Crisis in PSBs - II: Ethics Must Be Made
Integral to Governance
Moneylife Digital Team
30.7.2019
If we want to improve the governance process, we
have to make ethics at the centre. Ethics and values should be the basis on
which all corporates and more particularly, banks dealing with public resources
shall function, as trustees. It is the attitude to life and the value system
one has to cherish and live with.
Values are universal in character whereas their
application changes. Business executives apply various ethical tests as a
guide. There is variation among them on what test they apply on different
occasions. These tests, developed by Fr K Cyric include:
Corporate Executive Ethics
Tests[i]
|
Ethics Test
|
Focus Question by the Executive
|
|
Relevant
Information Test
|
“Have
I obtained as much information as possible to make a decision?”
|
|
Involvement
Test
|
“Have
I involved all who have a right to have input?”
|
|
Test
of Common Sense
|
“Does
the action I am getting ready to take really make sense?”
|
|
Consequential
Test
|
Have
I anticipated and attempted to accommodate the consequences of this decision
on any, who are affected by it?”
|
|
Mirror
Test
|
“What
does the man in the glass really say?”
|
|
Conventionalist Ethics Test
|
“Does
this fall within the legal framework?”
|
|
Hedonistic
Ethics Test
|
“Does
it feel good to make such decision?”
|
|
Intuition
Ethics Test
|
“Does
my gut feeling approve of this decision?”
|
|
Revelation
Ethics Test
|
“Does
the decision cause greatest good for greatest number?”
|
|
Professional
Ethics Test
|
“Will
the decision be approved by the professional peers?”
|
|
Organizational
Ethics Test
|
“Is
the decision consistent with organizational goals?”
|
|
Test
on one’s best self
|
“Is
this action or decision I am getting ready to make, compatible with my
concept of myself at my best?”
|
|
Fairness
Test
|
“Would
I consider this decision fair from the point of view of stakeholders?”
|
|
Enduring
Values Test
|
“Does
this decision uphold the enduring values?”
|
|
Universality
Test
|
“Would
I apply this decision to all similar situations, even to myself?”
|
|
Test
of making public
|
“How
do I feel if others knew I was doing this?”
|
|
Test
of ventilation
|
“How
would others view my decision?”
|
|
Test
of Purified ideas
|
“Am
I thinking that the decision I am making is right because some authority
says, it is right?”
|
[i] R. Durgadoss & B. Yerram Raju
(2011), ‘A Saint in the Board Room’, Konark Publishers (P) Ltd., New Delhi
Ethical Decisions Vary with Executive Profiles
A survey conducted in 1992 in Malaysia on 252
executives from different countries revealed that there were differences in
ethical decisions, which varied with job position, job specialization, ethnic
group, age and salary. There were differences in attitude between the USA and
Hong Kong personnel. 77% of USA personnel said that they would report a
defective or unsafe product, compared to 50% of Hong Kong respondents.
Three women, Sherron Watkins (ENRON), Coleen Rowley
(FBI agent on clues to September 11) and Cynthia Cooper (World Com), all
whistle blowers were named as the persons of the year 2002 by Time magazine.
Cuoto, an employee of Bayer Corporation who knew
how Bayer was making wrong claims on the USA government, fought a hard battle
to have his testimony recorded and videotaped in August 2002, even though he
was struggling with terminal illness. Bayer pleaded guilty and paid fines under
False Claim Act.
Such a strong level of conviction and whistle
blowing attitude is not prevalent in many countries, where people do not come
forward, even when they see wrong-doing happening in front of their eyes; thus,
the behavior of executives differ from region to region. Moneylife in India has
been acting as a whistle blower in many breaches to the legitimate claims of
various stakeholders of the banks and FIs. Much ahead of the unfolding of the
IL&FS collapse, it has warned that this monolithic institution has made
many compromises of the rules and regulations of SEBI and RBI, though it took
quite some time for the regulators to take note of them. It is therefore
important that each bank board should approve a Whistle Blower Policy and
prominently display it on its website.
Facing Ethical Dilemmas
In business, not only are executives faced with
questions between right and wrong, but also between right and right. We have
experienced situations in which the professional responsibilities unexpectedly
come into conflict with deepest values. Executives are caught in a conflict
between right and right. And no matter which option they choose, they feel like
they have come up short.
Research on moral standards and business ethics is
sparse. Martin Weber in 1998 found that 85.9% of managers claim drawing their
moral standards at work from the expectations perceived in the work
environment. Organizational norms embodied by the corporation’s culture are
strong determinants of individual thought and behavior in the workplace,
whereas corporate culture establishes and maintains norms.
When employees have no clear picture of the moral
or ethical stance of the organization, they tend to operate at the lowest
perceived level. Going by the increasing frauds, the alleged corruption in
banks at various levels where they interface with the customers on loans and
the way persons in top positions compromised the principles and statutes leads
us to conclude that the ethics committees of bank boards, even where they are
in place, have not functioned effectively.
A quote from a Raghuram, Rajan’s speech of May
2014, would be an apt conclusion of this paper: ‘The banking sector is on the
cusp of revolutionary change. . . Let us remember that what is at stake
is not just the tremendous amount of national value that is represented by
public sector banks but future financing and investment in our economy. A
healthy public sector banking system should be distant from government
influence but not from public purpose.’ https://www.rbi.org.in/scripts/BS_SpeechesView.aspx?Id=893
