CISI Ireland members got to hear directly from the Central Bank on what they expect from financial institution as regards risk, at another highly successful and very well attended seminar on the 10th September. The keynote address was given jointly by Brenda O’Neill and Steven Clark, Head of Wholesale Market Conduct Policy and Implementation Team at the Central Bank. Brenda is the Head of Division, Securities and Markets Supervision Directorate.

The theme of the presentation was that for financial services firms, future success will not just be about avoiding incidents of misconduct but rather about a better culture and overall behaviour.

The seminar was attended by representatives from over 20 financial services firms including banks, asset managers and stockbrokers.

Ms O’Neill emphasised that it was not just about the numbers but culture and behaviour measured rigorously. “Mis-conduct doesn’t define conduct” she noted. Traditional models for financial services are changing at a rapid rate and part of the Central Bank’s remit, through its Market Scan process, requires looking ahead to see what might over the horizon and the extent of Irish financial services firms resilience and readiness to mitigate any attached risks.

It is also essential, Mr. Clark pointed out, that all employees in the financial services sector involved in risk management fully understand the true underlying risks and not just be experts in process.

2019 will prove to be a tumultuous year whichever way you look at it for the UK and much has and will change in the investment and advisory world over the coming months.

With our CISI Southern Branch agenda largely set for 2019 for events both in Guildford and Reigate, we hope that you have enjoyed the programme so far and, looking forward, more can be found on the event page of the main CISI webpage for the remaining events (Guildford & Reigate) across both locations for 2019.

Your CISI Southern Branch Committee will reconvene in September to look forward to 2020 and the year ahead.  It would be great to hear from members and attendees on what you would want to see on the agenda in 2020, and any constructive changes you would like to see. As examples, you might want to consider:

• Do the venues work for you?
• Do the timings of events (we try to mix them up a bit) suit?
• Do the topics and division of timings help your CPD development?
• Did you attend the ‘Super-Event’ and would you want this style/type of event again?

As you can guess, this is not an exhaustive list, but I wanted to see if any constructive feedback can be used to enhance our CISI offering still further.

Keith Churchouse CFP Chartered FSCI
President, CISI Southern Committee

CISI Yorkshire has continued to support its members by offering a variety of events over the last year covering diverse subject matters such as Smart Beta, Ethical Investing, VSTs, Cyber Security and SMCR.

We are also delighted to support CISI’s new Young Professionals Network "YPN" , and invited Claire Young to our launch event on 7^th March where she inspired our members by talking about how she has made a successful career for herself in the media and as a public speaker following on from her being a runner up in BBC’s ‘The Apprentice’.  We intend to run at least a couple of specific YPN events throughout the year with the aim of providing a platform for our younger members to network and develop their careers.

CISI have continued to enhance their online offering with a vast repository of learning materials.  To make the most of membership benefits, I encourage members to utilise the Professional Refresher, CISI TV and Online Magazine resources.  Slides from our local CPD events can also be found on My CISI.

Total membership in our region now stands at 1180 (including student members) which is an increase of 80 members compared to last year.

We are always looking for ideas for future CPD events, so please get in touch if there is a particular topic you would like to see covered.

I would like to thank my fellow committee members for their ongoing commitment they make so that we can continue to provide a varied events programme for the region.

A report sent to the regulator is misleading about how phased changes will be implemented. Vikram, a member of the working group responsible for those changes, becomes aware that the report is factually incorrect. What should Vikram do?

Toby works as a fund manager for a mid-size firm of asset managers which has been the subject of a recent regulatory visit. A number of procedural weaknesses in the firm’s processes were identified. The principal one in which Toby was involved related to the fact that fund managers were permitted to initiate, book and execute their own trades.

In response to this criticism, Toby and his fellow managers said that they were not responsible for introducing the system; they were merely following the firm’s procedures. Accordingly, if the firm wanted them to do something else, it should tell them what to do. However, it all seemed a bit of a storm in a teacup as it had not given rise to any problems. Nevertheless, the firm undertook to the regulator that it would modify its procedures.

Shortly after having provided this reassurance to the regulator, one of Toby’s colleagues initiated a trade to buy Norwegian Government warrants, but accidentally placed an order for ten times the required value. With the unaltered system still in operation, this was not picked up immediately, coming to light only when it was queried by the settlements team because it was outside the normal run of transactions.

This failure was reported to the regulator, which insisted upon an urgent skilled person’s review of the firm’s systems, with an early date for remedial action to prevent similar and potentially more destructive events. The firm was given a deadline for the implementation of these changes and told to report these to the regulator.

In response to this requirement, the firm set up a working group with representatives of all those areas affected by the regulator’s requirements. Toby was somewhat irked to be nominated to represent his area. Over the following weeks a number of meetings were held and new end-to-end processes were designed. Some parts of these were put in place, although it was felt that the introduction of the complete package should be phased in to ensure that the individual stages were working effectively.

Meanwhile, a report was written for submission to the regulator, having been signed off by the head of compliance and the chief executive. This was circulated to the working group only after having been sent to the regulator. Toby read it and was alarmed by statements that a number of new procedures had been introduced, which was not the case, as they were a part of the phased introduction which had not yet occurred. He raised this in the working group, from which he received a variety of responses, ranging from “we must do something – can we get the letter back”, to “we didn’t sign the letter so it’s not our problem”, together with a variety of more considered comments.

The upshot of the meeting was that Toby should convey the group’s concerns to the head of compliance. Toby met the head of compliance and told him of the working group’s concern that the letter sent to the regulator was factually incorrect, since it stated as fact that processes had been put in place which, although they had been designed, had not yet been implemented. The head of compliance responded that, personally, he was quite relaxed about this, saying that it was really only an issue of timing, and that during the next few weeks the statement would become fact. Accordingly, he had no intention of telling the CEO that he had been induced to sign a letter to the regulator making untrue statements.

Having been told effectively to mind his own business, Toby’s initial reaction was to let the matter drop. But he communicated the view of the head of compliance to the working group, from which the consensus was that further action was now outside its remit, because the group existed to ensure smooth introduction of the new processes.

Toby was unsettled by what he knew had taken place, and while he was not happy about it, he felt that because of the seniority of those involved, it was really out of his hands. After all, the CEO must have known what he was doing and besides, introduction of the new processes was occupying his every waking minute. A short while later, Vikram, a fellow working group member, came to see Toby and told him of his discomfort at being aware of the position of the firm, should the regulator discover that it had been misled and that staff knew about this. Surely they all had a responsibility to be honest, but he was in a quandary as to what, if anything, he could do without being implicated. Vikram’s concerns echoed those of Toby himself, who had tried to identify some plausible actions.

He set these out for Vikram:

• Let matters take their course. Undermining senior executives, especially the CEO, would be career suicide. Anyway, the new processes will soon be up and running and the problem will disappear.
• Arrange to speak to the CEO and tell him what has happened.
• Arrange to speak to the firm’s senior independent non-executive director.
• Use the firm’s Speak Up telephone line.

CEO Harriet must decide what the correct protocol is when a supplier repeatedly tries to give a personal gift against company policy.

Harriet is the CEO of a small wealth management firm with about 100 staff members. The company has a gifts policy in place which states that all gifts received must be declared to the HR manager. Items of low value or items that have been personalised or engraved (such as pens or calendars) may be kept after being declared. Additionally, gifts may be kept if they have been given as a result of a personal connection or relationship – but this is subject to Harriet’s discretion. Otherwise, all gifts are held by HR and staff members are given the chance to enter a raffle and win one of the gifts on the day before the office closes for the Christmas break.

One of the firm’s suppliers is a small, privately owned printing company, Rainbow, to whom the firm has sent all of its printing for a number of years, and where Harriet has a friendly relationship with its Managing Director, Herman.

In early December, a package arrives from Rainbow containing six bottles of wine, with a generic note saying: “Thank you for being such a great customer this year. We hope that your staff members enjoy this contribution to your Christmas gift raffle.” This is not unusual – Rainbow has sent the same gift for the past two years in a row – and the package is given to HR to be declared and added to the collection of other gifts received throughout the year.

However, a week later another package arrives from Rainbow, addressed personally to Harriet. This is a bottle of wine, which Harriet knows is more expensive than the wine already received. It is accompanied by a slightly cryptic note from Herman to Harriet: “I know your policy is to share gifts between your employees at Christmas, but I did not want you to feel left out.”

Harriet sends this gift to HR to be added to the Christmas raffle and sends a polite note back to Herman thanking him for the wine, saying she is glad that he has enjoyed working with her, but that she is sure that Herman will understand that she cannot ignore the firm’s rules just because she is the boss.

A week or so after returning to work following the Christmas break, Harriet receives an email from Herman inviting her to lunch with him in a few days’ time. Harriet is happy to accept as it does not appear that Herman has taken offence over the note she sent to him regarding the bottle of wine. Herman says that he will meet Harriet at her office and they can go on to the restaurant together.

As arranged, Herman calls for Harriet at her office, and tells Harriet that he has booked a table at a well-known restaurant, just a short walk away. Harriet has not been there before as it is considerably more expensive than she would normally choose for a business lunch. Nevertheless, she enjoys a convivial lunch with Herman, whom she is able to reassure that the firm has no current plans to change its suppliers and they part on good terms.

A few days later, Harriet arrives home late after attending an evening function and is greeted by her partner who says that they have received a package, which she opens to discover two bottles of rather good claret in a very nice presentation box. There was a note from Herman, which said simply: “Enjoy!”

