An explanation for the emerging shift from compliance culture to ethical culture in the financial industry

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dc.contributor.advisorRossouw, Deonen_ZA
dc.contributor.authorBezuidenhout, Stephanen_ZA
dc.contributor.otherStellenbosch University. Faculty of Arts and Social Sciences. Dept. of Philosophy.en_ZA
dc.date.accessioned2022-05-24T11:47:24Zen_ZA
dc.date.accessioned2023-01-16T12:46:37Zen_ZA
dc.date.available2022-05-24T11:47:24Zen_ZA
dc.date.available2023-01-16T12:46:37Zen_ZA
dc.date.issued2022-12en_ZA
dc.descriptionThesis (MPhil) -- Stellenbosch University, 2022.en_ZA
dc.description.abstractENGLISH ABSTRACT: Financial services are an important and influential sector of every economy, contributing significantly to global economic activity. A stable and sustainable financial sector is, therefore, critical for global economic growth and socio-economic development. To explain the emerging shift from a compliance culture to an ethical culture in financial services, the study begins with a literature review of the corporate scandals involving Enron and WorldCom. Although Enron and WorldCom were not in the financial services sector and certainly not the first corporate failures, they marked the beginning of a period of significant regulatory reform by supervisors and regulators in response to ongoing systemic and corporate failures. The study continues its literature review of how, despite regulatory efforts to prevent future scandals and losses through reforms, the financial services sector’s conduct has remained largely unchanged. Financial institutions' sole focus on profit, distorted incentives for bankers, and regulators' restrictive and narrow approach to reforms have all contributed to the state of the sector. In order to deal with the restrictive reforms, the study reviews how financial institutions developed sophisticated compliance programmes designed to mitigate the risk of regulatory sanction and reputational harm. The compliance culture that evolved within these institutions proved ineffective, resulting in significant unintended consequences and an inability to adequately address poor governance and prevent corporate failures in a sustainable way. The study examines these inefficiencies, their effects, and how regulators proposed addressing the compliance culture's 'dark side'. The study further explains the motivations for the emerging shift from a compliance culture to an ethical culture against the background of how regulators and industry groups have started to call on the financial services industry to reconsider its approach and embrace an ethical culture. The study finds that regulatory frameworks alone are insufficient to address the sector's unethical practices, and approaches that promote ethical behaviour of financial institutions are necessary. In conclusion, this study considers the advantages for organisations that make the transformation to an ethical culture.en_ZA
dc.description.abstractAFRIKAANS OPSOMMING: Finansiële dienste is 'n belangrike en invloedryke sektor van elke ekonomie, wat aansienlik bydra tot globale ekonomiese aktiwiteit. ’n Stabiele en volhoubare finansiële dienste sektor is daarom van kritieke belang vir globale ekonomiese groei en sosio-ekonomiese ontwikkeling. Om die ontluikende verskuiwing van 'n voldoeningskultuur na 'n etiese kultuur te verduidelik, begin die studie met 'n literatuuroorsig van die korporatiewe skandale waarby Enron en WorldCom betrokke was. Alhoewel Enron en WorldCom nie in die finansiëledienste sektor en ook nie die eerste korporatiewe mislukkings was nie, was dit egter die begin van 'n tydperk van beduidende regulatoriese hervorming deur toesighouers en reguleerders in reaksie op voortdurende sistemiese en korporatiewe mislukkings. Die studie gaan voort met ‘n literatuuroorsig van hoe, ten spyte van regulatoriese pogings om toekomstige skandale en verliese deur hierdie hervormings te voorkom, die finansiële dienste sektor se gedrag grootliks onveranderd gebly het. Finansiële instellings se uitsluitlike fokus op wins, verwronge aansporings vir bankiers, en reguleerders se beperkende en eng benadering tot hervormings het alles bygedra tot die toestand van die sektor. Om hierdie beperkende hervormings te hanteer, ondersoek die studie die gesofistikeerde nakomingsprogramme wat finansiële instellings ontwikkel het om die risiko van regulatoriese sanksies en reputasieskade te beperk. Die voldoeningskultuur wat binne hierdie instellings ontwikkel het, blyk ondoeltreffend te wees en het gelei tot beduidende onbedoelde gevolge. Hierdie studie ondersoek verder hierdie ondoeltreffendheid, die uitwerking daarvan en hoe reguleerders voorgestel het om die nakomingskultuur se 'donker kant' aan te spreek. Die studie bied ‘n verduideliking vir die motiverings agter die ontluikende verskuiwing van 'n voldoeningskultuur na 'n etiese kultuur aan teen die agtergrond van reguleerders en bedryfsgroepe wat 'n beroep op die finansiëledienste sektor begin doen het om sy benadering te heroorweeg en 'n etiese kultuur te omhels. Die studie bevind gevolglik dat aangesien regulatoriese raamwerke, alleen, onvoldoende blyk te wees, is benaderings nodig wat finansiële instellings se etiese kultuur bevorder. Ten slotte verken die studie ook die voordele vir organisasies wat die verskuiwing na ‘n etiese kultuur sou maak.af_ZA
dc.description.versionMastersen_ZA
dc.format.extent72 pagesen_ZA
dc.identifier.urihttp://hdl.handle.net/10019.1/126031en_ZA
dc.language.isoen_ZAen_ZA
dc.publisherStellenbosch : Stellenbosch Universityen_ZA
dc.rights.holderStellenbosch Universityen_ZA
dc.subjectFinancial institutionsen_ZA
dc.subjectBusiness failuresen_ZA
dc.subjectIndustries -- Social aspectsen_ZA
dc.subjectBusiness enterprises -- Finance -- Law and legislationen_ZA
dc.subjectUCTDen_ZA
dc.titleAn explanation for the emerging shift from compliance culture to ethical culture in the financial industryen_ZA
dc.typeThesisen_ZA
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