“Building an Ethical Culture

– A Leadership Imperative in

the Repositioning Process”

Presentation to

THE CARIBBEAN ASSOCIATION OF INDIGNEOUS BANKS (CAIB)

37th Annual General Meeting & Conference

November 10, 2010.The Hyatt Regency, Port of Spain, Trinidad.

Presented By:Lennox Sealy (PhD, MBA)

of Lennox H. Sealy & Associates

Organization Development Consultants

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CAIB 2010 THEMERepositioning the Region:

The Role of the Financial Services Industry

1. To Revisit the Concept of Ethics and

Ethical Corporate Behaviour

2. Some How-to’s on Building an Ethical

Culture

3. Defining the Leadership Imperative in

the Repositioning Process– “To Be & To

Build”

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THE PRESENTATION OBJECTIVESTHE PRESENTATION OBJECTIVES

PRESENTATION FLOW

1.0 The End1.0 The End

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2.0 The Beginning2.0 The Beginning

3.0 The Continuation3.0 The Continuation

Let’s Start with…..

Finish with…

Continue with…

1.0 The Leadership Imperative – As Key Players in

the Financial Services IndustryThe Repositioning Challenge

can be articulated as“To Be and to Build”

To be true to self by being Ethical andTo Build an Ethical Culture

1.0 The Leadership Imperative – As Key Players in

the Financial Services IndustryThe Repositioning Challenge

can be articulated as“To Be and to Build”

To be true to self by being Ethical andTo Build an Ethical Culture

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1.0 The End1.0 The End

“There is only one ethics …One true set of rules of

morality …One code -

That of proper individual behavior in which the same

rules apply to everyone alike.”

CLOSING CLOSING THOUGHTTHOUGHT

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Peter Drucker

AN ACTION AGENDA FOR AN ACTION AGENDA FOR LEADERSHIPLEADERSHIP

1. Demonstrating that indeed as indigenous institutions we know our customers best by continuously researching their future needs

2. Taking advantage of our size by reducing the cycle time for the introduction of new products

3. Riding the waves of new technologies faster than the bigger guys

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AN ACTION AGENDA FOR LEADERSHIPAN ACTION AGENDA FOR LEADERSHIP4. Actively bringing back into our

customers’ minds the two magic words – confidence & trust

Gains confidence but Builds trust

5. Ensuring a desired outcome that can represent competitive advantage – A region known for “Leadership in Ethical Banking”

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"Never let a serious crisis go to waste. What I mean by that is - it's an opportunity to do things you couldn't do

before”White House Chief of Staff Rahm Emanuel

How did we get here ? “A global banking crisis was last night

threatening to spiral out of control, and frantic US officials

were locked in talks to save one of the world's biggest insurance companies just a day after they let one

of its most powerful investment banks go to the wall”

The Independent - 16th September 2008

How did we get here ? “A global banking crisis was last night

threatening to spiral out of control, and frantic US officials

were locked in talks to save one of the world's biggest insurance companies just a day after they let one

of its most powerful investment banks go to the wall”

The Independent - 16th September 2008

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2.0 The Beginning2.0 The Beginning

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A Post –Lehman World?A Post –Lehman World?

2.1 The Etymology of Ethics

Origin of the Word Ethics

Definitions of Ethics

Ethics and Values

Personal or Professional

Ethics ?

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ORIGIN OF THE WORD ETHICSORIGIN OF THE WORD ETHICS Origin – From the Greek word – ethos

(accustomed place, habitat of horses) made popular by Aristotle

Ethics represent codes of morality: A system of moral principles which defines the appropriate conduct for a

person or group

www.bing.com

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ETHICS – WHAT IS IT?ETHICS – WHAT IS IT? DEFINITION 2 DEFINITION 2

The recognized rules of conduct in respect to a particular class of

human actions or a particular group, discipline, culture e.g.

Medical ethics; Christian ethics. dictionary.com

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ETHICS vs. VALUESETHICS vs. VALUES

Values are also principles or standards but they differ from

person to person, and are more subject to change and variation over time. They are however the principles that guide individual behaviour even when no one is

looking.

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ETHICS – NOT QUITE THE SAME ETHICS – NOT QUITE THE SAME AS VALUES!AS VALUES!

Ethics are anchor points that keep us as groups of persons or organizations from being drawn in by relativity and therefore they help us re-examine and accept/reject changes as cultural norms and individual values change.