Slightly irked by the prospect of having to lug the heavy box in to work at a time when she is very busy, Harriet thinks no more about it and goes to bed.

With Harriet’s heavy schedule, the matter of the wine slips from her mind until a few weeks later when preparing for a dinner party. Her partner says that he has opened the wine that Herman sent as it looks rather good.

On hearing this, Harriet sighs, remembering that she had meant to take the wine in to work and give it to HR to hold until Christmas. Clearly this is no longer an option.

What should Harriet do?

• It’s just a couple of bottles of wine given to her personally, so she can enjoy them with a clear conscience. Cheers!
• She must find out the price of the gift package and contribute an equivalent value of wine to the staff ‘Christmas fund’.
• Recognise that the action that Herman has taken is a deliberate attempt to circumvent the firm’s policy on gifts, which he is aware of. This calls into question his overall standard of integrity. Might this extend to his business dealings? She must review the firm’s dealings with Herman.
• She must write to Herman, from the office, in polite but strong terms, telling him that his generosity was misplaced in sending the gift to her home, as he knows that she cannot accept it. She will warn him that he is in danger of upsetting their previously good professional relationship.

Fran is a senior member of the team in her bank which works on providing a ‘reward programme’ to account holders who meet various levels of activity on their bank account and related credit cards. She has recently been responsible for introducing a new reward scheme to her bank customers, in partnership with a well-known airlines group.

Shortly after the fanfare of the launch it transpires that the amount being credited to customers’ loyalty reward accounts has been wrongly programmed by a factor of 100. As a result, millions of travel miles have been wrongly credited to account holders. News of this has spread like wildfire, particularly within the bank, where a number of members of staff appear to have taken advantage of the error to book extensive and expensive overseas travel. The cost to the bank and the airline of honouring all of these unearned ‘miles’ could run into many millions of pounds.

As soon as Fran is made aware of the problem, she contacts the administrator of the scheme, who quite quickly identifies a ‘computer operator error’ as the cause and asks Fran what they should do. Fran feels that she must lose no time in informing her superiors of the problems with the incentive programme but that she must offer them solutions to the problem at the same time.

Fran suggests to the administrator that they suspend the scheme immediately, but is told that they could only accept such an instruction in compliance with the terms of their contract with the bank. Accordingly Fran would have to get the agreement of a senior executive of her bank to amend the contract.

Knowing that she will be unable to avoid raising the matter at the highest level in her bank, Fran considers some recommendations on how to proceed. Recognising that there are a number of parties involved, including customer, bank and reward provider, she feels that any recommendation that she makes must take each of them into account.

Her initial thought is that the most straightforward course of action would be to cancel the scheme and start again, crediting everyone with the correct miles.

Unfortunately, when investigating who within the bank had used the reward scheme, Fran is surprised to see her own boss, a number of other senior executives and even two directors. Accordingly, she feels that she had no alternative other than to report the matter directly to the CEO.

The CEO has already been made aware of the problem by his opposite number at the airline and thanks Fran for bringing him the details. However, on reading the list of names, his immediate response is to ask his PA whether the Chairman is in the office, as he must see him immediately. Taking Fran with him, he hastens to the Chairman’s office.

The Chairman listens with increasing dismay as the CEO recounts what has happened and the potential cost. He is even more concerned to hear the names of those bank personnel who have taken advantage of what was, manifestly, a mistake. In his anger, his initial response is to suggest that the bank should dismiss all those staff who have taken advantage of the mistake.

At this, the CEO interjects and says that he thinks that might cause more problems than it solves and so offers the Chairman a number of potential ways forward:

• Offer all staff the chance to reimburse the bank for the equivalent value to the travel booked using the rewards.
• Tell staff that their actions have breached their responsibilities to their employer, who will take disciplinary action against them commensurate with the seniority of the member of staff.
• Dismiss all those staff involved, irrespective of the impact that this may have on the operations of the bank, on the basis that their behaviour amounts to dishonesty.
• Accept that the bank was partly responsible and offer to share the cost of any use made of the rewards with the individual concerned.

Background

Richard is the newly appointed department head of the operations department, whose poor reputation has led senior management to focus on it. He has a reputation for being a demanding, some would say ruthless, manager and the department views his appointment with some trepidation.

On his first day, Richard tells the section heads that he is determined to improve the performance of the department by eliminating the unacceptable number of errors which occur. He says that section heads have a key role in driving the performance of their teams and his department, adding that he is aware of his reputation, which he admits is not undeserved.

A week later Richard sees the section heads again and draws their attention to the weekly errors report which, he tells them, far from showing an improving trend, contains more errors than ever before. He then reads a letter to them, which he intends to send to department staff, stating that if all work is not checked and the failure to do so results in unacceptable errors: “it is highly likely that the individual…will face disciplinary action, which could result in dismissal.” The new regime will be enforced immediately.

The impact of the letter is a sepulchral hush in the office and the working of longer hours by many staff, especially the section heads.

A week later, unprompted by Richard’s ultimatum, the internal audit team carries out a snap audit of the department, as a result of which they identify a number of errors, most of them historic. However Richard’s attention is drawn to one specific item, which is still current and includes entries passed two days previously. An instruction to make automated dividend payments into a client’s account has been set up wrongly, resulting in a series of duplicated payments being made. Although none of the amounts is more than £25 and a total of about £200 has been wrongly paid, it is the apparent failure of his letter to make any difference which really upsets Richard.

Exasperated that this should have occurred so recently, he asks who should have checked the entries and is told that it is Nadia, a long-serving section head, who has a mixed track record.

The Dilemma

With a copy of his letter and the internal audit findings in his hand, Richard storms into the office of his divisional head. He demands that, following on from his warning, disciplinary action be taken, saying that he expects the divisional head’s support, as crucial in achieving an effective department.

The divisional head is going to a meeting, so tells Richard that he will see him later on. Before doing so, he contemplates a number of key issues that he considers should be addressed before making a decision. It is essential that any action that is contemplated is fair and scrupulously follows the firm’s procedures but, bearing this in mind:

• What sort of culture does the firm want?
• Is zero tolerance acceptable?
• Does this operational failure meet that criterion?
• Do you want people to own up when they have erred?
• If so, how do you incentivise and encourage them to do so?
• Do you want to reward appropriate behaviour? How can you do so in this case?
• How will Richard feel if his divisional head does not support him?
• Should you weigh the materiality of Nadia’s failure against the potential impact on the authority of your new manager?
• If you think disciplinary action is warranted, which may lead to dismissal, what should Nadia have done to avoid being dismissed?
• Where do you draw the line and what message does this send to other colleagues?

Options

Having considered these questions, the divisional head sees that he has a number of potential courses of action, all of which have some merit and he wonders which he should choose. Should he:

• Support Richard in his proposed course of action, to the maximum extent that is permitted within the firm’s employment policies, because he was selected to do a job and failure to support him at this stage will fatally undermine his authority?
• Support Richard in taking action, but ensure that it is proportionate to the actual incident, irrespective of the warning that he gave?
• Suggest that no action should be taken without involving HR, even if that results in losing the shock and awe impact for which Richard clearly hopes?
• Suggest that no action should be taken that may have unintended consequences?

Consideration must be given as to whether taking a hard line will improve or worsen the situation.

The verdict

He should support Richard in taking action, but ensure that it is proportionate to the actual incident, irrespective of the warning that was given.

Background

Calliope is a small business which provides technical and educational support to the financial services industry. It is well regarded by its customers, who rate its products and services highly in helping them meet the increasingly stringent standards required by the industry regulator. Calliope is not the only business which undertakes these activities, but it is an industry leader.

Alex, the chief executive, is conscious of the need to maintain leadership in the sector, but is happy to share the firm’s experience with other bodies, which do not compete directly with Calliope, believing that the promotion of a professional approach by the sector will benefit the industry generally. Accordingly, when he is approached by Terry, the head of Sorex, a small charity, which is seeking to follow the same path as Calliope, but lacks the resources to do so, he is happy to lend a member of staff to provide advice and guidance. Relying on Sorex’s charitable status, Alex is confident that it will not act in any way that is commercially detrimental to Calliope.

Greta has a background in educational development and is experienced in introducing new systems, which was a major incentive for Calliope to hire her several years previously, a decision which it has never regretted. As head of educational development, Greta regularly attends industry conferences and events, where she networks with her peers in similar bodies, as well as product developers looking to penetrate the sector. Because of this, she is well known in the sphere in which Calliope operates. Her reputation and recent attendance at a conference, where she spoke with a Sorex delegate, resulted in Terry’s call to Alex.

Greta spends two weeks helping Sorex to identify the processes that need to be revised to accommodate the new systems that it must adopt to be able to deploy its new technology successfully. She then returns to Calliope, where she resumes her regular work. Terry is full of praise for what she achieved at Sorex, telling Alex that the business would not have been able to make the necessary changes without her help.

The Dilemma

Alex is delighted that his altruistic approach has been beneficial, but his positive feeling towards Sorex evaporates when, two weeks later, David, Calliope’s head of development, tells him that Greta has given notice of her intention to resign, because she has been offered another job, which will allow her to lead her own division, reporting directly to the chief executive. This is a challenge which she eagerly anticipates, as she feels that she does not have the level of responsibility at Calliope which she really wants and which, she believes, her experience warrants. She will also receive a significant boost to her salary.

