BUSINESS ETHICS IN THE FINANCIAL SECTOR WHAT IS ETHICS?

Ethics relates to: - doing things right - doing things at the right time - doing what one can justify - fair treatment avoiding the immoral

- discharging responsibility with undoubted integrity Can doing things right reflect ethics? Without going to details, we can agree that doing things right is one of the good reflections of ethics. Baby feeding is followed by teaching the baby on how to feed himself. The baby is made to learn on the right way of feeding himself. When things go wrong in this teaching/learning process the baby is repeatedly followed up until it is made sure that he is up to the standard of self feeding. It can then be said that he can do it right. But what is wrong in as long as he can somehow put the food in his mouth? It is wrong because of the moral and social values attached thereto. We can proceed on this line including other activities the baby is thought including dressing, greetings, etc. all concentrating on enabling the baby appreciate the moral values. Doing things right OK, but why at the right time? Time taken should as of necessity be attached to evaluate if the activity is performed within ethical standards. One can be given an assignment to perform. If the assignment could be performed within hours, but has unreasonably taken a week, there should be clear reason to suspect ethical problems. If a surgery scheduled to take place tomorrow is unreasonably postponed to the next day, the likelihood of its being cancelled due to death of the patient will be high. Even though we advocate lateness to absence, we must ensure that the cause of lateness is not ethical problem. HENCE TIMELINESS. Doing what you can justify. There is observable confusion between justification and excuse. This must be made clear. Where we cannot justify our deeds, we revert to listing of excuses. That gives the symptom of ethical problems. We are either lazy, incompetent, not genuine, immoral or other unethical problem is within us if we fail to do what we should do or if we fail to justify what we did. There is human problem of not accepting failures and reverting to excuses. Can this forum find a way out where

we are at all times ready to accept our failures and ready for corrections? If we succeed in that, then we are many steps forward towards ethics. Fair treatment as indicative of prevalence of business ethics All those to be served by an institution deserve fair treatment. There is a clear conflict in the proper interpretation of the old Amharic saying, YEBAID MOGNE KELIJIH IKUL ARGEGN (meaning to say, unwise stranger claims equal treatment like own son). Though the saying is not meant to promote unfair treatment, it is frequently misused to the extent that it is better unlearned. Institutional service should not discriminate. If it does, then that is another signal of ethical problems. Can we avoid the immoral? Appreciating what is immoral is prerequisite to avoid it. The capacity to judge between what is morally good and the immoral paves the way to ethical handling of things and tasks. What is felt to be too immoral by one can be considered as immaterial by the other. Where then is the social norm to differentiate between the two. For instance, the policy of a bank could read that a customer who issues an insufficient fund cheque should be penalized Birr 50 on the first instance. While implementing this, a clerk took the discretion to waive the penalty for a client and applied it on the other. Asked to explain, the clerk tried to justify and said, Client A threatened that he would shift his business to another bank, whereas, client B accepted the penalty with regrets for his deeds. Can anything appeal to the moral of the clerk? Did the clerk avoid anything immoral? Did he operate within acceptable social norms? Was he loyal to his company policy? Was he wrong? Should we appreciate that he has saved a client for his bank? We can discuss that latter. Integrity? Cant we do without it? Integrity is just a word but encompasses various concepts. Credibility, Stability, Respect, Character, Responsibility, Self-discipline, Perseverance, Emotional maturity and Moral courage are all in one reflections of integrity. Encompassing all these multi-facet concepts, how simple could it be to say somebody is a man of integrity? How effective can an employer be in measuring integrity? Do we recommend its inclusion in performance evaluation of employees? No matter how complex it is there can be no dream, leave aside reality to do away with integrity. At the minimum the symptoms of absence of integrity should not be manifested on the individual, company or customer. IS BUSNESS ETHICS IN THE FINANCIAL SECTOR OF ANY EMPHASIS AS DISTINCT FROM OTHER SECTORS?

Whether we speak of institutions in our financial sector or otherwise, we cannot escape the frequently asked question; "How is the leadership of the institution in promotion of Ethics. For ethics to have significance in any given institution, the leaders need to be principle centered. Is it that easy to have principle centered leaders in all organizations? What do we mean when we say a leader is principle centered? Stephen covey has this to say; Principles are not invented by us or by society; they are the laws of the universe that pertain to human relationships and human organizations. They are part of the human condition, consciousness, and conscience. To the degree people recognize and live in harmony with such basic principles as fairness, equity, justice, integrity, honesty and trust, they move toward either survival and stability on the one hand or disintegration and destruction on the other.

