The substantial facts of the case was with regard to the 2011 UBS rogue trader scandal, which resulted into a loss amounting to exceeding $2 billion US dollars at the Swiss Bank UBS (Bbc.com 2018). This case was based on the conduct of business ethics. The professional conduct and ethics in the business area can be explained in this context to analyse the case. This was the consequence of an unauthorised trade performance by Kweku Adoboli, who was the director of the Global Synthetic Equities Trading Team of the Bank in London. The CEO of UBS and the co-heads of Global Equities at UBS resigned, on assuming the responsibility for the unauthorised trade incident. Later it was emerged that UBS failed to take any step after they received a warning that was issued by their computer system about the trade practice by Adoboli (Shirbon 2018). Though he was released on a conditional bail, but he was convicted later for the two counts of fraud and false accounting. He appealed against the sentence and conviction. The ethical break down in Adoboli case was the breach of business ethics as he his actions and behaviours are in violation of the business standard and set of values. This study intends to discuss the Adoboli case in terms of the individual factors set out in the model of unethical decision making. It further analyses the factors to explain the action of Adoboli.
An UBS trader, Kweku Adoboli was ordered to deport from UK to his birth country Ghana on the ground that Adoboli was a foreign criminal. In 2011, he was arrested for the suspicion of fraud with regard to a loss of estimated $2 billion US Dollar (Moore 2018).The 38 year old trader Adoboli claimed himself as a British, as he had spent the most part of his life and attended school in the United Kingdom before working in UBS. He was sentenced for seven years jail in 2012 for alleged fraud (Ludlow 2018). He made an application for overturning the order of deportation, which was brought against him. He lodged an application for judicial review of the deportation order before the High Court claiming that the Home Office unlawfully ordered him sentence. He had served sentence for three and half years for two accounts of fraud charges and then the deportation order was brought against him. An example of a similar story was identified, when a rogue trader, Jerome Kerviel, caused a loss to the second largest bank of France, of an amount of $7.1 billion. This incident sent a shockwaves through the struggling economic market of Europe.
The condition was nothing but just an unethical behaviour flourishing beneath the organisation. Ethical decision can be made under the conditions of certainty, uncertainty and risk. The unethical decision making of an individual is motivated by several factors, such as: personal morality, motivation, moral development and other personal factors. In the Adoboli case, the individual factors which affect the unethical decision making are, knowledge, personal goals, values, culture, personality and morals. Knowledge of a person determines the type of ethical decision made by a person. The knowledge may include the academic and positional awareness and skills of a person. It also includes a self-knowledge which prevents a persons from a situation where conflict has occurred. It provides a person with a firmer idea and capability to deal with the ethical dilemmas in work practices. Individual needs to examine their cultural background while seeking out the knowledge associated with their gender, race, class, age and others. If an individual has sufficient information or knowledge of a thing, they are like to adopt and learn the information. Additionally, development of knowledge about the attribute of subject are deemed to have an effect on the economic decision (Cohn, Fehr and Maréchal 2014). If a person learns about the desirable characteristic of a subject, they would value it more irrespective of how they used to value the subject. This is how access to information affects the knowledge and the knowledge affects the ethical decision making of an individual. Another important factor in this scenario is the personal goals, which may cause differ in the behaviour of an individual. Personal values helps in determining the goals and outcomes of the conduct. Goals are the outer expressions of the personal values. Personal goals govern the behaviour, and also colour the way an individual responses to a situation. If the personal goal is influenced by ethics, that impacts the ethical decision making of an individuals. Personal goals that is influenced by unprincipled ideas, may have a reverse effect on decision making. Values as defined as a belief of an individual, is also a significant factor that helps in ethical decision making. It helps to determine the way an individual would perceive a particular situation. Values many be given to different subject matter by different people, like safety, excitement and others (Crossan, Mazutis and Seijts 2013).Values may include ethical, social and ideological values and the ultimate choice response. Value is an inherent substance in the individual that induces them to act in a manner. It may be influenced but not regulated by anyone other than the individual. Value can change over the time, and represent a significant impact on the decision making. Through individual value, the culture can be defined. Corporate culture in this respect plays a significant role to shape and influence the conduct of people. Culture has an affect over the nature of the interactions within the organisation. It is influenced by the norms associated with the behaviour, communication and management within the organisation (Craft 2013). Improving the business culture can help in reducing misconduct in the organisation. The employees who have a favourable perception towards the culture of the company, are less likely to commit misconduct than the employees who are not favourable of the norms of the company. Sense of morality can be provoked by conflicting goals. Organisational injustice gives an opportunity to display the personality and morals of an individual. Individual needs to infuse their morality and ethical personality in everyday activities and in order to achieve that, the policies should be designed in a way to keep ethics at the top of the mind.
