Financial execs: Wall St. corruption getting worse
(MoneyWatch) Wall Street's ethics have gotten worse since its self-serving deals brought the economy to the brink of collapse five years ago, according to a new survey.
Nearly 25 percent of financial services employees say they would engage in insider trading, according to Labaton Sucharow LLP's second annual survey of ethics among those companies. (Labaton Sucharow is a law firm that provides representation for whistleblowers.) That is a 9 percentage point increase over the previous year's survey. In that time the tighter rules proposed in the Dodd-Frank financial regulation law have been stalled by lobbying in Congress.
Close to a quarter of those surveyed said they had observed or had firsthand knowledge of wrongdoing in the workplace. Even more troubling: The more experience a respondent had, the more corruption he or she reported witnessing. Nearly 30 percent of those with more than 20 years' experience said they had seen misconduct. That's 9 percentage points higher than those with 10 years or less in the field.
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There is also a widespread belief that corruption is a necessary part of their jobs: 29 percent said they might need to engage in illegal or unethical behavior to be get ahead in their careers. That is a 17 percentage point increase over last year's survey. Many also believe this is built into how you earn raises and bonuses. More than 26 percent said the compensation or bonus plans at their companies give employees an incentive to compromise ethical standards or violate the law.
Surprisingly, in response to each of these questions, younger professionals on Wall Street were significantly more likely to be aware, accept and engage in illegal or unethical conduct than their more senior colleagues.
For example, 36 percent of respondents with 10 years or less experience said they may have to engage in misconduct to get ahead. That's twice as many as those with 20 or more years' experience. There was a similar divide when it came to assessing corruption in their own companies. About 35 percent of those with 10 years or less experience believed it was likely co-workers engaged in misconduct, compared to 16 percent of professionals with more than 20 years' experience
According to the report's authors, "A particularly troubling and consistent finding throughout the survey is that Wall Street's future leaders -- the young professionals who will one day assume control of the trillions of dollars that the industry manages -- have lost their moral compass, accept corporate wrongdoing as a necessary evil and fear reporting this misconduct. This is a ticking economic time bomb that responsible organizations must immediately defuse or pay a heavy price."
Many financial professionals also say that the corporate culture is biased against doing the right thing. Nearly a quarter fear retaliation if they were to report wrongdoing in the workplace; 17 percent said top executives in their firm would look the other way if they suspected a top performer had engaged in insider trading; and 15 percent doubted these executives would report insider trading violations if a top performer was involved.
On a positive note, there is a growing perception that government regulators are doing a better job. Some 62 percent said the Securities and Exchange Commission is effective at detecting, investigating and prosecuting misconduct, and 57 percent felt the same way about the Financial Industry Regulatory Authority. Both of these numbers are up by nearly 100 percent since the previous year's survey.
