Yet another scandal in the business world. Shocking!
The Libor (London interbank offered rate) scandal concerns how Barclays Bank manipulated the benchmark rate. Google “Libor scandal,” and you’ll get your heart’s content of reading materials. Most likely, Barclays was only the first to be caught; from the cozy club of financiers, more will fall.
Finance is probably the weakest link in my business education, so I am not getting into the financial implications of this latest scandal. What has fascinated me about this imbroglio is the management’s attitude. Once again, the top executives have insulated themselves from the everyday lives of people and accorded themselves a different set of ethical standards. One particular example captured the real “spirit” of these high officials. An executive from Barclays tried to defend their illegal act as no more problematic than the other banks, “We are clean, but we are dirty-clean, rather than clean-clean.” They really do live in a different world; they even have their own language code. Dirty-clean? Said with a straight face?!
Here is my rationalization of how the top executives have created their own world: From intergroup dynamics, we learn that each group constructs its own set of perimeters within which to form the group identity and rally around their goals. Over time, the boundaries each group delineates for itself serve as walls; the more they feel threatened, the harder the walls become. I contend that since the people at the higher ranks belong by definition to a small group size, their group boundaries are much less permeable than the boundaries of larger groups. The more criticism they sense coming their way, the more they want to protect themselves, usually by blocking input from any different perspectives. When they find ways to justify and rationalize their decisions, by conferring with each other in the same group circle, they really believe their words. Hence, they rarely see that they are actually lying, and or behaving inappropriately.
NPR reported a story on psychologists studying why people behave unethically or immorally. Those who commit such acts are not always “bad” people; most of them are wonderful individuals. (I have difficulty accepting that about the executive saying the above “dirty-clean” nonsense. But I am willing to be proven wrong.) However, once they find themselves in a bind and they frame their situation strictly and narrowly in “business transaction” terms, their rationality/rationale takes on a different tone. The first “small” unethical and borderline-illegal act becomes the thread that unspools the following yarn of developments. Until they are caught, they may still delude themselves that what they are doing is never selfish.
Oh, by the way, Mr. Diamond, the CEO of Barclays who stepped down from this fiasco, will not receive his $31 million bonus. I don’t know if I should cry or just sigh.
So, the question in the title is essentially the chicken and egg metaphor. How do you ensure that your socially constructed reality is in congruence with the moral and ethical standards of society at large?
Till next time,
Staying Sane and Charging Ahead.
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- Do corporate integrity programmes work or does culture eat them too? (thoughtmanagement.org)