Академический Документы
Профессиональный Документы
Культура Документы
The stages
Context Plan Act Observe Reflect
4. Primary Research
The Process The Stakeholders Map Findings Conclusion
5. Secondary Research
Employer employee conflict Famous cases of international banking frauds Ethics in Recession
The analysis
I. Appendix I
References
2.
Initial claim
In such structured working environments such as financial institutions, loan officers will try to get approved as many loans as possible in order to reach their targets (and earn their bonuses/commissions) since bad loans and risk evaluation are dealt by other departments. They might be able to achieve this by not giving particular risk-related information to whoever approves the loan as it might disqualify the customer and as a result inhibit the loan officers to cash their commissions.
Research aim
The study will investigate whether loan brokers faced the dilemma of putting their personal interests before their duty.
Research design
The research will be a qualitative study consisting in gathering data from open interviews with professionals of the field in Albania. After collecting and analysing the data there will be a second round of interviews with the same people that participated in the first round to discuss the findings and see if the interviewees agree with them or have something to add or object. A validation group with different people that have knowledge in finance will take place contemporarily.
Data gathering
Since the interviews are not entirely structured, new points may come up from each loan broker. As the number of the interviewees increases, so does the list of the findings and issues to be discussed. As a result, there is the risk that things that came up from later meetings have not been discussed in the earlier ones. To avoid this gap, the final findings will be rediscussed with all the people that contributed to the study.
Success criteria
4
The study will try to fulfil the following criteria: Explain and expose the research content. Develop and apply ethical principles. Confront data from different sources. Consider all alternatives.
Knowledge creation
The study will aim to generate new findings by exploring the whole loan process. How do the financial institutions respond to the possible loopholes that might exist in the system? All interviews will be channelled to cover as many different points of views as possible.
The stages
Context
My concern is to understand whether the behaviour of loan officers is ethical or not.
Plan
I need to understand the loan process and interview loan brokers.
Act
A questionnaire developed by McNiff and Whitehead (2006) will be used.
Diagram 1. Action Research Stages. Adapted from McNiff and Whitehead 2002.
What is my concern? What are the reasons for my concern What might I do to research this How will I judge if I am successful?
Before starting the primary research, the complete questionnaire, which can be found on Appendix 1, was covered. After deciding what the main concern of the study would be, I started collecting secondary data in order to identify a gap and position the primary research accordingly in order to answer the initial questions. Due to the complexity of the situation, a qualitative study was considered being the most efficient approach.
Observe
During the interviews, new points came up continuously. The interviewees opinions were little influenced from the company they were working for most probably because of the very similar practices among these institutions. But because they were asked to answer to open questions (not multiple choice) most of them offered alternatives that hasn`t been mentioned in earlier interviews. Nonetheless, when they were asked specifically on the issue, they agreed on most answers previously given by their colleagues arguing that they hadn`t thought about it...but now that you mentioned it, it makes sense.
Reflect
The structure of the interviews has to be regularly updated in order to include the new discussion points. This enables covering a wider view avoiding to inadvertently missing important and/or influential factors. After completing all the interviews, a form of feedback from the participants will be necessary.
In order not to separate the world into business realm and ethics realm we need The Stakeholder Theory to integrate the two thesis since it makes no sense to talk about business without talking about ethics and vice-versa (Freeman et. al. 2010). Stakeholders can be divided in two categories. The first category includes financiers, customers, suppliers, employees and communities that affect directly the company. The second category includes all other groups or individuals that can affect the business indirectly but still have to be taken into consideration. The theory sees stakeholders' interest as joint rather than opposed although different stakeholders have different interests. At any time, a stakeholder approach should be adopted to create as much value as possible for stakeholders by trying to avoid trade-offs (Freeman et. al. 2010). The theory has evolved in time from considering the stakeholders as subjects that are to be managed to forming a network where the business can engage with them and take the interdependence into consideration. This can be best achieved by integrating corporate social responsibility into strategic management (Andriof 2002). We can conclude that by studying the stakeholder theory we can see capitalism as a network of relationships which consists of human beings fully integrated in both the business and ethics world (Freeman et. al. 2010).
4. Primary Research
7
To complete this study a series of qualitative interviews has been completed with loan brokers from six financial institutions in Albania. Bank Raiffeisen Bank Emporiki Bank (part of Credit Agricole`) National Commercial Bank Procredit Bank
The interviews have covered mostly the following areas: The process of loan application from the first contact with the customer up to the repayment of the loan. Who approves the loans? What are the criteria for judging the performance of the loan officers? Who takes responsibility for the bad loans?