To assess how easy or difficult to have principle centered leadership in all institutions, it is important, I believe, to consider the following list of characteristics of such leaders as set out by Stephen is important.

1. 2. 3. 4. 5. 6. 7.

They are continuously learning They are service oriented They radiate positive energy They believe in other people They lead balanced lives They see life as an adventure They are synergistic

It is to be noted that it does not mean possessing one of the above characteristics would make somebody a principle centered leader but only the mix of all the above. Even though the leadership of a given institution is at least very near to possess all the above qualities, it is not 100% proof that business ethics in that organization is at perfection due to personal level differences among people. We can however agree that it has a significant role.

The business in the financial sector of Ethiopia has a universal quality in that it is business of persons. Friendship or relationship with customer is the demand of the business. Concern to the customer yields result. Therefore, I believe accepting the fact that the customer and the customer alone is the profit center of the institutions is not an option but a necessity. One of the targets of the leadership in the sector therefore, must be to win appreciation of customer service by the entire staff. But how? The key elements to customer service are many, but to speak of the main ones, they are six. 1. 2. 3. 4. 5. 6. Knowledge Skill Courtesy Pride Smile Extra effort

We can think of traditional sayings in Amharic, that are relevant to each of the above. That would then lead us to conclude that the key elements to customer service were prevalent in the Ethiopia of our grand fathers. So to say, manifestation of the above six in our handling of tasks in the right direction has been demonstration of ethics.

The Management Team Does company leadership refer to the CEO alone or the Management Team, or still further to all supervisory levels? The CEO has taken the responsibility of leading the company and leading it towards lasting success. To effectively discharge this responsibility, delegation of authorities, clear assignment of responsibilities and building strong management team, all members focusing to promote company mission, in pursuit of shared vision is a necessity. If a member in the management team goes in different direction, then the damage is to the entire machinery in the drive towards success. Hence oneness of objective. How do we view the management team in each of our financial institutions? Weak? Strong? Average? And relative to which other sector? The answers to these questions are better left for the discussion time. The Employee and the Employer It is not because it is the order of the day that we say Human Resource of any given institution is the key asset of the Company for its productivity. But, because it is a fact to be accepted. It is true that employee is employed through an agreement entered with the employer to perform certain specific tasks. Starting day one of his employment however, he is a productive asset of the Company and has to be treated as such. He has to be oriented, trained, and developed. In the

absence of adequate orientation on company vision, mission, targets, disciplines, procedures and policies, it is difficult to expect that the employee can withstand the challenge in his employment. How is the culture of orientation, training, career development and relationship with employees and customers in our financial sector? Are supervisors strong enough and ready to prepare successors? If not, why not. One important issue which we should always appreciate is that, the workers, as distinct from other company assets are PERSONS. As persons they need to be trained, cared for , motivated and made to possess the feeling that they are employed to make a difference. Employee at any level, must be made to feel that he can contribute to quality service. The cleaner, the guard, the operator, the clerk and all the way up the ladder have their role in quality service. But are all employees aware that they have the role? If the cleaner cleans the office regularly, only to avoid complaint of the Supervisor or at times penalty, then there is something wrong. If the cleaning is done to please other employees and the profit center customers, then that cleaner is categorically working for quality. So also with all level employees and Managers. Unless people are mobilized for and determined to work for quality, culture of ethics cannot develop in that given institution. Any thing for correction in this regard in the financial sector? Customer Relationship Insurers and Bankers are indeed privileged when we consider the type of clients as compared with some other disciplines like physicians. The Medical Doctors customer is a patient who demands immediate cure. Insurer deals with somebody who has at least something to insure; property, liability or own life. The Banker deals with somebody who deposits or who has the capacity to borrow, expecting remittance or sending money. Looking at the totality of the customers therefore, we can say the financial sector deals with people seeking smooth operation and in relatively better physical and mental condition. Important issue to our subject in this connection is the character of the customer and his ethical behavior. Development of Policies and procedures Amongst the sectors known to have possessed comprehensive manuals of policies and procedures, we can say that the financial sector of Ethiopia comes in the first category of possessing such policies and procedure in form of manuals. During my twenty nine years stay in the sector, I have worked in three banks and two insurance companies. As far as having such manuals is concerned, all have it. Still I observe that the deserving focus is being given. This has to be appreciated as it makes the members be aware of giving balanced service, provided follow-up of implementation is consistent. We should all however admit that policies and procedure manuals should be revisited from time to time to ensure that they are responding to increasing business complexity, changing customer need, incoming technology and changing employee expectations. Are we up- to-date in such