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BUSINESS CULTUREThe shared values, behaviors and

norms of a group. It includes the patterns of activities and symbols that

give it significance and meaning. Basically, culture in a business setting

is “how we do things.”Culture is shaped by the ethical

standards of an organization whether written or unwritten.

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ETHICAL ETHICAL DILEMMA SDILEMMA S

An ethical dilemma is a complex situation that will often involve an apparent

conflict between moral imperatives, in which to obey

one would result in transgressing another.

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RESOLVING THE ETHICAL RESOLVING THE ETHICAL DILEMMA / PARADOX?DILEMMA / PARADOX?

T. S. Eliot wrote, "The general ethos of the people they have to govern determines

the behavior of politicians”

“Your personal values determine how you resolve dilemmas”

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2.2 The Great Divorce – The Past

A Separation ofPersonal Values

&Organizational Ethics –

“ How we got unethical in business”

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ORIGINAL THOUGHTS ON WORK AND ORIGINAL THOUGHTS ON WORK AND LIFELIFE

Originally, life was work and work was life and one ethical standard applied.

“The time of business - does not with me - differ from the time of prayer and in the noise and clatter of my kitchen I posses God in as great a tranquillity as if I were on my knees”

Early Monk in the Monastery of St Benedict's

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THE THE MERCENTILE CAPITALIST MERCENTILE CAPITALIST PERIOD – THE MARRIAGEPERIOD – THE MARRIAGE

The values of "accumulation of wealth" and the associated evils reared their heads in European society in the fifteenth century

The famous Martin Luther (1483-1546) moved to preserve that medieval relationship between life and work, and sanctified the accumulation of wealth and serving God as “a marriage”.

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JOHN CALVIN'S ( 1509 – 1564) JOHN CALVIN'S ( 1509 – 1564) THOUGHTS – THE SEEDS OF THOUGHTS – THE SEEDS OF

DIVORCEDIVORCE

John Calvin, a native of the bustling financial centre of Geneva, sought further to encompass “business” in his theology and did so through the doctrine of “the elect.” Calvin’s doctrine was taught as “God’s favour could be seen in one’s degree of success i.e. whether you were one of the elect.

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THE SEPERATIONTHE SEPERATION

There was a continual movement from the idea of faithfulness in work as the path to salvation, to one of observable, measurable success in work as a mark of salvation

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THE WESLEY RATIONALIZATIONTHE WESLEY RATIONALIZATIONJohn Wesley's (1703 – 1791) Famous

words sought to rationalize the continuing drift - “Gain all you can, save all you can, give all you can".

Seminal thinkers like Adam Smith (1723 – 1790) and John Locke (1632 – 1704) eventually helped move the mind set from vocation in the name of salvation to wealth accumulation, individual freedoms and material success as the benchmarks of the new capitalism

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THE DIVORCETHE DIVORCE

This new 'ethic" created a new kind of workforce: Self-motivated, dedicated to the task at hand focused on material gain.

The accumulation of wealth eventually became an end unto itself and work was no longer a means of serving God. The divorce was official and complete.

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3.0 The Return to an Ethical Culture

– The Continuation

Challenges & Solutions of the

Remarriage

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3.1 The Continuation

Definitions of an Ethical

Culture

The Challenges

The Ethical Process Map &

its Elements29

AN ETHICAL CULTUREA set of attitudes, and values

that an organization subscribes to that helps in

making decisions that are in the best interest of the

organization, its stakeholders and the society

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ETHICS & THE BANKERETHICS & THE BANKER

The Banker’s role is one of stewardship based

on trust.

He/She is trusted to look after people’s money

and has a duty to manage that money

responsibly. The context of all fiduciary

responsibility therefore goes beyond legal to the

ethical. Is it not then obvious that ethical

behaviour is a prerequisite for a banker?