David tells Alex that Greta will not tell him the name of the potential new employer, saying that it is too early and that she is giving notice immediately, so that Calliope has as much time as possible to find a replacement. Alex is understandably dismayed by this news, saying that he hopes it is nothing to do with Sorex and David responds that he cannot imagine that any organisation which claims to be a charity would act in such a manner.

Greta is working her three-month notice period, without revealing the source of her new job, when Alex meets Terry at an industry event. Terry tells Alex that Sorex has embarked on its new product introduction, thanks largely to Greta’s help, that he is extremely pleased that she has decided to join Sorex and that he is grateful that Calliope is not making her life difficult in the meantime.

Alex is flabbergasted by this news and considers how to reply.

Possible Options

• Alex wonders whether he is being over-sensitive and should simply accept that people move on. On the other hand, perhaps he has cause to feel justifiably outraged that Sorex has stolen a key member of staff from Calliope, who acted charitably towards them and he should tell Terry and his chairman this.
• Alex also wonders whether he should try to block Greta’s move, if possible, even to the extent of entering into litigation, but he is reluctant to consider offering Greta a substantial salary increase and restructuring the department to make her the head, in order to keep her.

Verdict

Alex should tell Terry that he feels outraged at Sorex’s actions and that he will also communicate this to the Sorex chairman.

Background

Pandora is a manager in a major firm of investment managers, where she is involved with the firm’s graduate recruitment programme, interviewing and evaluating many students and hopeful recruits every year.

One of the areas about which her employer is particularly concerned is the increasing use of social media, such as Twitter and Facebook, by students and candidates, both before recruitment and once they have joined the firm. Although the firm recently introduced policies concerning social media use, they appear to be practised more in the breach than in the observance.

Greg applied to join the firm while he was at university, where he had a wide circle of friends, with whom he enjoyed an active social life. Much of this was organised using social networking sites, which also carried frequent exchanges among the students and their friends. Many of these postings were light-hearted, some contained things that the writers might wish they hadn’t said and some were possibly actionable.

Greg’s older cousin, Bill, has been working at the firm for several years, in a different unit from that to which Greg has applied and is a valued employee. He has kept in regular touch with Greg, and other colleagues, both by email from his account at the firm and more recently via Facebook, which he has only recently started to use.

On more than one occasion, Bill has communicated, via Facebook, with Greg and a small circle of friends and colleagues, expressing frustration with senior management of the firm, in a negative manner. Bill did not realise that Sam, who is friendly with Bill’s supervisor, Howard, is among the recipients of these communications. Sam felt strongly that Bill’s messages were inappropriate and did not reflect well upon the firm, especially among potential recruits. Greg has also responded to Bill’s messages with some dismay, wondering whether the firm is right for him. Accordingly, Sam felt obliged to report the nature of these messages to Howard and to the firm’s human resources department.

In the meantime, Greg has spent a number of days going through a rigorous selection process and was pleased that he has been offered a job, in a different unit to Bill’s, subject to satisfactory references and confirmation of his academic achievements.

The firm’s recently instituted social media policy states that: “excessive use of company email for non-business purposes could result in limitations on the use of email by the individuals concerned.” It further states that: “negative comments made publicly by an employee about the firm, whether in written, oral or electronic form, could result in disciplinary action being taken against the employee.”

Having been informed of the content of Bill’s negative messages, the human resources department contacted not only Howard, but also Pandora, who was about to confirm the job offer with Greg, whose references and academic achievements were exemplary. They also examined Bill’s company emails and discovered numerous examples of internal and external communications, which were more of a social than a business nature. There were also some messages that were critical of the firm.

The Dilemma

The next day, Howard asked Bill into his office to discuss the matter. Bill was taken aback. He admitted occasional use of company email for purposes that were not strictly corporate, but claimed this was by no means excessive; and he said that his critical comments of the firm were not indicative of his actual sentiments, but were delivered jokingly, and in retrospect, foolishly. He maintained that the Facebook communications were a private dialogue between him and a few close friends and did not contravene company policy in terms of any public derogatory remarks. He sought to minimise any potential damage that might have been done to the firm as a result of these remarks, saying that Greg seemed keen to join the firm. Bill expressed deep regret at what may have been perceived as malice or sarcasm in his Facebook communications, which like his emails were delivered in a tongue-in-cheek spirit. Howard listened, then reinforced the firm’s policy with Bill, ending the meeting inconclusively.

Immediately following this conversation, Bill telephoned Greg outside of the office to seek further information on what the firm may have seen on Facebook and warned him that this could negatively impact them both. He also wondered whether it was within the firm’s rights to delve into his personal communications.

Possible Options

Both Howard and Pandora were uncertain about what to do next, with regard to Bill and Greg. On the one hand, Bill has appeared to act improperly in his use of the firm’s email to make critical remarks about the firm, as well as sending quite a few messages of a non-business nature.

On the other hand, these appear to be relatively isolated instances on the part of an otherwise valued employee. More problematic, however, is the consideration of the external Facebook communication with Greg and a few others, which could be viewed as a private conversation, albeit electronically recorded.

Pandora also has to consider how this may affect Greg, who is poised to join the firm and is not in apparent contravention of policy. The firm must act fairly with regard to Bill and Greg and be seen to do by the outside world. This is particularly important as the social media policy has only just been instigated and this will be an initial test of it.

These thoughts led to Howard and Pandora considering four possible options:

1. Bill should be let off with a warning and Greg should be hired, with reinforcement to both of them of the firm’s policies.
2. Disciplinary action should be taken against Bill (which could include termination of his employment) and Greg’s recruitment should be terminated.
3. Greg should be hired as planned, but Bill’s employment should be terminated for his conduct.
4. They feel unable to deal with it and decide to refer the matter to the compliance and legal department.

Verdict

Bill should be let off with a warning and Greg should be hired and the importance of adherence to the firm’s policies should be stressed to both of them.

Given that the firm’s policy is still relatively new and untested and the private nature of the communication, this response is softer than is likely to be the case as the policy becomes more established.

Background

Paul was a senior manager in Visible, a long established firm of financial advisers which also offered investment management services and was seeking to position itself as a leading wealth manager. As a part of this plan, Paul was charged with reviewing all of the businesses, investment products and services offered by Visible with a view to introducing a new investment platform to provide a class leading proposition to its clients.

Paul identified a number of potential platform providers and after viewing the products of a number of IT firms and carrying out a competitive tender, the firm of Spectral, a long established IT provider, was chosen as being the most able to identify with Visible’s vision and provide what was envisaged.

Paul was very pleased that Spectral had been chosen and was confident that they would be able to deliver and good progress was made. Inevitably, a number of unforeseen difficulties arose, which resulted in some delay, added to which as the project progressed a number of additional features were required which further delayed the launch.

However the Visible platform was finally ready and launched to a largely positive reception from the investment community and customer response was very good. As a result of this experience, the Visible executive determined that their configuration of the Spectral platform represented a valuable asset that could be marketed to other users, provided they did not represent a direct threat to Visible.

Paul was again charged with managing this exercise because of his in-depth knowledge of what the Visible platform offered and the competitive advantages it was felt that it would bring to a user. Paul approached a number of suitable potential users of the platform and after discussions with a number of firms received a positive response from Grey Bank, a high profile name, but one who did not provide direct competition to Visible.

Following a period of intense testing Grey Bank determined that the Visible platform which had been specifically customised to meet their requirements was acceptable and Paul was waiting keenly for them to sign a formal agreement. This would be accompanied by a high profile launch, with considerable fanfare, and Paul was quietly pleased at the prospect which he felt could only be highly positive for his career aspirations.

However, this satisfaction was short lived because at an industry meeting shortly before the scheduled signing day he bumped into representatives of Spectral , who told him that on the back of their successful platform sale to Visible, Spectral had managed to conclude a very good deal with Indigo Bank.

Paul was somewhat taken aback on hearing this news, since Grey Bank and Indigo Bank were similar types of organisation and therefore would be appealing to the same types of customer. More significant was the fact that Visible had sold their platform to Grey Bank on the basis that it offered unique advantages.

The Dilemma

If Indigo could now offer a not dissimilar product, how might Grey Bank view their proposed agreement with Visible? Might they accuse Visible of misrepresentation, or more importantly for Paul, might Grey Bank decide not to sign the agreement, or at least to delay signing? Paul wondered whether he or Visible had actually done anything wrong and whether he should make Grey Bank aware of the fact that the platform that they were offering to their customers was based on a product from Spectral and that, inevitably, there would be some operational aspects that they both shared, albeit that they looked quite different.

Paul was very conscious of the importance that Hugo, his Director, attached to this project which would earn them both great credit if it went well, but Paul as the project leader would be the one in the spotlight if there were any problems. Consequently, before discussing the matter with Hugo, Paul examined Visible’s agreement with Spectral to see whether it contained any language that said or suggested that Spectral could not sell their platform to anyone else without Visible’s agreement and was concerned to note that it did not.

Options

Paul then considered the various options which he could recommend to Hugo as the best way to proceed, which he felt were:

• That Hugo should immediately contact his opposite number at Grey Bank and tell them what Paul had learnt, but seek to reassure them by pointing out that the Indigo Bank product would not contain any of the enhancements made by Visible, nor any of the Grey Bank customisation, leaving it to Grey Bank to decide whether to proceed.
• Visible should carry on as planned, without saying anything about the Spectral sale to Indigo, since the Grey Bank product was similar only under the skin and so no direct comparison could be made. If Grey Bank subsequently complained, and they might not, Visible could deal with that when it happened.
• Paul should immediately contact Grey Bank and without mentioning anything specific, encourage them to sign and launch their new platform as soon as possible, warning them that he had heard Indigo Bank was also about to launch a new platform which might steal Grey Bank’s thunder.

The verdict

The fairest and most transparent approach is for Visible to alert Grey Bank to Spectral’s sale of a platform to Indigo Bank, and leave the decision to Grey Bank. This should avoid any potential problems in the future

Background

Ray had completed nearly a year of his first job in a small branch of the bank, which he had joined straight from school and was very happy to receive a good appraisal saying that he had performed well and showed great potential. Accordingly, he was not very surprised to be told by the Assistant Manager that, the branch manager, Christine, wished to see him at 4 o’clock.

Christine congratulated Ray on his performance and said that although, as a rule, staff were not able to participate in the bank’s bonus scheme until they had completed 12 months service, because Ray had performed very well she wished to encourage him. Accordingly, she had made an exception in Ray’s case and she handed him an envelope, saying that she hoped that Ray would be pleased, adding that because of the special nature of the payment and the bank’s rules on bonuses generally, he must ensure that he did not discuss it with anyone. Ray felt a little embarrassed to have been singled out but pleased to have made a good impression.

Quickly Ray went into the staff room where he opened the envelope and was pleasantly surprised to find £150 in new notes, as well as a letter from Christine saying that the bonus was her personal recognition of Ray’s hard work and good performance. Ray was a bit surprised at the comment which left him unsure whether the “bonus” was from the bank or from Christine herself.

Although Christine had told Ray not to mention the award to anyone, which was the bank’s normal rule regarding bonus payments, he felt unable to keep his apparent good fortune to himself. On the way home sent a text to his friend Dan, whom he had met on the bank’s induction course when he joined the bank, suggesting they meet later for a drink. Dan, who worked in another branch but lived nearby, readily agreed.

When he got home, Ray relayed his good fortune to his mother who said how pleased she was, adding that she hoped he would do something sensible with the money. Later that evening when Ray met Dan he told him that he had had a spot of good fortune and offered to buy him a drink, “not just the usual pint, but anything you like” said Ray extravagantly and Dan asked him to bring the cocktail list.

When Ray returned with the drinks and sat down, Dan asked him what had prompted this unusual generosity and Ray said that he was not supposed to tell anyone, but that he had received a bonus. Dan expressed surprise saying that as they had not been in the bank for a year they did not qualify for the bank’s bonus scheme and anyway, staff had been warned that bonus payments would be very limited, so Ray getting one must surely have been a mistake!

Ray responded by telling Dan that Christine his Manager had said that the bonus was personal and despite Christine’s warning he showed Dan the letter. Dan read the letter and said that he was very surprised and it looked as though Christine had given Ray the money out of her own pocket. He said he thought that was rather unusual and added that he hoped Ray had not been asked to do anything unusual by Christine. Ray asked what Dan was implying adding that he did not actually have much day to day contact with Christine.

Dan said that he thought it was unusual to give people any sort of payment in cash, because it could imply all sorts of things but, even so, he was enjoying his drink bought with the proceeds of Ray’s good fortune. Ray replied that he was sure that he had done nothing that he should not have done and suggested that they talk about something else and the conversation turned to more controversial matters, such as football.

At the end of the evening Ray and Dan went their separate ways not having said any more about Ray’s bonus, but Ray awoke in the early hours and had difficulty going back to sleep because he wondered whether he had done anything wrong in accepting the money or whether anything that he had done at work might have been at all “suspect” but he could not think of anything.

The Dilemma

Ray wondered whether he should raise the matter with anyone either in the branch, and if so who? Or should he perhaps phone the helpline number that he was given on his induction, but he was unsure to whom he would be talking and whether it would get back to Christine that he had called. That seemed possibly to be worse than doing nothing. In the end, after tossing and turning some more Ray fell asleep with the matter unresolved.

Options

In this case, Ray rightly has some suspicions of irregularity by Christine. Does Christine have an ulterior motive for awarding Ray the bonus in this way? It seems clear that the bonus payment was not made according to normal procedures.

Accordingly, Ray has four main options:

1. Approach Christine directly to clarify the situation and return the bonus.
2. Notwithstanding that he had been told not to discuss it with anyone, Ray should report it to whoever is responsible for HR matters in the branch.
3. Call a staff helpline, with whom he could raise the matter.
4. Nothing. He was very fortunate to have received a bonus in these difficult times.

Confronting Christine directly raises the stakes and could have potentially serious consequences for both Christine and Ray. It is still not clear what motivated Dale to take the action that he did.

If Ray reports the matter to HR, it could also have serious implications for them both, with Christine at particular risk of being fired. Nonetheless, the firm’s bonus procedures appear not to have been followed and the situation needs to be resolved.

Although the call to a staff helpline might provide some useful advice, were it to be anonymous, there could be the risk that this matter is reported by the staff helpline, which would have a similar result to the scenario of reporting it to HR.

In any case, any investigation is likely to determine that Christine has acted improperly, and so has Ray by accepting the money. This could damage their professional careers.

By doing nothing, Ray is implicating himself in a process that is neither open nor fair, and not overly honest.

The verdict

The best course of action is for Ray to report the situation to the staff helpline and get further advice. He should in any case return the money to Christine, citing his confusion, as a new employee, around the process and the secrecy of the transaction, and leaving the next steps, if any, up to Christine. While this may not improve his standing with Christine, he is acting with integrity in seeking to ensure that the bonus process is open and transparent, and leaving it to Christine to unwind a very sticky situation.

Background

Rachel works as an investment adviser and manager for Outrageous Wealth Managers, which she joined last year, having worked for a number of years for the wealth management subsidiary of Azure, a major UK bank.

One day, as she returns from visiting clients at their home in the country, she boards the train and sees sitting at a table Bruce, with whom she used to work and who still works for Azure. Bruce is engaged in reading what look like business related papers but Rachel says hello and sits down opposite him.

Rachel asks Bruce how he is getting on at Azure, which she hears is undergoing a periodic reorganisation and he responds gloomily that life is not getting any easier. He is only on this train because he has been to see his doctor who says that he is suffering from stress.

Rachel sympathises with him, adding that she will not disturb him from his work and she begins to read a magazine. Meanwhile Bruce continues reading his papers, occasionally apparently signing what Rachel takes to be letters to clients. After a while, the train slows, and Bruce begins to gather his papers, which he places in two piles. One pile he gathers up and puts in his brief case. The other pile, which seems to have hand writing on, he tears in half and puts under his empty coffee cup.

The train pulls into the station and Bruce quickly says goodbye to Rachel and hurries off, putting his cup in the bin as he does so. As Rachel gets up and puts on her coat she notices the Azure Bank logo on the papers that Bruce pushed into the bin and she wonders to herself whether she should retrieve them.

The dilemma

Rachel tries to rationalise this thought by saying to herself that she will see that the papers are more securely disposed of since they may be confidential and although she no longer works for Azure, she would not like Bruce to get into trouble.

Rachel takes the papers out of the bin and although they have been torn in half and one edge is damp, she can see quite clearly that they are draft letters to Azure customers and contain their contact and detailed financial and investment information.

At this point Rachel, who had picked up the papers apparently with the best of intentions, finds her mind racing. These papers could be extremely valuable to her in providing an entrée into valuable new clients and without any great effort on her part. Bruce must really be under stress if he can be so careless, she thinks. But she wonders whether it would really be fair to Bruce if he was suddenly to lose all his best clients. Rachel and he were never more than fellow advisers at Azure, but even so, she would not like it if the boot was on the other foot.

Nevertheless, Rachel dries off the papers, puts them in her briefcase and returns to the office where she types out a report on her customer visit. But even as she does so the question of the Azure papers plays on her mind and she decides to discuss the matter with Simon a fellow manager, with whom she gets on well.

She tells Simon what happened on her train journey saying that she considers there to be four options for dealing with the letters, which she retrieved.

She says to Simon that her initial thought is simply to shred the papers, since that way she will not be tempted to do anything with them and no one will be any the wiser, although clearly Bruce is entirely unaware of what he has done.

On the other hand, she could send the papers back to Bruce saying that she had perhaps saved him from some embarrassment if someone else had found them, which might cause him to think a bit harder about what he does.

If she sends the letters to Azure compliance, they will no doubt conduct an investigation and Bruce might get into trouble, possibly even lose his job, which she certainly does not want.

But why should she not use the information that she has found?

Simon says that he quite understands Rachel’s dilemma, which has the added personal dimension that because she worked with Bruce, she does not want any action that she might take to rebound on him. He then asks Rachel if she would worry less if the person who had abandoned the papers had been a stranger and she says that it would make life a bit simpler but does not resolve her principle dilemma, which is whether she should actually make use of the information.

Simon and Rachel debate this issue for some time saying that a useful yardstick would be to consider how they would feel if the boot was on the other foot. If they had “lost” some client information, which was found by a competitor, would they expect it to be returned, or would they assume that the finder would try to use it; and what would be their reaction if they did.

Rachel continued to feel that shredding the papers was the right course of action and is dismayed that Simon argues that since the papers had been abandoned and they had done nothing dishonest in obtaining them, then there was absolutely no reason why Rachel should not make use of them. He even suggests that if Rachel does not intend to use them, she should give them to him!