The Process
With minor differences the loan process passes the following stages: - Application - Documentary Collection - Consideration by the Loan Officer - Request for approval (Risk department, Branch or HO Credit Committee) - Disbursement - Repayment
Loan Brokers
Competitors
Auditors
Risk Evaluators
Managers
Media
______________________________________________
Primary Stakeholders
_______________
Secondary Stakeholders
Findings
-
4 out of the 6 institutions covered in the study do not give personal target but rather team targets. This is believed to be minimizing risk-driven behaviors of particular individuals. The officer that forwards the loans for approval is always responsible for its repayment, even though it is not him/her who approves it. Bonuses are calculated after taking in consideration both the processed amount of loans, the bad loan weight to the whole portfolio as well as factors from totally different nature such as communications skills. High credit risks/amounts are all approved in high levels of the hierarchy in order for the case to be scrutinized by the high management. The Central Bank is more concerned with the liquidity of the credit institutions and that the process is transparent to the customers. In the bad credit process, it just gives suggestions but does not force any practice to the institutions.
Conclusion
The study does not confirm the initial hypothesis. Although there might be some isolated cases of loan officers trying to gain extra profit from their position harming the company, the study suggests that generally institutions have successfully managed to minimise the possibility of the brokers actions to be profit-driven. On the other hand, is possible for the
9
loan officers to act in customers' interest (and against companys interest) for human reasons (i.e. mercy) or due to other factors (i.e. bribes, blackmail etc) but the risk to be discovered is high since there is continuous control from internal and external auditors. Table 1. summarizes the changes made to the claim of the study before and after the validation process.
Loan officers try to get approved as many loans as possible in order to reach their targets (and earn their bonuses/commissions) since bad loans and risk evaluation are dealt by other departments. They might be able to achieve this by not passing particular riskrelated information to whoever approves the loan as it might disqualify the customer and as a result inhibit the loan officers to cash their commissions.
It seems like companies have managed to minimise the possibility of the brokers actions to take on extensive amount of risks in order to increase their loan portfolio by abolishing the loans approved high commission relationship. On the other hand abuse for non financial gains is still possible but the risk to be discovered is high due to the continuous auditing.
5.
Secondary Research
a) that it does not coincide with the interest of the company and b) it considerable enough to affect the judgement that the employee is expected to exercise on the company's behalf. More simply, the conflict arises when the self-interest of the employee pushes him/her to disregard the directions given by the employer and against employer's interest.
Ethics in Recession
Although this might come as a surprise to some, ethical awareness seems to increase in times of financial turmoil. Managers and supervisors talking more about ethical behaviours when the company's existence is in discussion might be one of the probable reasons why this occurs. Another explanation is that employees tend not to take risks in times of tension when management is on high alert.
11
Table 2. shows the results on some unethical behaviours, relevant to our case, and how the results change during the recession period.
Behaviours Company resource abuse Abusive behaviour Conflicts of interest Lying to outside stakeholders Document alteration Misuse companys confidential info Customer privacy breach Misrepresent financial records Accept gifts or kickbacks* 2009 23% 22% 16% 12% 6% 6% 6% 4% 4% 2007 n/a 21% 22% 14% 6% 6% n/a 5% 4%
* In 2007, accepting/giving bribes, kickbacks and gifts was asked as one question.
Table 2.Percentage of US workforce observing specific forms of misconduct (2007 2009). Source: 2009 National Business Ethics Survey Ethics Resource Centre.
The conflict between following the rules or own principles. The choice between legal duties and human circumstances. Reporting or not somebody who is doing something wrong to the risk of becoming unpopular.
In our case, we can see the first three dilemmas applying to the loan brokers. While the first two are financially motivated, the third case can apply when the broker can be motivated by human feelings as for example if somebody needs the loan for a life-saving surgery. As Velasquez (1992) points out, conflicts of interest do not need to be financial.
Integrity: What do our principles guide us? Good Harm Truth : Who would benefit and how? : Who could be harmed and how? : Are we honest and accountable?