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Ethical behaviour comes from

1. A firm commitment to adhere to sound moral principles and values

2. A second commitment to verify that the resultant behaviours are congruent with ones principles

3. A third commitment to continuously improve

These commitments are manifested Spiritually, Mentally and Emotionally in our dealings with our colleagues and how we preside over the financial transactions of our institutions

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CHALLENGES OF DEVELOPING AN CHALLENGES OF DEVELOPING AN ETHICAL CULTURE –ETHICAL CULTURE – THE SELFTHE SELF

CHALLENGES OF DEVELOPING AN CHALLENGES OF DEVELOPING AN ETHICAL CULTURE –ETHICAL CULTURE – ORGANIZATIONAL ORGANIZATIONAL

1. Implementing governance processes that demand ethical conduct2. Recruitment of employees who are already committed to morally sound behaviours3. Taking clear action when behaviours border on the unethical4. Willingness to lose “business” by not dealing with those who are unethical

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CHALLENGES OF DEVELOPING AN CHALLENGES OF DEVELOPING AN ETHICAL CULTURE – ETHICAL CULTURE – THE EXTERNALTHE EXTERNAL

1. Societal norms focused on the “quick” accumulation of wealth 2. Country norms that accept bribes as part of business3. Poor examples set by societal leaders4. Opportunities presented by technology to engage in fraud 5. Stakeholders who do not have ethical standards

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DEVELOPING AN ETHICAL CULTUREDEVELOPING AN ETHICAL CULTURE Map the organization’s vision,

governance structures and its code of ethics

Identify where the organization is doing a good job in managing risks and encouraging and maintaining ethical behavior?

Where is it falling short? Take corrective action using your

process map

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Adapted from Kirk O. Hanson

Model Values

Package Values as Code of Ethics

Adopt Code of Ethics as an Anchor Point

Continuous Monitoring of Behaviors

OpenlyDiscussDifficultEthicalCases

Do Compliance:• Audits• EnforceDiscipline

Revisit Code of EthicsRegularly

Process for Implementing a Culture of Ethics

Clarify Vision &Values

A Defined Governance System is

Imperative

Process Elements forProcess Elements for Ethical Culture Development Ethical Culture Development

1. Statement of values and Code of conduct

2. Examples for senior executives3. Training and repeated communication

of values, standards & Company Code of Ethics

4. Systems which embody the values5. Continuous evaluation of behaviors

6. Effective hotline system – Whistle blowing

7. Clear mechanism for resolving tough cases

8. Compliance enforcement system9. Periodic renewal process for values and

standards10. Overall governance system for ethics and

values

Process Elements for Ethical Process Elements for Ethical Culture Development (Cont’d)Culture Development (Cont’d)

4.0 The Leadership Imperative –

Remarriage and Repositioning

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"Never let a serious crisis go to waste. What I mean by that is - it's an opportunity to do things you couldn't do

before”White House Chief of Staff Rahm Emanuel

Asking the Right Questions?Asking the Right Questions?

“Better to have an approximate answer to the right question, than

an exact answer to the wrong question.”

Statistician - John W. Tucker

“Better to have an approximate answer to the right question, than

an exact answer to the wrong question.”

Statistician - John W. Tucker

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1.1. Am I seen as an ethical leader?Am I seen as an ethical leader?2.2. Does my corporate governance Does my corporate governance policies effectively state our ethical policies effectively state our ethical position? position? 3.3.Do I have the processes in place to Do I have the processes in place to deal with ethical dilemmas?deal with ethical dilemmas?4.4. Are my people acting in an ethical manner on a day-to-day basis?

FOUR RIGHT QUESTIONSFOUR RIGHT QUESTIONS

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THE NEED FOR SELF-EXAMINATION – An issue of

credibility

Credibility refers to believability of a person, source or message.

Leadership credibility therefore has context: Today that context has to be an ETHICAL one and leadership must build an ethical culture that

defines the conduct of the business

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AN ACTION AGENDA FOR AN ACTION AGENDA FOR LEADERSHIPLEADERSHIP

1. Demonstrating that indeed we know our customers best by researching their future needs

2. Taking advantage of our size by reducing the cycle time for the introduction of new products and riding the waves of new technologies faster than the bigger guys

45

AN ACTION AGENDA FOR AN ACTION AGENDA FOR LEADERSHIPLEADERSHIP

3. Actively bringing back into our customers’ minds the two magic words – confidence & trust

Gains confidence but Builds trust

4. The desired outcome – Leadership in Ethical Banking

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CONTINUING QUOTE

“Divorced from ethics, leadership is reduced to

management and politics to mere technique.”

James MacGregor Burns

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THANK YOU THANK YOU FOR FOR

YOUR ATTENTIONYOUR ATTENTIONPLEASE CONTINUE YOUR PLEASE CONTINUE YOUR

IMPROVEMENT PROCESSESIMPROVEMENT PROCESSES

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