How would you improve ethics in financial services?

Ethics in Financial Services: It’s Time for a Change!It’s obvious that after the recent financial collapse, ethics in financial services seem to be lacking. Whether it is for money, success, or innovation, it’s tough to deny that a large part of a business’s success is in part tied to a certain amount of greed, however; we must find ways to temper that greed, and harness it as a tool and motivator, rather than let it run rampant and unchecked. This of course, is easier said than done. While in many cases, government regulation is helpful in acting as a watchdog over business and financial services, it can also stifle innovation and healthy competition. We must therefore find a balance between regulation and freedom to operate, which will still promote growth and success, while limiting the temptation for greed and corruption. That being said, here are a few of my thoughts on how to do so.


Bonus systems restructure

There is no denying that bonuses can be a great motivator and wonderful incentive to those working in the financial world, however; the system should be properly weighted and structured toward individual investor success. Similar to many hotels and hotel chains whose success and bonuses are determined in large part by customer satisfaction as well as the meeting of revenue goals, we might consider restructuring financial bonus systems also to be based upon the satisfaction of its customers. Sure, bonuses would fluctuate with the swings of economies and markets, but so should bonuses. If you’ve lied or lost money for your investors, why should you receive a bonus? Your job is to make money for your investors, and keep them satisfied with their investment options, customer service, honesty, and explanation of market events, fees, and charges. With a large portion of the bonuses placed in the hands of customers, through customer surveys and feedback, I have a feeling more focus would be placed upon meeting customer needs and less focus upon company goals and individual bonus plans.

Decrease perks and pay

The argument against lower pay and benefits, as well as decreased bonus amounts for those in the financial sector, is that financial operations will loose out on obtaining the best and brightest talent to come and work for them. Well, in my opinion, we’ve all see where the best talent has gotten us; maybe it’s time to try some lower-level talent for a change.

Now I’m not saying financial sector employees should be relegated to minimum wage, or anywhere close to it. However, a reasonable level of pay (say between $50,000-$250,000 for non-executives and under $2,000,000 for executives) should bring in sufficient talent to run these operations effectively. Rather than hosting huge events, eating steak dinners, sponsoring sports arenas and stadiums, and buying company cars, private jets, and lush corporate offices, maybe the bigwigs should be keeping their eye on the ball and focusing on successfully running their businesses.

Why is it that some of these CEOs feel they are worth hundreds of times more in salary than the President of the United States, who, while not all agree upon his level of success, is still the most powerful man on the planet and has far more responsibility than an corporate CEO? Believe me, with a 10% unemployment rate right now, I’m sure you’d find plenty of qualified individuals ready to jump at the chance to accept very reasonable salaries for manage these financial operations.


Don’t just watch the little guy
Having worked in finance, I understand just how many regulations, checks, and audits there can be on the lower and mid-level employees. Meanwhile the top of the food chain is able to bounce numbers, skew reports, and manipulate figures to portray the best financial picture. While I agree Sarbanes Oxley, GAAP, and other accepted tools used to keep accounting practices on the up and up are important, I feel there needs to be even tighter restrictions when it comes to those who are actually running or overseeing these financial operations. You can audit the daylights out of the accountant or controller of a particular portion of the business, but if the president or CEO of that same operation is left unaccountable, the entire operation will likely be headed for eventual failure.


Harsher punishments for unethical practices and violations
Finally, I think there needs to be harsher punishments for those found in violation of financial rules, laws, and regulations. Fines, restitution, a smack on the wrist or verbal chastising from government regulators, the threat of community service or even time spent in a minimum-security prison don’t seem to be having the desired effect. Maybe jail time or being faced with doing hard time in a real prison might awaken some of the more unethical members of the financial industry to the consequences of their actions.



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