Business Ethics in Financial Institutions

Happy New Year – Let’s Get Serious about Business Ethics!

We have an interesting business ethics project for 2017.  ColoradoNDR will be assisting in an ethics project examining the financial industry.  While the basis of the project will be regulatory compliance and enforcement research, the outcome (hopefully) will point to character strengths each of us individually need to recommit to – with a bit of self-reflection.  We also need to be involved and devote some time to the examination of how federal administration may possibly misuse policy.

Financial Regulatory Compliance

Sounds a bit dismal for the eve of out 2017 New Year celebration – but stay with us.  We hope to provide a little hope and understanding in the coming year. Our subject and best example:  Looking back on the past year, in April, 2016, the Department of Labor (DOL) issued new regulations intended to eliminate conflicted advice in the management of retirement investment accounts.  The new regulation proposed by the DOL was several years in the making.  The concept is unquestionably important.  However, the outcome has fostered growth in a fiduciary cottage industry for attorneys. 

As DOL Fiduciary Rule architect, she is “deputizing you all to monitor what is going on in the advice community”

Phyllis Borzi, Department of Labor

The conundrum is the vague nature of description and the lack of enforcement by the DOL points to what we believe to be administrative flaws.  Phyllis Borzi, Department of Labor’s architect of the policy has stated that it is up to consumers to enforce the rule through “state contract actions” (ThinkAdviser, May 25, 2016).  One of the more noted Borzi quotes is that she, as DOL Fiduciary Rule architect, has indicated that she is “deputizing you all to monitor what is going on in the advice community” (ibid).  We don’t think this is wrong, we simply wonder if commerce and government should step back and determine if ethical decision making should be structural (legislative) or cultural (leadership review).  Long story short, we’ll be heading out on the leadership / corporate audit trail this spring. 

Learning Ethics

We wanted to end with a good / not so good example of where we are heading.  One of the better examples of doing right for the wrong reasons came to us in a story from the latest Rotarian magazine (Bures, 2016. The Rotarian. vol. 195 no. 7).  Those of you who are not Rotarians, the organization and magazine is assumed to be exemplary in business ethics.  The topic was learning ethics in prison.  The story told the tale of a founder of a health care organization (a Rotarian member).  The story’s subject was told by his boss to “do something to the books to get the numbers where they need to be” (2016, p. 40) and that is exactly what the individual and his colleagues did.

Ethical Leadership

While the action was wrong, the part of the story that caught our attention was the lack of reflection or remorse in damage to their customers and clients.  The story lauded the individual’s action in securing a criminal attorney, surrendering himself, taking on basic lawn mowing jobs to make ends meet and finally writing a book.  The message from the individual was that he was weak and did not stand up to his boss.  Not an excuse but an indication of the impact of leadership behavior on the team.

As we begin this interesting policy project – we would like to remind everyone that:

  • If you are a leader – define your character (and your business) and lead ethically
  • If you are an employee – be selective in the companies and individuals you work for
  • If you are a client – be sensitive to character flaws of the organizations you use
  • And if you are a parent/mentor/employer – lead by example.

We’ll keep you posted on the policy research!  Wishing you and yours a healthy, safe and ethically sound 2017!

Napach, B. (2016). DOL Will Rely on Consumers, Advisors to Help Enforce Fiduciary Rule: Borzi. Retrieved December 30, 2016, from
Varnavides, G. (2011). The flawed state of broker-dealer regulation and the case for an authentic federal fiduciary standard for broker-dealers. Fordham Journal of Corporate & Financial Law, 16(1), 203-225.

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

This site uses Akismet to reduce spam. Learn how your comment data is processed.

Blog at

Up ↑

%d bloggers like this: