Accountants Ordered to Disclose Information on Personal Misconduct | Financial Times

Starling Team

Recent reports show that banks are not alone in facing increased scrutiny around misconduct risk.

According to Financial Times, “The Financial Reporting Council has demanded information on complaints about bullying, sexual harassment and alcohol or drug abuse, including the seniority of the employees implicated and their area of business.”

This is the first time that the FRC has asked accounting firms for information on the beahvior of their partners and directors. Firms have until October 11 to provide complaints data, and until August 30 to provide details on harassment, discrimination, substance abuse and whisteblowing policies.

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When Innovation and Trust Are at Odds | Harvard Business Review

Starling Team

Innovation may be a goal for many organizatins, but rushing to meet these goals comes with a price. When a company doesn’t meet the basic expectation of trustworthiness, botth stakeholders and customers feel betrayed. This leads to a lack of trust in future actions.

Risk management and compliance functions are fading as a new subculture comes to light. This subculture celebrates achievement, and punishes any “non-cooperators”. Those “non-cooperators” are often the people who are concerned about risk. The question becomes: how can organizations both innovate and manage risk?

The bottom line is that innovators and people in control functions think differently. They often have conflicting incentives. Improving collaberation between complaince personnel and innovators is key.

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Most Employees Retaliate If They’re Slighted at Work | KelloggInsight

Starling Team

Research by Cynthia Wang, clinical professor of management and organizations at the Kellogg School, shows the impact of poor workplace conduct. “It is highly costly to organizations, because it slows down efficiency and hurts morale that’s so key for organizational functioning,” she says.

Most studies on workplace conduct focus on individual behavior. However,  negative conduct stems from a more complex soical situations. Researchers discovered that when employees are slighted they “seek to even the score.”

This shows that dishonesty and misconduct may well spread via processes of social contagion like all other observed human behaviours. It is not about bad apples; it is about bad barrels. People will behave poorly when they perceive that their peers are doing similarly. Negative workplace behavior breeds further negative workplace behavior.

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Australian Regulator Proposes Tougher Rules on Bankers’ Pay | Financial Times

Starling Team

Australia’s prudential regulator has proposed a new rule that would require banking executives to wait up to seven years to receive bonus payments and have pay linked to non-financial criteria. John Lonsdale, deputy chair of APRA, says that existing remuneration arrangements aren’t incentivising the right behaviours.

The post from Finanical Times goes on to explain, “In the wake of financial scandals and falling profits investors have balked at the generous awards to executives in the country’s four big banks — Commonwealth Bank of Australia, ANZ Bank, Westpac and National Australia Bank — delivering large protest votes against their remuneration reports.”

While incentive schemes are an essential driver of behavior, APRA and other regulators hoping to curb misconduct in the industry should give equal attention to non-financial drivers of employee misconduct, such as firm culture and behavioral norms that are poorly understood.

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House of Lords Criticised for Culture of Bullying and Harassment | Financial Times

Starling Team

Naomi Ellenbogen published a report that cites ‘toxic behaviours unworthy of any institution’. Her House of Lords Commission report did not name any alleged offenders but found “toxic behaviours” and “systemic cultural issues”.

The report comes after a series of harassment cases in the House of Commons. It called for sweeping change to the rules that apply to both members of the House of Lords as well as their personal staff, and processes to ensure that complaints were taken seriously in future.

While staff members said that most members of the House were not problematic, they also described a “hard core” of offenders, and estimated that as many as 20 per cent of the members behaved in an “inappropriate and high-handed” way.

Working with Starling can help organizations prevent issues with culture and conduct. We provide data driven insights that allow our customers to create the most efficient, productive and powerful organizations possible, and to transform those held back by culture or conduct related risks.

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