At the team meeting next Monday, Rachel recounted what had occurred on the train and her struggle to decide what to do with the papers that she had retrieved from the bin, adding that she had discussed the matter with Simon but that they had been unable to come to a conclusion. Matthew, the partner, said that this represented an interesting dilemma and that he would be interested to hear the views of the other 6 team members and perhaps they should spend a few minutes discussing it about it.

Matthew allows the team a few minutes to consider the matter giving them four possible courses of action:

1. Return the papers to Azure compliance.
2. Return the papers to Bruce at Azure
3. Shred the papers and any copies that have been made
4. Keep the papers and make use of them.

Verdict

The most ethical course of action would be to shred the papers and to let Bruce alone know what you have done, so that he is aware of the potential ramifications of his carelessness without the risk of causing harm to either you or him.

Background

You are the Chief Executive of a medium sized company which employs about 300 staff. A few years ago, your company embarked on a policy of outsourcing many of its processing functions and to ensure competition, you deliberately placed the business in three equal parts to three outsourcing providers. Sorted, Leapfrog and Zebra

This has proved successful and the additional cost of managing all three has been outweighed by the more competitive pricing you have been able to extract from them and their keenness in wanting to increase their own market share of your “wallet.”

After a number of years successful operation the outsourcing contracts are under review and it has been suggested that competition between the firms and the economies of scale which will result from using a single firm, should ensure a considerably improved contract. Richard, your head of operations is tasked with overseeing the process..

You returned from holiday yesterday and whilst discussing a number of issues with Richard, he tells you that his son Thomas is now working at Sorted, having been accepted onto their graduate scheme. You recall that Thomas graduated from university last year and having problems in finding a permanent role, initially had undertaken voluntary work.

As if sensing some disquiet, on your part, Richard asks if there is anything wrong and points out that Thomas has not lived with him or his wife for the last four years and is completely independent. He tells you that Thomas applied to Sorted on his own initiative and that he had not mentioned Thomas’s application to anyone at Sorted until Thomas told him that he had been accepted.

Given the impending contract negotiations involving Sorted you remind Richard of the need for strict impartiality in making recommendations and decisions and he strongly protests at the inference that he might be influenced in favour of his son’s employer. You tell him that whilst you may have no concerns about that, it is important that not only is the process fair, but also that it is seen to be fair.

In due course, following final presentations by the bidders, your team-members discuss their views and the Leapfrog offer is slightly more financially attractive than Sorted’s bid However, Richard argues strongly that from an operational point of view, Sorted offer a better solution and he points out that past involvement with Leapfrog had thrown up a number of technical issues, which he was not convinced had yet been overcome, whereas Sorted offered proven technical competence and that was why they cost a little more.

After a prolonged period of deliberation you concede that there is no obviously best solution and tell the team that you will take the matter to the board and make them aware of all the views and ask them for their input before coming to a final conclusion. As you leave the room, you ask Richard how his son is getting on and he tells you that Thomas is doing well and currently on attachment to Sorted’s offshore processing centre, which you realise is where Sorted will handle your firm’s work.

When the board meets and you present the outcome of the contract negotiations discussion is fairly brief and the conclusion is that for the relatively small price difference the better and more established technical performance of Sorted is felt to be crucial and you are instructed to accept their bid. Later that day when you tell Richard the outcome, he is very pleased and says that it will be the icing on the cake for Thomas, whose next attachment is to work in the CEO’s office.

The dilemma

You telephone the Sorted CEO to tell him the good news and during your conversation he tells you that the firm annually sponsors two members of staff to undertake MBA ‘s and that he has decided that one of these should be Richard’s son Thomas. Although you are a bit nonplussed by this, you say how pleased you are for Thomas and are sure that Richard will also be very pleased. Because it is not clear from the CEO’s remarks whether he has yet told Thomas about the MBA scholarship, you decide not to say anything to Richard at this stage, but you are concerned whether the award is an entirely objective decision, on merit, or whether it may have something to do with Sorted winning the contract.

At this point you are seriously concerned at the possible implications of what you have been told and wonder what, if anything you can or should do about it.

There are a number of ways of seeking undue influence in decision making, some obvious, some less so and indirect influence over someone in the decision chain is one of those.

In this instance, although you have no evidence that Richard was influenced by his son’s employment and nothing that he has ever done has caused you to doubt his integrity, you are concerned that Richard’s support for Sorted leaves your firm open to the accusation that Richard’s support for Sorted was influenced by his son’s employment and the subsequent MBA opportunity. Although neither is of direct benefit to Richard, there is a potential unspoken message that reciprocity will be expected at some time in the future.

Accordingly, whether or not there is a corruption of the decision making process, it is important that your processes are seen to be open honest and transparent by all taking part. Are you confident that is the case in this situation and, if not, what can or should you do about it?

Options

Your first step should be to raise your concerns with Richard, particularly regarding the award of the scholarship to his son. Whilst it would be entirely wrong to try to influence whether or not Thomas accepted the award (and why should he not?) the fact is that if the information was in the public domain, it would be likely to arouse suspicion of favours being bought. In the context of his support for Sorted, Richard did make a logical case for preferring them to Leapfrog and his position was ratified by your board, albeit that they were asked only to judge the business case, so it is not as though Sorted won the contract unexpectedly.

However, it is important that the other participants in the bid, particularly Leapfrog, are reassured that the process was entirely open and it would be sensible to explain why it is that they have not been chosen, but not in such a manner that it actually makes them suspicious that you do have something to hide, which is not the case.

Although you now feel uncomfortable about your firm’s relationship with Sorted, it would be quite inappropriate to try to influence whether Thomas accepted a “scholarship” but the obvious way of dealing with this situation is to ensure that Richard has no involvement in any significant decision making processes involving Sorted, albeit that is quite difficult, given his position.

Verdict

Clearly it is not appropriate to try to control the legitimate activities of the offspring (or wives) of your staff members, but they should be encouraged to be as open as possible regarding employment of family and friends in any business capacity which has a realistic prospect of giving rise to a conflict of interest. In this instance, had you been made aware at an earlier stage of Sorted’s employment of Richard’s son, it would have enabled you to have removed Richard from the contract negotiations and thus to have prevented this uncomfortable situation arising.

Background

Jake is a member of the trading desk of a commodities derivatives trading firm, where he has worked for several years and is an experienced derivatives trader. The firm has recently recruited Ravi, as their first trainee trader, previously having recruited only traders with several years experience. Because it has only recruited established traders, the firm does not have any formal training procedures to provide guidance in how Ravi should be treated.

Jake has been appointed Ravi’s mentor, to work with him, share his knowledge of the firm’s products and procedures and befriend him. However, Jake is unhappy with this role because he is under time and stress pressures in his own job, having been given a new project with a tight deadline. He has protested to his head of desk, who told him that even so, there is nobody else to take on the role and he’s got to do it.

Grudgingly Jake accepts the role but is given no guidance in what is actually expected of him and having given Ravi a brief overview of what goes on in the office, particularly the location of the coffee machine, he tells him that he should observe what the traders do suggesting that he will soon pick things up.

After a period of this informal and unstructured “training”, Jake is asked whether Ravi is ready to begin trading and replies that “doing it is the only way to learn and he will soon pick it up”. Jake is relieved that his mentoring role, whatever it meant, appeared to be over as he had not found much time to spend with Ravi, and anyway, he had not really felt that it was a priority, either for him, or even the firm, since no one had actually told him what the role required.

The problem

Ravi is told that he can begin to trade and that if he has any problems he should refer to Jake, who is asked simply to keep an eye on him. One day Jake overhears Ravi starting to place an order on the market in an exotic derivative. Ravi has not been trained in the derivative and although Jake had discussed it briefly with him, Jake realises that Ravi has misunderstood its nature, and that the credit and position risk of the trade is much larger than the desk is allowed to execute under the firm’s procedures. Jake quietly and deliberately leaves the desk for a break.

Within an hour the head of the desk is called urgently by the risk department with questions about the outsize trade, which had been blocked by the firm’s risk control system. He summons Jake and Ravi and angrily asks how it happened. A visibly upset Ravi explains his misunderstanding of the credit consequences of the trade and said that the trade was 100 times bigger than he intended. He is told that he is in very serious trouble and is sent home for the day.

The desk head then asks Jake what he knows about it, and why he failed to keep an eye (or listening ear) on Ravi. Jake responds aggressively that he knows nothing about the trade since he was away from the desk, that he’s not responsible for any mistakes that Ravi makes and anyway he was employed as a trader not a nursemaid.. No-one knows whether Jake was at the desk at the critical time, although they suspect he knew about it..

The dilemma

Whilst the firm has been spared an embarrassing situation on this occasion, thanks to its control systems, the event does raise a number of questions which the Chief Operating Officer is asked to address.

Her first consideration might be whether this situation is actually one where the primary responsibility rests with the firm’s policies, or lack of them, or if it is simply a case of poor performance and a failure by one or more of the three individuals directly involved. If so, what should she do?

Options

If we consider first of all the position of the firm, they appear to be the authors of their own misfortune because they have no formal training program for Ravi and seem to have relied on a process of osmosis to educate him in what he needs to know. So a failure of corporate responsibility appears to be at the root of the situation. This has then been amplified by a continuing failure of responsibility by the head of the trading desk in assigning to Jake the role of mentor.

