need to understand that there is a code of ethics that is important to use. They talk about a "Regulation O" that tells banks how to deal with employees working in a bank. This is just one example of the importance of ethics. By knowing the ethical policies, an individual can be sure to stay out of trouble. Threats: Without knowing the policies and the information in her employment contract, Ben can be one of Shelby's biggest threats. He is not thinking clearly and he is not being rational. He wants to maintain the status quo at any cost. Ben also seems to want to do whatever it takes to pull in customers, hence the reason why he is willing to have the rancher pay for the trip. Rationale: Ben has been with the bank for ten years but he does not like change. He is resistant to the new policies and he does not seem to be learning them. He does not seem to be responsive to his own professional development as it would mean he would have to adopt the new policies. Solution 2: SWOT Strengths: This solution would make Ben happy and it would stop everyone from worrying about ethics. The more people know, the better they can align with the purpose of the bank. Shelby would be seen as a team player. Rationale: Following what a supervisor says is one of the most desirable aspects of a business. The challenge is that sometimes the supervisor can be wrong. In this situation, it is important for Shelby to have a better understanding of the job and what it entails in order to make good decisions. Weaknesses: Ben is resistant to change. He is the senior loan officer and he may expect that everyone will do what he says without question. He may be threatening if she does not comply. Also, the wrong decision may cost her the job anyway. Rationale: Ben seems like a man who is used to getting what he wants. This could be a problem for Shelby as she becomes more involved with her job. This weakness may eventually become a strength. Opportunities: In this situation, there are no real opportunities except for understanding how to follow someone else's dictates. Threats: Ben may be Shelby's biggest threat. He gets angry when he is questioned and this can be a sign of someone who would become abusive. Listening him and letting him have his way all the time may be more detrimental than losing her job. Solution 3: SWOT Strengths: The more Shelby learns her job, the more confident she will feel in it. As an example, if she knows the policies, she will be able to use them appropriately. She will also be able to organize her own work as a loan officer and do a better job for her customers. Rationale: Duska (2005) points out that it is important to understand that "The Golden Rule will remain a central ethical principle.." (p. 19) in business dealings. In this case, Shelby is already using her own ethics and she is most concerned about not doing something that does not feel right to her. Weaknesses: Having no ethical context can create problems for the bank and for Shelby. If she starts working against her own values, she will be unhappy. If she starts doing things that are contrary to her beliefs and only listens to Ben, she may not do well in her job. Rationale: Duska says that "the ethical person will still adhere to the principles of being honest and keeping one's promises" (p. 19). The way this happens is to be involved with her own ethics first. By having her own ethical foundation, she will be better able to understand the bank's ethical code. Božović (2007) states that there are two types of ethics that come into play in any business: Collective and individual. He states that an individual must be careful about using their own ethics when they are contrary to the collective needs of the organization. By doing this they can "damage the business climate" (p. 175). If Shelby only goes for her own values, she will not be as strong a loan officer as if she looks at both. Opportunities: The major opportunity for Shelby is to do a good job for her customers and for herself. She'll be able to build credibility and experience to stay with this bank or any other bank where she may work. Rationale: Banking is changing. There is ongoing change because of the economy and banks are more in the spotlight than in the past. Banks are being asked to be highly respectable and ethical in their dealings. By becoming an ethical loan officer, she will have many opportunities for jobs. Threats: A threat that could happen if Shelby sticks with her own ethics and does not understand them in relationship to the bank ethics, may mean that she loses her job. She may not do the best for her customers and this may cost the bank money in the long run. Rationale: Without a strong ethical policy, many different issues can develop in a job that no one knows how to work through. Choice The best choice in this situation is for the office to understand and embrace the ethical policies. The reason this is so important is because it allows the bank to be honest with its customers. Susca (2006) suggests that there are many different ways of dealing with ethical dilemmas. One way is to ask six questions: 1. "Why is this bothering me? Determine what the issue is. 2. "Who else matters? Consider the stakeholders now and down the road. 3. "Is it my responsibility?" Figure out what your role is and the limits of your responsibility. 4. "What is the ethical concern?" For example, is it fairness? Promise keeping? 5. "What do others think? Seek others opinions. Ask for help. Learn from, and respect disagreement. 6. "Am I being true to myself?" This relates to the personal-character aspect of the decision. Does it jibe with your values and character?" (Susca, "How to Address.."). If Shelby was able to work through these questions for herself, she may have found an easier time of dealing with the situations. In the rancher's situation, if he pays for the transportation, it should be made clear that the visit does not mean that he will get the loan. This could eliminate the idea that favorites were being played. In the situation with Shelby's customers, the ethical guidelines may point out what is necessary to do in this situation. Common sense should also come into play; if they want to donate they can, but they should not be pushed to do it. Operation The goals that I would set for this group would be to go over the policies and the ethical guidelines. In particular: 1. All staff will read the material and discuss it. 2. A method will be developed that all ethical dilemmas can go through in order to address their relevance (e.g. the Susca model). 3. Bank employees will pay for the transportation when visiting clients. 4. Staff will develop a plan for future lending activities based on the ethical guidelines and the needs in the branch office. References Božović, J. (2007). Business ethics in banking. Economics and Organization. 4 (2). 173-192. Retrieved March 11, 2010 from http://facta.junis.ni.ac.rs/ eao/eao200702/eao200702-09.pdf Duska, F. (2005). Ethics in financial services: A look ahead. Journal of Financial Service Professionals. 59 (1). 19-21. Business Source Premier. AN: 15590599. Susca, D. (2006). Thinking it through: How to address ethical dilemmas. Retrieved March 13, 2010 from http://www.cbia.com/cbianews/2006/200607_ AddressEthicalDilemmas.htm Read More