Business culture in banking industry favors dishonest behavior, study shows

November 19, 2014
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Bank employees are not more dishonest than employees in other industries. However, the business culture in the banking industry implicitly favors dishonest behavior, as an economic study at the University of Zurich indicates. A change in norms would thus be important in order to improve the battered image of the industry.

In the past years, there have often been cases of fraud in the banking industry, which have led to a considerable loss of image for banks. Are bank employees by nature less honest people? Or does the in the favor dishonest behavior? These questions formed the basis for a new study by Alain Cohn, Ernst Fehr, and Michel Maréchal from the Department of Economics at the University of Zurich. Their results show that bank employees are in principle not more dishonest than their colleagues in other industries. The findings indicate, however, that the business culture in the banking sector implicitly favors dishonest behavior. The results suggest that the implementation of a healthy business culture is of great importance in order to restore trust in the .

Occupational Norms Implicitly Favor Dishonest Behavior in Bankers

The scientists recruited approximately 200 bank employees, 128 from a large international bank and 80 from other banks. Each person was then randomly assigned to one of two experimental conditions. In the experimental group, the participants were reminded of their occupational role and the associated behavioral norms with appropriate questions. In contrast, the subjects in the control group were reminded of their non-occupational role in their and the associated norms. Subsequently, all participants completed a task that would allow them to increase their income by up to two hundred US dollars if they behaved dishonestly. The result was that bank employees in the experimental group, where their occupational role in the banking sector was made salient, behaved significantly more dishonestly.

A very similar study was then conducted with employees from various other industries. In this case as well, either the employees' occupational roles or those associated with leisure time were activated. Unlike the bankers, however, the employees in these other industries were not more dishonest when reminded of their occupational role. "Our results suggest that the social norms in the banking sector tend to be more lenient towards and thus contribute to the reputational loss in the industry," says Michel Maréchal, Professor for Experimental Economic Research at the University of Zurich.

A Change in Norms is Needed in the Banking Industry

Social norms that are implicitly more lenient towards dishonesty are problematic, because the people's trust in bank employees' behavior is of great importance for the long-term stability of the financial services industry. Alain Cohn, who recently joined the Booth School of Business at the University of Chicago as a postdoctoral scholar, suggests concrete measures that could counteract the problem: "The banks could encourage honest behavior by changing the industry's implicit . Several experts and supervisory authorities suggest, for example, that bank employees should take a professional oath, similar to the Hippocratic Oath for physicians." If an oath like this were supported with a corresponding training program in ethics and appropriate financial incentives, this could lead bank employees to focus more strongly on the long-term, social effects of their behavior instead of concentrating on their own, short-term gains.

Explore further: Executive rewards put banks at greater risk

More information: Alain Cohn, Ernst Fehr and Michel André Maréchal. Business culture and dishonesty in the banking industry. Nature. November 19, 2014. DOI: 10.1038/nature13977

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7 comments

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Caliban
3.7 / 5 (3) Nov 20, 2014
Would have been nice if the participants had been broken down according to job description. It seems likely that much useful information would have been generated thereby.

And, professional oath or no-- it is hard to imagine how a shark can be made into a goldfish.
gkam
2.3 / 5 (3) Nov 20, 2014
Why are none of the Banksters in prison?
Milou
5 / 5 (2) Nov 20, 2014
Politics breeds the same type of sharks
gkam
2.3 / 5 (3) Nov 20, 2014
Banksters and everybody who works in finance are parasites. They deal with the wealth created by others until it sticks to their greedy little fingers.

Now, they own us.
gkam
3 / 5 (4) Nov 20, 2014
Wealth is created by the artist, the journeyman, the worker with his hands on the tools, not the banker, the accountant, the "adviser" for their money. They are the parasites who fiddle with it until they own it, because they own Congress.
Nik_2213
not rated yet Nov 23, 2014
That's the problem with big bonuses in any job. From 'used cars' to 'siding' to sales-folk in a department store, there's a fine line between keeping staff sharp, and 'going for the kill'.

For a long time, my employer did bonuses as a company-wide percentage of pay. There was no 'personal' input beyond doing a good job. There was also a neat 'suggestion' scheme to reward personal contributions.

Then, sadly, a mega-merger changed the rules, and a lot of seriously stupid stuff ensued as senior staff tried to cash in...
cantdrive85
not rated yet Nov 23, 2014
They needed a study to show this obvious result? One only need to look at the small handful of "banking families" who traditionally have owned the largest banks and understand the top down control wielded by these organizations. The money changers have been known as the leeches of society for centuries now, the modern central banking systems have institutionalized such graft.

"I sincerely believe... that banking establishments are more dangerous than standing armies."
Thomas Jefferson

"It is well enough that people of the nation do not understand our banking and monetary system, for if they did, I believe there would be a revolution before tomorrow morning."
Henry Ford

"Who controls the issuance of money controls the government!"
Nathan Meyer Rothschild

Bankers are behind most wars, assassinations of leaders (including all presidential), and economic turmoil over the last several hundred years. Only the naive would be surprised by the above findings.

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