revisit? I hope our discussion will answer this question. If we are to accept the situation as yet to be improved, then a serious commitment and task of its implementation is ahead of us. It is only with clear and updated policies and procedures on hand that we as institutions can give fair, equitable, standardized and ethical treatment to the customers. The Moral Hazard Customers Why do we frequently hear of cheques returned due to insufficient fund from banks? Why do we at times hear of undeserving loans advanced by banks? Why do we hear of fraudulent claims accepted by insurers? Can we speak of employees sound business ethics in isolation from that of the customer? Are there no customers of moral hazard? What is to be done?

Corruption Is there corruption? Who induces corruption? For corruption to exist, at least two parties must be involved. The corruptor and the corruptee. If a manager or employee is inducing to go off track in his service to the customer, in pursuit of personal interest, and if that is agreed upon between the two, then the manager or the employee is corruptor whereas the customer is coruptee. The reverse order is also possible, if the customer induces unfair treatment through promise for protection of personal interest of the manager or employee, and if that is agreed upon by the two parties, then the customer is corruptor and the staff is corruptee. Both of these are undesirable. The question however is how to stop these? It is possible. Promotion of Ethics! But whose role? The role of Government in having ethics in the academic curriculum needs focus for lasting success in this regard. Ethics will have to be something one should start to grow with. This is in addition to the role to be played by civil servants in deterring corruption. Families are still all the more centers of focus. How many of you have not heard the Amharic saying Sishom Yalebela Sishar Yikochewal starting from young age? Were we made to condemn this, appreciate or remain neutral about it. This is something to be unlearned, by any one with positive outlook towards ethics.

Most of what is said in the earlier parts regarding Leadership, Management Team, Policies and Procedures are contributory to development of ethics if our commitment for upgrading ethical standards is obtained. Hence significant role is to be played by the managers and employees. Customers have no less significant role. They must be able to differentiate between their rights for service and their duties to be entitled to that service. They must appreciate that demanding beyond their right is contaminating the society. The community has still important role. The latent danger as ethics regresses and corruption develops is clear. The community will suffer. Hence the community also has a role in developing ethics. In short instead of listing as to who has the role for development of ethics, it is short and easy to think of who has no role? Conclusion Banks and Insurances have series of risks to manage. Insurances generally buy the risk for premium. The seller pays the premium. If the risk survives they gain, if it fails they pay for. In their calculable move, they segregate risks to insurable and non-insurable. Where they believe that the risk wont survive, they refuse to insure. The Bankers however manage the risks as they cant exist without such risks. Market risks, Legal risk, Operational risk, Credit risk, Interest Rate risk, Reputation risk, country risk are not exhaustive, but main banking risks. Cognizant that Banks and Insurances can only secure lasting success through effective and efficient management of the risks, without leaving the matter to the responsibility of the Management and staff of the institutions, customers can also be of help in the process of identification, measurement and control of these risks. Hence, high ethical standard of customers. Venture is made in this short presentation to enable us raise some questions relevant to the need for further development of business ethics, without being limited to the financial sector. I believe that all of us appreciate that we didnt get together to condemn the past, but to build the future. The past has left some experiences. We have to promote the good side of it and avoid the bad. The only bad experience is the experience that is unlearned from. Let us learn from the past experiences and get involved, in building the future. Let us discharge our responsibility to the next generation by handing over Ethiopia of better business ethics. As a member of BEN-Africa, I am aware of the Business Ethics Network being extended to various parts of the continent. If we form BEN-Ethiopia now, we can have a growing network, which can promote ethics. Are we ready to be involved or we leave it to others by putting ourselves aside? I would like to conclude with a statement frequently advocated in Dashen Bank, "There is no commitment without involvement." Let us all get involved!!