Despite being alerted to the fact that Jake was unenthusiastic about his additional role, citing pressure of work, the head of the trading desk appears not to have made any effort to oversee what support Jake was providing to Ravi in his role of mentor. Neither does he appear to have shown any ongoing interest in how Ravi was progressing. Consequently the head of desk and Jake were both individually and equally at fault at that level.. But there is Jake’s additional complicity in the “fat-finger incident” in which he was aware that Ravi was in difficulty but chose to walk away, an action completely lacking in integrity.

As for Ravi, how might his role be regarded?

Ravi appears to carry the least blame of all in this incident, in which he was assumed to be competent, without having been provided with the proper means of gaining such competence. As a result the firm had unreasonable expectations of him. But what about the trading error, which was his fault?

Verdict

Although this should not be overlooked, it would be unreasonable of the firm to point to that as being the sole problem, and place all of the blame on Ravi. Although clearly he undertook the trade in a type of derivative with which he was not familiar, it is apparent also that the salesman in the firm gave Ravi instructions in a cryptic form, which only an experienced trader would understand, expecting him to do something for which he had not been properly trained and which he should not have been asked to do, without proper supervision.

• The firm needs to put in place a remedial training programme, to ensure that Ravi receives proper training, if he is to be permitted to continue and it would be extremely unfair to assign all the blame to him.
• It would be appropriate at least to reprimand the head of desk and Jake for their combined failure to oversee Ravi.
• Whilst Jake’s actions are deserving of a more serious sanction, the fact that he was not seen leaving his desk rather than supervising Ravi, allows him to avoid a more severe penalty, which he undoubtedly deserves.
• And what of the COO making the decisions? Should she be willing to accept blame for inadequate mentoring procedures which were her responsibility? It will be hard for her to accept that she, rather than only the trader or Jake was at fault, but she should do so.

Background

Tracy is a junior member of staff in the settlements team of a small regional stockbroker, where she has been employed for under a year, having joined straight from school. Although she feels reasonably confident that she can deal with most of the requirements of her job, she is a little nervous when her two colleagues suddenly are sick as the result of a virulent flu bug, leaving her as the sole member of the team apart from her supervisor Laura.

On Friday afternoon, Laura has to leave the office early to visit the dentist and as Tracy checks through the outstanding items late in the day, she is concerned to discover that a purchase instruction from Sir James Moat, one of the firm’s key clients, instructing the firm to buy 60,000 shares in Grey Bank at a price of 38p is due for settlement that day.

The market in Grey Bank shares is very volatile and they have nearly doubled in price since the client gave his instructions, and Tracy is very worried that failure to settle the transaction will cost the firm a lot of money if they have to re-buy the shares at the current market price.

Tracy decides to ring the bank which holds the firm’s client money account to see whether she can get them to act on her payment request over the phone and although she has a good relationship with the bank, they tell her that they will act only if they receive a fax in the next 15 minutes, and it must be signed by two authorised signatories of Tracy’s firm. Conscious of the time ticking away Tracy quickly prepares the fax instruction and in Laura’s absence looks for Ken, her office manager and one of the firm’s other managers to sign the fax. She successfully gets the signature of Peter, an investment manager, who is the only person that she can find but Ken has apparently left the office for a few minutes.

The Dilemma

Tracy is very worried as there are now only 10 minutes left, when she sees on Laura’s desk a signed fax instruction for a different transaction, but containing the necessary signatures. Quickly she photocopies the instruction, cuts off the signature section and sticks it on to her own fax. She then photocopies her fax and satisfied that once it has been transmitted and printed at the other end it will stand a quick scrutiny, she sends it off. Tracy follows up the fax with a phone call to the bank and is told that the instruction is fine, and they will make the payment.

On Monday, Tracy came in to work and Laura asked her how things went on Friday, expecting to be told that all was quiet in the office as it was Friday afternoon. Tracy told her about Sir James Moat’s Grey Bank settlement situation and the difficulty that she had in getting signatures, explaining how she had dealt with the matter, expecting to be congratulated for using her initiative. Instead, Laura reacted with a look of horror saying, “you’re telling me that you instructed our bank to make a payment using forged signatures?”

Tracy defended herself saying that she had obtained Peter’s signature, which was the only one available and, in any case, she had the client’s instructions and failure to complete the transaction not only would have cost the firm several thousand pounds, but also have made the firm look incompetent in the eyes of a valued client. She believed that what she had done was simply acting in the best interests of the firm. Besides which, she had spoken to the bank on Friday and they were happy that they had a valid instruction, so there was no problem with them and the only person who appeared concerned was Laura.

But Laura focused only on the fact that Tracy had forged a signature and said that she would report the matter immediately to Ken and see what he had to say about it, since this was very serious.

Options

Ken thinks about what happened and what might be the most appropriate response:

• He recognises the dilemma which Tracy faced and congratulates her on saving the day by her pragmatic response to a difficult situation.
• He recognises the dilemma which Tracy faced and accepts that she had to do something but is very concerned that she felt that what she was doing was acceptable. He tells her that under no circumstances should she repeat it.
• Ken is influenced by Laura’s views and says that, regardless of the circumstances, what Tracy did is entirely unacceptable. She should be subject to serious disciplinary proceedings, which might well result in dismissal.
• Ken feels that because of the circumstances, including Tracy’s inexperience and short time that she has been with the firm, it would be inappropriate to take any draconian action against her. She should be firmly reprimanded and cautioned against undertaking anything of a similar nature in future.

Clearly, Tracy found herself in an invidious position. She felt that whatever course of action she might take had serious ramifications and she made a choice. But did she have any other choices?

Where junior members of staff are involved, the most appropriate course of action when faced with a serious dilemma beyond their competence or delegated power must be to refer the matter to someone more senior. Taking responsibility upon oneself should never involve any action that is fraudulent, illegal or even questionable.

Verdict

One possible alternative course of action could have been to pass the problem on to Peter, the investment manager, who was an authorised signatory, leaving it to him to try to convince the bank to make the payment against his sole signature, or to determine an alternative solution. Whilst that might not have worked, it would have resolved Tracy’s dilemma in that she involved a more senior member of staff, who should have been better able to decide upon an appropriate course of action. However, it might not have resolved the problem for the firm.

However, faced with what has occurred, Ken’s approach should be to discuss the matter with Tracy, to go over her options at each stage and to advise her what she should have done. He must tell her that using the copied signatures in the way that she did is not acceptable and that in the circumstances he would have accepted her explanation had the transaction not been processed, since it was not her fault that it had been overlooked. It was not for Tracy to judge whether failure to process the payment might have cost the firm money.

Ken should also discuss with Laura how it was that the important payment came to light only after she had left the office, and tell her that she was as much at fault as Tracy.

Alistair has been employed for a number of years by Incognito Partners, a small firm of investment advisers, where his role required him to take professional examinations as a part of his training programme.

Having found his threshold competence examinations quite taxing, and with a heavy workload, Alistair is none too enthusiastic about the increased examination requirement arising as a result of the Retail Distribution Review although the firm has allowed him time off for study and sent him on a training course.

Alistair is aware that Gordon, one of the partners in the firm is a keen supporter of the local branch of his professional institute and is a member of the review panel for the key examination, which Alistair is sitting this year.

Alistair receives a phone call from Gordon, who is out visiting a client at their office close by, telling him that he has forgotten some key papers, which he has left in the top drawer of his desk. He asks Alistair to find them and bring them straight round to the client’s office.

Alistair, keen to oblige hurries into Gordon’s office and starts going through his desk drawers looking for the file, as instructed, but can find nothing in the top drawer and begins to look more widely when his eye is caught by a folder labelled “Investment Institute 2009 Summer Examination.”

His heart skips a beat and as he takes it out of the drawer he sees underneath it the file containing the papers which Gordon had asked him for. He drops the examination folder back in Gordon’s drawer, puts on his jacket and hurries over to the client’s office. Having handed the client file to Gordon, Alistair makes his way back to the office and, as he does so wonders what the folder that he saw in Gordon’s desk might contain. Would it be the exam questions and answers?

Alistair spends the rest of the morning wrestling with the temptation to nip into Gordon’s office to have a look in the folder and becomes rather distracted from his work, until Gordon returns from his client visit and Alistair becomes caught up in the administration resulting from it.

At the end of the day, Alistair chats with his colleague Hazel, who is also taking her exams but, unlike Alistair, seems to have no difficulty in studying or passing her exams. Alistair mentions to Hazel what he had seen in Gordon’s desk drawer that morning and says how tempted he had been to have a quick look at the contents of the folder and she smiles sympathetically saying how much easier it is to pass exams when you know the answer!

Examination day arrives and Alistair struggles with the paper, later admitting to Hazel that he found it really tough and the outcome was “in the lap of the gods”. Hazel is rather more sanguine about her chances saying that the paper seemed to play to her strengths and she anticipates a good result.

Some weeks later the dreaded results day dawns and Alistair anxiously arrives in the office early, to access his result. He is somewhat surprised to find Hazel and Gordon there already, particularly when he hears Gordon congratulate Hazel on her Pass with Credit, adding “it looks like the help I gave you really paid off”. Seeing Alistair come in, Hazel blushes as she thanks Gordon, and immediately asks Alistair how he fared. Alistair logs in to his computer and accesses his Institute record where, with his heart pounding he opens his record to be greeted with a result of Grade D-marginal fail.

