Assessing ethical behaviours in the Spanish banking and insurance industries: evidence and challenges

Abstract

This study aims to improve understanding of the ethical nature of the relations in two labour-intensive industries to facilitate the creation of an ethical culture. For this purpose, the authors first review literature related to the main influences on ethical behaviour, then perform an empirical analysis of those factors using a hierarchical stepwise regression of a database of 525 banking and insurance employees. Contrary to expectations, leadership has a less important effect on ethical behaviour than other organizational factors. The results reveal several implications for improving the management of ethical behaviour in these industries.

Keywords::

• banking industry
• employees
• ethical behaviour
• ethical culture
• individual factors
• insurance industry
• situational factors

Notes

^1. Husted et al. (1996) argue that the emergence of a global moral order means that people in different cultures, using reasoning processes based in different values, share similar attitudes towards questionable business practices.

^2. In this regard, it is interesting to consider the case of preferred participations in Spanish banks. This subordinated debt (perpetual) instrument grants rights to a fixed dividend if profits are earned; now that secondary debt markets have closed (at the request of the Spanish National Securities Market Commission), this instrument impedes recovery of money deposited. Both procedurally and in terms of content, these products entail immorality with regard to their client targeting (e.g. elderly, people with weak financial knowledge or who have trouble understanding the risks associated with the product). They now are being traded in by banks for different options that entail nominal value losses for customers (ABC 2012; El País 2012).

^3. Moral concerns related to remuneration are especially intense in Spain, where the salaries of boards' directors are among the highest in Europe (Gómez-Ansón and Cabezas-García 2011). In the banking sector, public controversy has been exacerbated by not only enormous increases in remuneration – despite the financial crisis (García-Castro and Aguilera 2012) – but also the publication of enormous compensation and pension funds for directors of entities that were taken over by the government (Expansión 2011).

^4. The fulfilment of different stakeholders' interests and the embrace of the idea of the common good and solidarity are the precise notions that Argandoña (1999b) identifies as serious challenges for Spanish businesses in the modern era.

^5. People freely decide to behave in ethical or unethical manners, such that they become more honest or dishonest and more perfect or imperfect as human beings, which ultimately benefits or harms them (Guillén 2006).

^6. In the face of an ethical dilemma (e.g. lie/tell the truth), the selected behaviour affects other agents and the actor (Guillén 2006), so it is either ethical or unethical and makes the actor either more or less perfect.

^7. Mentors, as in the servant leadership paradigm (Greenleaf 1977), should not teach directly but rather observe, reflect, support and guide trainees through the formation process so they can find their own leadership path (Western 2008).