Bankers are not inherently dishonest; rather, the banking culture leads them to act dishonestly, research suggests.
Using a sample of 208 employees—128 at a large international bank, another 80 from other banks—Chicago Booth’s Alain Cohn, with the University of Zurich’s Ernst Fehr and Michel Andre Maréchal, tested whether the employees’ level of honesty changed when the “banker” identity was salient.
The researchers asked the employees to perform a task, for which they could earn up to $200. Beforehand, individuals in the treatment group were asked questions about their professional backgrounds, which brought their professional identity to the foreground. The researchers asked the other group, the control group, questions unrelated to their professional life.
In the task, each employee performed 10 coin tosses without supervision, and reported their outcomes online. Before each toss, employees were told that one outcome—sometimes heads, sometimes tails—would earn them $20.
The control group appeared to report the results of their coin tosses honestly, saying they had the desired outcome roughly half the time, as random chance—a benchmark of honesty—would predict. However the participants who had been prompted to think about their professional background were considerably less honest: these employees reported a 58.2 percent success rate.
Those in core banking business units such as private banking, trading, investment management, and asset management were more likely to cheat than those in support roles, such as human-resource or risk-management.
The authors explored several possible reasons why the salience of professional identity could have made the banking subjects behave less honestly, and conclude the main reason has to do with the subjects’ beliefs about the determinants of social status. Subjects in the treatment group tended to agree more strongly than those in the control group that social status is primarily determined by financial success. Believing this, they were more willing than others, on average, to sacrifice honesty to achieve financial success. “These findings substantiate current concerns about the influence of materialistic values in the banking sector,” the researchers write.
The researchers propose changes to banking industry norms: bank employees could take an oath reminding them of their responsibility to society, similar to physicians’ Hippocratic Oath, and undergo ethics training. Most importantly, the researchers say, banks should consider changing the financial incentives that encourage dishonest behavior.