Understandably, Alistair is upset and at the end of a difficult day he heads for the pub, inviting Hazel to join him “and help drown my sorrows and drink to your success”. Although he tries not to focus on his exam result, Alistair is unable to avoid the subject and particularly Gordon’s comment, which he overheard. When he asks Hazel what help Gordon had given her, she is very cagey and says that he simply helped her understand some of the investment concepts that she was having trouble with and, as a member of the exam panel, he provided a good understanding of the way the examiner thinks.

The Dilemma

Alistair feels aggrieved that Gordon felt able to help Hazel, who appeared to him to have no trouble with the subject, whereas he received no offer of help, Gordon having told him that as a member of the exam panel, it would be improper for him to coach members of staff. As the evening wears on Alistair becomes more despondent as he contemplates the prospect of further months of study, whereas Hazel becomes more relaxed, particularly when other friends join them and, in an apparent effort to enliven Alistair, says to him with a laugh “do what I did, get Gordon to leave the paper lying about!”

Alistair smiles ruefully thinking “I wish it were that simple” but, as he lies awake that night he wonders whether Hazel was serious and whether that was what Gordon meant by his overheard remark. But is there any truth in it and what should he do?

Options

In this instance, Alistair has some suspicions of malpractice by Gordon, who as a member of the exam panel has a duty of confidentiality to the Institute and appears also to have deliberately favoured one member of staff over another. However, he has no direct proof of anything. Consequently, it is imperative that he does not make rash accusations against either Gordon or Hazel, particularly since there is a danger that he is viewed as being motivated simply by jealousy.

Consequently Alistair has four main options:

1. Immediately contact the Institute and report his suspicions.
2. Discuss the matter with his firm’s senior partner and seek his support in approaching the Institute about the matter.
3. Approach Gordon direct and tell him that he is aware of what he has done.
4. Do nothing.

Contacting the Institute, either in person or via a “whistle-blowing” address, immediately raises the stakes and, assuming that Alistair’s story is taken seriously has potentially profound consequences for both Gordon and Hazel. If an investigation determines that Hazel cheated and was helped by Gordon, disciplinary action is likely, which could result in both of them losing their careers.

Discussing the matter with the senior partner is a sensible course of action. It gives Alistair the opportunity to air his concerns with a third party who may either support his view, including taking further action, or by looking at the situation from a different perspective, come to a different conclusion.

Approaching Gordon directly is not likely to achieve anything beyond a flat denial that he has done anything wrong, albeit that he may be embarrassed if he did provide help to Hazel, having told Alistair that he could not do so. As Alistair works for Gordon, this is not a good move

Doing nothing may now seem quite attractive. Whatever action Alistair takes, he has not passed his exam and this is not going to change. Making life difficult for other people with whom he works may be viewed by them and other colleagues as unnecessarily vindictive, with only negative consequences for all concerned. So what will Alistair have gained? He may consider it better to let sleeping dogs lie.

Verdict

This is very much a case of thinking before you act. Our recommendation is that Alistair should first discuss his concerns as dispassionately as possible with a close colleague and then, if he still believes that he should take action, Alistair should approach his senior partner. It should be accepted that his senior partner may not be supportive of Alistair, preferring either to ignore the matter, or telling Alistair to leave it to him to tackle Gordon. This may leave Alistair feeling that he will contact the Institute anyway.

Background

You are a senior supervisor in a large financial services firm which, in common with many of its peers, has announced a significant number of redundancies and there is a generally unsettled feeling in the office.

You are approached by your line manager who tells you in confidence that he has been asked to review staff performance, with a view to implementing a 5% across the board cut in staff numbers and asking for your help in trying to identify those who can be put on the list. The principal criterion is that their departure should not result in any operational problems.

This is a task that you have always feared becoming involved in, as you have built up your team over a number of years and, having encouraged them to think of themselves as more than just colleagues, have become friends with many of them. Consequently, it is seemingly inevitable that a number of your friends will find themselves on the list, regardless of whether or not you are responsible for their inclusion.

In preparation for the meeting to which you have been invited the following week, you consider all your team individually and the more you look at their names the more you are faced with the fact that almost all of them seem to have a reason, either personal or professional, why you do not want to put their name forward.

On the Tuesday night you spend a few wakeful hours wrestling with the problem of how to adopt a “professional” approach which will not leave you feeling that you have betrayed your colleagues/friends. Your mood is not helped when you get into the office early on Wednesday and Eddie, one of your team members comes over and invites you to a lunch time drink to celebrate the news that he has just heard that he and his wife Nicola, are expecting their first child. Nicola used to be in your team, but now works in another part of your firm.

As Eddie says to you, the event is wonderful, but the timing could have been better, with all the uncertainty in the air about job security and he asks you whether you have heard anything on the grapevine. You reply that these are difficult times and that you are as concerned as everyone else.

At the meeting with the line manager, your HR manager is also present and says that the firm will need to ensure that all the appropriate procedures are followed as they don’t want to get involved in a large number of claims for wrongful dismissal. The meeting starts with your line manager going through a list of members of staff who report to you and making observations about the performance of a number of them, whom he feels would not be a loss to the firm. Although you agree in general with his observations, which are based largely upon annual performance appraisals which you have signed, you are concerned when he mentions Eddie’s name as being a possible contender for the list, bearing in mind what he told you that morning.

The meeting ends and you are told that there will be a follow-up in a couple of days time to confirm the names. In the meantime you have your lunchtime drink with Eddie to contend with and although you think about trying to excuse yourself, you decide to go along as it would be churlish not to, particularly since a large number of other team members will be there.

When you get to the pub Eddie buys you a drink and whilst doing so says that he had hoped that Nicola would be there but her department has been summoned to a meeting and he is very worried that she might lose her job. At this point, you wonder whether there is anything that you could say to Eddie to alert him to the possibility that he might suffer the same fate, or might you have a word with your line and HR managers?

The Dilemma

Understandably, you are concerned that a member of your staff may be about to lose his job at a time which is likely to be very stressful for him and his wife. This may be compounded if his wife also loses her job. You wonder whether there is anything that you could or should do to try to prevent this or ameliorate the impact.

Should you intercede for personal reasons? ie Eddie and his wife, who also works for the firm are about to become parents.

Should you try to soften the potential blow by tipping-off Eddie that he may be made redundant?

Considerations

When dealing with situations which have a direct human dimension there is an obvious temptation to take actions which you might not otherwise take, particularly if you are friends with those involved. Accordingly you may well ask yourself the questions:

Should I/Can I intercede for personal reasons? ie Eddie and his wife, who also works for the firm are about to become parents.

Should I/Can I try to soften the potential blow by tipping-off Eddie that he may be made redundant?

After all, there may be numerous other members of staff with situations which are much more difficult than Eddie is about to face, of which you are unaware. Should not you consider all of them as well? But how can you?

And, if it is known that Eddie and his wife are being favoured, what might be the reaction of other members of staff? Alternatively, if you tip-off Eddie, how do you think that he might he react?

Verdict

When decisions have to be made that have a personal dimension, it is more important than ever to adhere to the primary requirements of ethical decision making and to measure your proposed course of action against the yardstick of openness, honesty, transparency and fairness.

In this instance, any overt action that you may be tempted to take to favour Eddie, however you to try to rationalise it, is likely to fall short of some or all of these requirements.

One consideration which, in such a personal situation as this, may not be at the forefront of your mind, is your responsibility to your firm, both as an entity and as a representative of the interests of all your other members of staff. Not only does this mean that you must seek to act objectively and impartially in this matter, but also that you have a primary responsibility towards your employer. This is a recurrent theme in the SII Code of Conduct, where it sits alongside your responsibilities to clients and the market.

Consequently, unless you have good business reasons, such as Eddie’s performance being better than that of other potential nominees, or that he genuinely occupies a key role, you have no overriding reason for seeking to keep his name off the list.

Additionally, you may feel that you should tell HR that Eddie’s wife is pregnant, but this is not a decision that you should make on Eddie’s behalf. It is up to her and Eddie to decide who they will tell and when, even though this may have a bearing on the firm’s decision on her future.

Accordingly, in this instance the correct course of action must be to compile the list and then assess the strengths and weaknesses of all of the nominees. This would enable all of you involved in its compilation to consider matters objectively, before coming to a final list. It may be that this will actually result in Eddie being removed from the list but, even if it does not, you have acted in an ethical manner.

Background

You are a relationship manager at Knights, a well-regarded boutique investment bank, where your director has been building a relationship with the finance director of Inks plc, a printing supplies manufacturer, for many months. Knowing that Inks has recently pulled out of a large acquisition deal, he believes that it is likely to be looking for another opportunity in the future.

Last week, this relationship building seemed to have paid off when Knights was approached by Inks plc and asked to tender for some corporate finance work. As ever, the time scale for producing the proposal document was tight, but the firm had been preparing for such an opportunity and seized it gratefully.

The team worked round the clock to produce the proposal document and yesterday it was finally sent to the finance director of Inks plc, using the firm’s email system. All the members of the team are confident that the proposal should win, as the team includes a leading industry expert, has recently delivered a highly publicised and successful piece of work and your director has a good relationship with the finance director of Inks plc.

The engagement is expected to be highly lucrative and is vital to your team to reduce the possibility of redundancy, which is an ever-present threat in today’s difficult environment.

This morning, you were shocked when your director summoned you into his office and asked you to explain why the proposal document was sent to Inks plain an email with a footer stating:

Our staff have chosen this year to support the charity Trees for Tomorrow.