The analysis
The brokers behaviour is not legal since it conflicts with the work contract and the code of conduct of the companies (e.g Emporiki Bank 2009: RZB Group: n.d) where is clearly written that the employee has the duty to act in shareholders interest and operate in full transparency. The decision of hiding information harms the shareholders since it exposes them to additional risk and in the long term will be reflected in financial terms. While the loan officer's loyalty should belong to the employer, they are putting their interest (or a third party`s) first. Eventually, other stakeholders like managers, auditors or risk evaluators may be harmed as
14
well. As a result, we can confirm that the decision to neglect risk will most probably hurt other people and as such is not fair or balanced. The alternative decision is to pass the information to whoever approves the loan. This action will decrease the personal gain of the loan officer and the customer and increase the other stakeholders; interest. By definition, the action of hiding information is secret so the officers are not being honest. They would not feel good if the information was divulged, on the contrary they would suffer serious consequences. It is the employees moral duty to work in the same line with the goals of the firm and to avoid all activities that might go against these goals. Deviating from these goals will be an unethical behaviour (Velasquez 1992) which leads us to conclude that this activity is unethical. As a final conclusion, the decision of hiding information for personal gain will fail all four previously mentioned ethical tests by suggesting that this kind of behaviour is unethical.
Appendix 1.
Action plan adapted from McNiff and Whitehead (2006). What is my concern? Why am I concerned? What experiences can I describe to show that I am concerned? What I can and will do about it? What kind of data will I gather to show the situation as it unfolds?
15
How will I modify my concerns, ideas and practice in the light of the evidence? How will I ensure that any conclusions I reach are reasonably fair and accurate? How will I evaluate the validity of the findings?
References
Andriof, J. (2002), Unfolding stakeholder thinking: theory, responsibility and engagement, Greanleaf Publishing Ltd: Sheffield. Atkinson, R.F. (1969), Conduct: An introduction to moral philosophy, Macmillan and Co: London. Blanchard, K. & Peale, N.V. (1988), The power of ethical managemen,. William Morrow: New York. Crane, A & Matten, D (2007) Business Ethics, 2nd. Edition, Oxford University Press: New York.
16
Daily Mail (2008), The biggest banking frauds at the worlds largest banks, [Online] (Accessed 12 April 2010) Available at: http://www.dailymail.co.uk/news/article-510150/Thebiggest-banking-frauds-worlds-largest-banks.html
Dedman, B. (2009), U.S banks suffer 149 percent rise in bad loans, MSNBC Online, Available at: http://www.msnbc.msn.com/id/29619163/ (Accessed 12 April 2010). Emporiki Bank (2009) Corporate Social Responsibility, [Online] Available at: http://www.emporiki.gr/cbgen/gr/sport&culture/social_responsibility.jsp (Accessed 12 April 2010). Ethics Resource Centre (2009), National Business Ethics Survey. Ethics Resource Centre:Arlington V.A. Freeman, R.E., Harrison, J.S., Wicks, A.C., Parmar, B.L. & De Colle, S. (2010), Stakeholder theory: the state of the art, Cambridge University Press: Cambridge. Hall, S.J. (1992), The emergence of ethics in quality. S.J. Hall (Ed.), Ethics in hospitality management: A book of readings. East Lancing, MI: Educational Fund of the American Hotel and Motel Association. Jaszay, C. (2002), Teaching ethics in hospitality programs, Journal of Hospitality Tourism Education, 14(3), pp.57-63. McNiff, J., Lomax, P. & Whitehead, J (2003), You and your action research project, 2nd. Edition, RoutledgeFarmer: Oxfordshire. McNiff, J. & Whitehead, J. (2002), Action research: principles and practice, 2nd. Ed., RoutledgeFalmer: Oxfordshire. McNiff, J. & Whitehead, J. (2006), Action research: all you need to know about, Sage Publications Ltd: London. Morton, A. (2004), Philosophy in practice: An introduction to the main questions, 2nd. Edition, Blackwell Publishing: Oxford. RZB Group (No date) Code of conduct, [Online] Available at: http://www.rba.hr/web/pdf/annual-report/rzb-code-of-conduct.pdf (Accessed 12 April 2010) Steare, R. (2006) Ethicability - (n) how to decide whats right and have the courage to do it, Roger Steare Consulting Ltd: London. Thomas, D. (2010), Europe faces bad loans on property, [Online] Financial Times, Available at: http://www.ft.com/cms/s/0/31e1a51c-3164-11df-9741-00144feabdc0.html (Accessed 12 April 2010). Velasquez, M.G. (1992), Business Ethics: Concepts and cases. 3rd. Edition, Prentice Hall Inc.: Englewood Cliffs, NJ.
17
18