Welcome to the Nexus of Ethics, Psychology, Morality, Philosophy and Health Care

Welcome to the nexus of ethics, psychology, morality, technology, health care, and philosophy
Showing posts with label Financial Advisors. Show all posts
Showing posts with label Financial Advisors. Show all posts

Friday, December 20, 2019

Can Ethics be Taught? Evidence from Securities Exams and Investment Adviser Misconduct

Kowaleski, Z., Sutherland, A. and Vetter, F.
Available at SSRN
Posted 10 Oct 19

Abstract

We study the consequences of a 2010 change in the investment adviser qualification exam that
reallocated coverage from the rules and ethics section to the technical material section. Comparing advisers with the same employer in the same location and year, we find those passing the exam with more rules and ethics coverage are one-fourth less likely to commit misconduct. The exam change appears to affect advisers’ perception of acceptable conduct, and not just their awareness of specific rules or selection into the qualification. Those passing the rules and ethics-focused exam are more likely to depart employers experiencing scandals. Such departures also predict future scandals. Our paper offers the first archival evidence on how rules and ethics training affects conduct and labor market activity in the financial sector.

From the Conclusion

Overall, our results can be understood through the lens of Becker’s model of crime (1968, 1992). In this model, “many people are constrained by moral and ethical considerations, and did not commit crimes even when they were profitable and there was no danger of detection… The amount of crime is determined not only by the rationality and preferences of would-be criminals, but also by the economic and social environment created by… opportunities for employment, schooling, and training programs.” (Becker 1992, pp. 41-42). In our context, ethics training can affect an individual’s behavior by increasing the value of their reputation, as well as the psychological costs of committing misconduct. But such effects will be moderated by the employer’s culture, which affects the stigma of offenses, as well as the individual’s beliefs about appropriate conduct.

The research is here.

Wednesday, August 21, 2019

Personal infidelity and professional conduct in 4 settings

John M. Griffin, Samuel Kruger, and Gonzalo Maturana
PNAS first published July 30, 2019
https://doi.org/10.1073/pnas.1905329116

Abstract

We study the connection between personal and professional behavior by introducing usage of a marital infidelity website as a measure of personal conduct. Police officers and financial advisors who use the infidelity website are significantly more likely to engage in professional misconduct. Results are similar for US Securities and Exchange Commission (SEC) defendants accused of white-collar crimes, and companies with chief executive officers (CEOs) or chief financial officers (CFOs) who use the website are more than twice as likely to engage in corporate misconduct. The relation is not explained by a wide range of regional, firm, executive, and cultural variables. These findings suggest that personal and workplace behavior are closely related.

Significance

The relative importance of personal traits compared with context for predicting behavior is a long-standing issue in psychology. This debate plays out in a practical way every time an employer, voter, or other decision maker has to infer expected professional conduct based on observed personal behavior. Despite its theoretical and practical importance, there is little academic consensus on this question. We fill this void with evidence connecting personal infidelity to professional behavior in 4 different settings.

The Conclusion:

More broadly, our findings suggest that personal and professional lives are connected and cut against the common view that ethics are predominantly situational. This supports the classical view that virtues such as honesty and integrity influence a person’s thoughts and actions across diverse contexts and has potentially important implications for corporate recruiting and codes of conduct. A possible implication of our findings is that the recent focus on eliminating sexual misconduct in the workplace may have the auxiliary effect of reducing fraudulent workplace activity.

Wednesday, April 11, 2018

How One Bad Employee Can Corrupt a Whole Team

Stephen Dimmock and William C. Gerken
Harvard Business Review
Originally posted March 5, 2018

One bad apple, the saying goes, can ruin the bunch. So, too, with employees.

Our research on the contagiousness of employee fraud tells us that even your most honest employees become more likely to commit misconduct if they work alongside a dishonest individual. And while it would be nice to think that the honest employees would prompt the dishonest employees to better choices, that’s rarely the case.

Among co-workers, it appears easier to learn bad behavior than good.

For managers, it is important to realize that the costs of a problematic employee go beyond the direct effects of that employee’s actions — bad behaviors of one employee spill over into the behaviors of other employees through peer effects. By under-appreciating these spillover effects, a few malignant employees can infect an otherwise healthy corporate culture.

History — and current events — are littered with outbreaks of misconduct among co-workers: mortgage underwriters leading up to the financial crisis, stock brokers at boiler rooms such as Stratton Oakmont, and cross-selling by salespeople at Wells Fargo.

The information is here.