Business culture and dishonesty in the banking industry

Trust in others’ honesty is a key component of the long-term performance of firms, industries, and even whole countries.  However, in recent years, numerous scandals involving fraud have undermined confidence in the financial industry.  Contemporary commentators have attributed these scandals to the financial sector’s business culture, but no scientific evidence supports this claim.  Here we show that employees of a large, international bank behave, on average, honestly in a control condition.  However, when their professional identity as bank employees is rendered salient, a significant proportion of them become dishonest.  This effect is specific to bank employees because control experiments with employees from other industries and with students show that they do not become more dishonest when their professional identity or bank-related items are rendered salient.  Our results thus suggest that the prevailing business culture in the banking industry weakens and undermines the honesty norm, implying that measures to re-establish an honest culture are very important. Our results suggest that banks should encourage honest behaviours by changing the norms associated with their workers’ professional identity. A norm change also requires that companies removefinancial incentives that reward employeesfor dishonest behaviours.  In addition, existing research suggests that ethics reminders may promote compliance with the honesty norm. The use of ethics reminders requires a detailed analysis of work routines to find out where and when employees make critical decisions regarding norm obedience, so that normative demands can be rendered salient at the right time and place. These measures may be an important step towards fostering desirable and sustainable changes in business culture.