‘Is it really necessary to print this email – think before you print.’

You explained that the proposal was sent using a standard Knights email. Knights customises the footers of all its emails on a regular basis to promote various products and issues. For example, last quarter the footer promoted the ethical funds advisory service which Knights offers and read: ‘Ethical funds – we can help you – think before you invest.’

You reminded him that the current footer had been given to Knights’ staff to promote their chosen charity, which encourages environmental awareness, and currently all the firm’s email footers read: ‘Is it really necessary to print this email – think before you print’. You had not thought to remove the footer before sending the proposal.

Apparently, your director had received a rather irate telephone call from the finance director of Inks plc. The finance director had been offended by the footer, reminding your director that, as a leading manufacturer of printer inks, Inks’ profits could be jeopardised if people took the footer seriously and reduced the amount of printing they performed. Your director had been told in no uncertain terms that, unless the footer was removed immediately from all Knights’ emails, Knights’ proposal would not be considered further.

Your director had indicated to Inks finance director that the email footers would be removed, noting that it was only a temporary footer anyhow. Your director asked you to determine who in the firm is responsible for the footers and to have it removed immediately.

Although you can understand the director’s desire to appease Inks plc and so remain in the tender process, hopefully winning this highly lucrative piece of work, you can’t help feeling that responding to a potential client in this manner is wrong and is, effectively, suggesting that the firm will do whatever it takes to win lucrative work.

You are conscious also that many of your colleagues, who support Knights’ charitable initiatives and worked hard to get the bank to agree to use of the email footer, will be extremely angry if it is removed under these circumstances.

The dilemma

If Knights changes the footer on its corporate emails in order to win the work:

• What impact will this have on Knights’ reputation, which relies on the firm acting and being seen to act with complete integrity and objectivity
• What message does this send to clients with regard to Knights’ integrity and willingness to stand up for its beliefs?
• What would the bank’s stakeholders think, given that Knights advertises its green credentials and currently has a high ranking in the Business in the Community index?
• What will be staff reaction to what might be regarded as outside interference in an internal matter, the firm’s support for a charity chosen by the staff?

On the other hand, you could argue that:

• With the prospect of redundancies in the air this is no time to get defensive about such a seemingly trivial matter.
• Knights exists to make money and this will be a highly profitable potential client. Without the income which business such as Inks might provide, the bank would not be able to be so generous in its charitable support, nor employ so many staff.
• Changing the email footer is not a big deal – there are many other worthwhile messages that could be written instead.
• Footers are changed regularly and no-one else needs to know why the footer was changed a little earlier than normal.

Verdict

The matter should be brought to the attention of the head of corporate finance so that an appropriate response can be discussed, hopefully defusing the situation.

Knights’ reputation relies on it adhering to the highest standards of integrity and objectivity and, ideally, it should not accede to the demands of Inks plc by changing the offending footer.

Instead, it would be preferable for the head of corporate finance to explain the bank’s position (and reason for the decision) to the finance director of Inks plc and seek to persuade him that the footer, on the one hand, and Knights’ highly attractive proposal, on the other, should not be seen as incompatible. After all, inviting Knights to tender was presumably influenced, at least in part, by its reputation.

By standing up for its beliefs and explaining to Inks plc why it is reluctant to change the email footer, Knights should be able to maintain its reputation for integrity and trust. In essence, the question is the extent to which you or your firm should stand up for your own beliefs and policies and the extent to which you are prepared to dilute these in pursuit of commercial objectives.

However, it is pertinent to consider the impact which failure to win this mandate might have on staff numbers and, when faced with such a decision, staff might feel less hostile to the potential loss of the footer, the reason for its removal notwithstanding. Accordingly, it would be sensible to put the facts to the staff, so that they can be aware of the dilemma. Their response may be different in times when business is plentiful to when business opportunities are scarce.

In this instance, the trigger for this difficulty is something that is apparently quite trivial and the key to resolving it must be to ensure that it is not allowed to become more significant. Since appearing to give in, on the one hand, or losing the business on the other, might each be seen as a sign of failure, it is probably necessary to spend more time on resolving this issue than it might warrant indifferent circumstances and, if unavoidable, give in to the client, for the good of those staff members who might otherwise lose their job, having first made them aware of this possibility.

Background

You are the new Administration Manager of a London based bank incorporated 3 years ago and you have responsibility for all ‘Back Office’ matters.

Senior front office staff have been travelling extensively for the bank to promote its business and a junior member of the administration team looks after all business travel arrangements and flight booking. She has taken over only recently from a more senior administrator who has recently left the department to join another firm.

The amount of overseas business travel is running at a high level, incurring significant expense and your MD asks you to consider ways of curtailing these costs.

One of your team mentions to you that the Bank has accumulated a substantial number of ‘air-miles’ as it is the Bank’s policy to accrue air miles generated by business travel in its name, rather than permit staff to collect them personally. No attempt seems to have been made to use these air miles to defray the cost of business trips and there are no other policies or rules covering the air miles scheme, leading you to conclude that there exists some general uncertainty about these arrangements.

On investigating the air miles total, which proves to be very substantial you notice that, while no business flights have ever been booked, surprisingly, there appear to be a number of flights booked in the personal names of both the former administrator who has left the bank and her successor who is now responsible for the scheme administration.

Analysis of the records indicates that these flights were for holiday purposes judging by the destinations, the fact that the air miles were also used for hotel bookings and that on at least one occasion, a non-member of staff also travelled. It transpires that the non-member of staff was the former administrator’s boy friend.

You interview your junior administrator who appears somewhat naïve and who says that her predecessor told her that the former Head of Administration had said that it was OK to use the air miles in this way. You also contact the former administrator who confirms what you have already heard, namely that your predecessor had said that it was acceptable for her to use the air miles as a perk. When you express surprise at fact that her boyfriend had his travel and accommodation paid for by the bank, she replies that the bank did not pay for anything; she and her boyfriend had paid all of the airport taxes, “which were a lot of money” and they only used the air miles. She repeats that her former boss knew about this and permitted it.

Upon checking, you ascertain that there is nothing in writing to confirm what you have been told and there is absolutely nothing in the bank’s procedures to cover this situation. Accordingly, you decide to contact your predecessor who has now retired and ask him whether he did in fact give permission for these two-administration staff, or indeed anyone else, to use the bank’s air miles for private travel and accommodation.

He says that he really cannot remember specific situations and is generally vague about the whole matter, leaving you feeling somewhat uncomfortable about the situation you are now faced with.

To complicate matters further, the team member who first informed you of the bank’s air miles account complains to you that it is unfair that only those staff directly responsible for administering the air miles scheme, can benefit from it. He considers that everyone in the back office should be able to benefit.

Verdict

There are a number of issues which may influence how you respond to this situation:

• There are no bank procedures to control the scheme
• Two staff who have been responsible for administering the air miles scheme have personally benefited from it
• It is unclear whether the former Head of Administration actually gave permission to any of his staff to use the air miles for personal travel
• It is unacceptable that only staff responsible for administering the scheme, benefit personally from the air miles without specific permission being given each time and within the context of formal scheme rules and independent controls
• You have received a complaint from another staff member about the apparent unfairness of the distribution of bank air miles
• The bank itself is not benefiting from its substantial air miles balance which could be used to reduce business travel costs
• According to your in-house legal counsel, you have no tangible evidence that the staff members concerned have actually done anything illegal.

Possible Courses of Action

• You might seek to obtain re-payment from the former administrator of the value of the flights/accommodation she and her boyfriend enjoyed.
• You could indicate to her that there will be a late P11D submission to HMRC for the value of the flights and hotel accommodation, which were a benefit in kind.
• You may wish to re-consider the wording of the written reference that the bank gave to her present employer which asked about honesty and integrity.

The practical difficulty with the three options above is that while you may question the honesty of the former administrator, bearing in mind your predecessor’s unhelpful attitude, there is no proof of wrong-doing.’

Notwithstanding these difficulties you should:

• Introduce formal written procedures for the administration of the air miles scheme and publish to all staff. This should include a requirement to obtain appropriate senior, sign-off for all flight/hotel bookings.
• Decide formally whether company air miles may be used only for business travel or whether a proportion may be ‘given’ to staff as an incentive.
• If air miles are distributed as an incentive, a demonstrably fair distribution method should be developed and published, applicable to all staff.
• Immediately advise your current administrator that, pending application of the new policy, any use of corporate air miles must be pre- signed off by you.

Conclusion

Although issues such as that referred to above may not, of themselves, appear significant, recent media attention, demonstrates that they do have the ability to generate a lot of attention. In public bodies this is likely to engender the view that no one in public life should receive any benefit that is not open and transparent. The question might then reasonably be asked, “Why should it be any different in business? “.

The response ought to be that standards of openness and transparency should be no different, in public or corporate life, even if the rewards themselves may be.

Consequently, and as suggested above, the introduction of a documented procedure, together with its formal application, are essential to prevent the continuation of this unsatisfactory and opaque situation which, if left unchecked, is likely to fester, and generate ill-will and possible general disregard for rules and policies.

The response of the former administrator suggesting that only cash counts as payment is a mistaken view that also needs to be dispelled. There is an often-expressed belief that because an item referred to does not involve actual cash, it has no value. However, the reality is that air miles have a value akin to that of the future cost of the travel to which the holder is entitled which, in a business, can be a significant amount, running into thousands of pounds.