Historic Survey of Financial Services Professionals Reveals Widespread Disregard for Ethics and an Alarming Use of Secrecy Policies and Agreements to Silence Employees

- Efforts to Reform Wall Street and Fleet Street May be Faltering -

NEW YORK, May 19, 2015 /PRNewswire/ -- Labaton Sucharow LLP, which established the nation's first practice exclusively dedicated to representing SEC whistleblowers, today announced the results of its collaborative survey with the University of Notre Dame's Mendoza College of Business: The Street, The Bull and The Crisis. [LINK]

The survey, the most expansive of its kind, polled more than 1,200 U.S. and U.K.-based financial services professionals to examine views on workplace ethics, the nexus between principles and profits, the state of industry leadership and confidence in financial regulators. With findings pointing to a continued disregard for ethical engagement and alarming new tactics to silence potential whistleblowers, the industry appears to be faltering in its reform efforts.

Profits, Not Principles

In one of the most concerning findings, 47 percent of total respondents feel it is likely that their competitors have engaged in illegal or unethical behavior to gain an edge. While nearly one in five professionals feels it is at least sometimes necessary for financial service professionals to engage in illegal or unethical activity in order to succeed, a full 32 percent feel compensation structures or bonus plans pressure employees to compromise ethical standards or violate the law. Of those surveyed, 27 percent don't agree that the industry puts the interests of clients first.

How severe is the ethical breakdown? An astonishing 22 percent of respondents say they have observed or have first-hand knowledge of actual wrongdoing in the workplace. In the U.K., 25 percent of respondents said they witnessed or had first-hand knowledge of wrongdoing. On an individual level, a quarter of those surveyed say they would likely engage in insider trading to make $10 million if there was no chance of being arrested. For U.K. respondents only, this figure is 32 percent, compared to 24 percent of respondents from the U.S.

"Most disappointing is the lack of change in many of the results when compared to surveys from previous years. Despite significant energy and efforts, it appears we need to continue to think about how to improve the culture of ethics in the financial services industry and most likely, in other sectors as well," said co-author Ann Tenbrunsel, Ph.D., David E. Gallo Professor of Business Ethics at the Mendoza College of Business and a co-author of Blind Spots: Why We Fail to Do What's Right and What to Do about It.

Secrecy Agreements Mask a Corrupt Culture

Perhaps the most disturbing findings relate to efforts to stifle reports of misconduct. Despite the unwaivable right to report potential wrongdoing to law enforcement, and the federal government's public effort to identify and punish organizations that illegally attempt to silence employees, a shocking 16 percent of those polled say their company's confidentiality policies and procedures prohibit reporting potential illegal or unethical activities directly to law enforcement. For respondents in the U.K., this figure surges to 21 percent, a full six percentage points higher than U.S. respondents.

One out of every 10 respondents report they have signed or have been asked to sign a confidentiality agreement that specifically prohibits reporting potential illegal or unethical activities directly to law enforcement. For those who make over $500,000 annually, that number rises to 25 percent. Of the total sample, 19 percent feel it is likely that their employer would retaliate against them for reporting wrongdoing.

"When corporate whistleblowers are prohibited, discouraged or retaliated against for reporting crime to cops, we should all be scared—very scared," said Jordan A. Thomas, Chair of the Whistleblower Representation Practice at Labaton Sucharow and co-author of the report. "The widespread, systematic and previously unknown scope of gag orders in the corporate world is a wake-up call. These tactics are particularly insidious because they keep local, state and federal law enforcement organizations in the dark about all types of wrongdoing—everything from large-scale corporate frauds, environmental accidents and public safety concerns."

Hope for the Future

According to both U.S. and U.K. survey respondents, financial regulators and law enforcement authorities play a critical role in detecting and deterring corruption. In fact, 61 percent of all respondents felt authorities in their country were at least somewhat effective at detecting, investigating and prosecuting securities violations.

Even more promising is the 89 percent of financial services professionals who indicate a willingness to report wrongdoing given the protections and incentives such as those offered by the SEC Whistleblower Program. This result—coupled with the high percentage of individuals who report awareness of wrongdoing in the workplace—offers the industry's best hope for reform. However, as 37 percent of respondents say they are still unaware of the program, it is imperative that regulatory and enforcement authorities and financial services firms step up efforts to educate employees and the public on the importance of reporting wrongdoing in the workplace, internally or externally.

"The SEC Whistleblower Program and other similar programs have effectively deputized all of us to report possible violations of law. As a result, in the U.S., the probability of detection has dramatically increased. Considering that 11 percent of SEC whistleblower tips have come from foreign nationals, and English citizens are the top submitters, the U.K. should ask itself whether the enforcement status quo is working and whether establishing a similar program would be in investors' interest," Thomas said.

Survey Methodology

Between December 22, 2014, and January 23, 2015, 1,223 participants using an email-based online panel. Respondents were employed in the financial services/banking industry in the U.S. and U.K. as account executives, financial/investment/wealth advisors, financial analysts, investment bankers, branch/operations management, and portfolio managers.