The factors like knowledge, personal goals, values, personality and morals had affected the unethical decision making by Adoboli, where he was alleged to commit false and fraud accounting to hide rogue trades. Adoboli had the risk of deportation for long but did not take any steps to avoid it. To avoid the risk he should have become a British citizen prior before happening of this situation. Adoboli had been previously violated the trading rules and served almost a half of a seven years sentence. In this case, the values of Adoboli were driven away by his unethical sense of behaviour. He made such an approach that easily caused the biggest loss in the history. Fear of punishment is an instinct value which resides within the human being. Adoboli was drove off the attribute and engaged into unethical behaviour. It is required for ethical decision making that the individual work for the goal of the organisation rather than the personal goal. When the means of the individual are consistent with their desired goals, their decision making shall be guided by ethics and value. Adoboli, in this case, applied his personal goals above the goal of the Bank where he was the manager. As a manager, it can be expected from Adoboli that he would act for the best interest of the organisation and not for the self-interest. Here the principle of justice in the person has its effect on the decision making of the person (Kuntz et al. 2013). Acting in an ethical way, is a deliberate decision chosen by a man and requires critical thinking. Adoboli should have involved in critical thought while making the two transaction, considering, the impact it would have over the organisation. It was his responsibility as a manager to think about the consequence if his conduct goes wrong. Organisational culture in this Adoboli case, helped him taking unethical decision. He booked a fake deal to hide the risk he took up. As a result he was declared as a master fraudster at the time of his trial. It can be observed from his activities that he was the part of the culture of risk despite the fact that he was convicted earlier for his conduct. The bank did not take an active part in bringing a change in the culture of the company to discourage unethical behaviour. The money we give to bank, is under the belief and trust that it will be safe with them. No matter how many times he was convicted before the order of deportation, his obligation as the manager was to refrain from committing such an act that can lead the organisation to loss. Despite of that, a global institution should not be organised in such a way to impose the responsibility of the loss of $2 billion US dollars upon only one individual. The organisation had no sufficient knowledge and skill to prevent the risk of loss. As per the confession made by Adoboli, He had the urge to take up risks, and in the meetings the manager kept on insisting the traders to increase the profits by pushing the boundaries. Personality and moral of a person acts as a factor for ethical decision making. Even though a decision is legal, it might not be ethical for an organisation. As an investment manager it can be expected from Adoboli that he possess morality to determine, whether his course of action comes under the acceptable standard of professional behaviour, which has been outlined in the code of conduct of the organisation.
The other factors influencing rouge trading are the need of revision of activities to ensure ethical behaviour and promotion of a culture to recognise the part of situational influence. Firstly, financial institutions should review and rather restructure the compensation system within the organisation so that the ethical conduct, and ethical decision making procedure are rewarded (Scholten and Ellemers 2016). The organisation and managers need to set up the kind of behaviour they expect their employees to observe and exhibit. They should also consider the system of compensation or rewards payment that would motivate or encourage the behaviour of the employees. Secondly, the unusual and rare situations helps us to make ethical decision and take prompt actions. Individuals who engages into rogue trading are those people who lost their ethical and moral bearings and made bad decision and got entangled in a cycle which they had no idea to how to break (Bagdasarov et al. 2013). The factors like goals of the organisation to inspire and reward positive behaviour and discourage the bad behaviour should be given more emphasise to avoid unethical decision making. When it comes to self-interest, individual tends to overlook bad and unethical choices. In respect to that, the means of a decision making should be scrutinised critically in the organisation. When it comes to a manager, they should accept that they are placed in a position higher than the other. They should be cautious while making a decision, not just about their intentions, but also about the interpretation of their behaviour. They set an example for the others about how a decision should be taken in a situation. Organisations should scrutinize their decision from time to time.
Risk management is another factor that can be applied in the Adoboli case. Intentional action of employee is the main result of non-compliance of the codes of employees. Risk management systems and processes can be effective only, if the people controlling them are proficient to maintain it (L.P. 2018). Non-compliance of conduct stem from the organisational culture for risk management. The employees should possess the ability to justify their intentional act for misconduct in the business practice in an intellectual way. The main components that makes an individual to take up risk is their unrealistic targets and the pressure to achieve a result at any cost and etc. Individuals tend to initiate risk, if they feel that they can escape the consequence if they are being unethical while taking the risk. It is the comfort that the individual feel with which they can commit a misconduct, induces the person to take up the risk. Employees may face pressure on them to commit misconduct. Organisational justice mechanism and poor corporate governance practices in an organisation, may make the employee acquire a feeling that they would be able to get away for non-compliance of the standard of conduct set by the company (Worstall 2018). The employees who are not engaged with in the misconduct activities, have the better ability to rationalize these kind of unethical behaviour that are targeted against the company. Excessive pressure on the employees to achieve goals or result, make them justify their act of taking short cut and risks (Bryant 2018). Integrity in the relationship of the employees and employers, is also a factor that plays an important role in the in this context. A positive relation between the corporate integrity and business performance leads to a strong management practice in the company to avoid culture conflict and unethical decision making.
In Adoboli case, a strong relationship between the business performance and the integrity of employee would make the employees speak-up to honesty (Mohan 2016). The roles of the managers are critical to improve and increase new ideas in the organisation, to avoid any pitfalls in risk management. As per the conversation of Adoboli, employees are at a great pressure at investment banks to generate high returns, which led the employees to break the rule (Farell 2016). If the investment banks carries on to rush behind the profitability as they once had, the employees will be left with no option other than taking risk to achieve that. Therefore, UBS needs to consider these individual factors for ethical decision making to avoid rogue trading.
References:
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