Houston, We Have an Ethical Problem.... / by Adam Howard

Here is a little-known fact.  Did you know Oliver Stone wrote Wall Street in an effort to make the viewing public aware of the unethical behaviour needed to succeed on Wall Street?

He hoped the movie would repulse people.  Turn the young against the finance industry as a vocation.

Much to his dismay, it had the opposite effect; Gordon Gekko became a popular anti-hero and the young flocked to finance.

Now, 30 years later, I am going to take a massive leap of faith here and make a big call; I think most people are really fed up with bad behaviour.

Bad behaviour at work; by our politicians; by our corporate leaders; by our friends; by our neighbours; by our children; by our fellow road users…..by everyone else.

Except us…right?  I mean, we are OK. We behave well…don’t we?

Well, maybe… but more on this later.

So, when I talk about bad behaviour, what am I really talking about?  I reckon what bothers us is a lack of ethics; a lack of ethical behaviour.

A good place for this rant to start is to define ethical behaviour, or ethics in general.

Ethics are defined by the Oxford Dictionary as “moral principles that govern a person’s behaviour…”

What about moral principles?  What are they?

Dictionary.com defines them as “relating to, or concerned with the principles or rules of right conduct, or the distinction between right and wrong…”

…the distinction between right and wrong…

Sounds simple, right?

Except it’s not.  It seems to catch people out all the time.  From the beginning of time to right now humans have had trouble distinguishing between right and wrong; choosing between a course of action that will either satisfy their desires or promote their interests, and the more morally sound option.

Things like Paris buggering off with Helen of Troy….Brutus and his boys knocking off Julius Caesar….Judas Iscariot giving Big JC the kiss of death for 30 pieces of silver….

What about some more recent examples? 

Bernie Madoff defrauding investors of about $65 Billion….Bondy buying Bell Group and then stealing all its $1.2 Billion in cash in 2 hours….Julia Gillard and Wayne Swann being mates with Kevin Rudd, then knifing him and bad-mouthing him….Malcolm Turnbull stating unequivocally that Tony Abbott had his full support, and then knifing him too….

And the above are BIG examples of unethical acts.  Smaller, less visible unethical behaviour is so commonplace, so ubiquitous that it’s not even worth noticing, let alone mentioning.

Sad, isn’t it?

And what makes this worse is the powers that be know this…they know it well.

An ancient work, The History of the Peloponnesian War, tells the tale of the war between the Spartan-led Peloponnesian League and the Athens-led Delian League.  Here is a link for an overview:

History of the Peloponnesian War

This tome was required reading for all students of Westpoint, the USA’s military academy for officers, until 2012 on the basis it teaches that the two biggest drivers of all human behaviour are greed and fear.

Greed – the promotion of one’s self interest at the expense of others; and

Fear – the fierce protection of one’s own self-interest to avoid the risk of loss.

And now, in the digital age, the age of the 24-hour news cycle, we are inundated with evidence of unethical behaviour on the part of our politicians, business leaders, entertainers, sports people and others.

All showing that the root cause of that unethical behaviour is either greed or fear.  Think I’m wrong?  Let’s have a run-down of some of the above:

Gillard and Swann knifing Rudd?  They were afraid they would lose the next election with Rudd in charge.

Bernie Madoff?  A greedy desire for a particular lifestyle and regard by his contemporaries, and then fear that he would lose both.

Turnbull and Abbott?  Fear of an election loss and a greedy hunger for power and control.

And we are fed up.   We want to see less naked self-interest from prominent people and more integrity (defined as the quality of being honest and having strong moral principles…).

Unfortunately, things seem to be set up in way to encourage the type of behaviour we don’t like.

Incentives seem to be in place that encourage some morally questionable behaviour.

What sort of incentives?  Well, bonus payments for exceeding sales targets, three-year election cycles with the threat of being thrown out of government for professional politicians, profits to be made from property development, high profits made from drug dealing, commission payments based on sales volumes, wages paid for performing jobs that are distasteful, high profits to be made from manufacturing weapons, high profits to be made from growing opium or tobacco….

Shall I go on?

Now, don’t get me wrong.  I love capitalism and I love democracy. 

Does anyone else remember what that ol’ ragamuffin Winston Churchill said about democracy?  That “It’s been said democracy is the worst form of government, except for all the others that have been tried.”

And capitalism? Well, I sell debt for a living so it would be somewhat disingenuous of me to call capitalism a failure.

It’s not the ideal system, but since it’s been around we have witnessed an epic improvement in health, wealth and wisdom across the human race.

But that needs to be balanced with something I have said in the past, and that’s what Adam Smith, the father of modern economics, said about self-interest and profit seeking.

He was a moral philosopher first and foremost and he said it was cool for people to pursue profit and self-interest, but that they should do so as long as they are displaying the highest virtues of justice, prudence, benevolence and self-command.

Here is a link to a piece that talks about Smith’s books, Theory of Moral Sentiments and Wealth of Nations.

Theory of Moral Sentiments and Wealth of Nations in a Nutshell

Smith regarded self-command as the highest virtue as it “enables us to restrain our passion for our own interests and to enhance our feelings for others.  But we only achieve self-command after the disapproval of others has led us to develop a habit of dampening our self-love.”

How about that??!!

So, we work out what the boundaries of acceptable behaviour are by making mistakes and getting smacked.

I could be wrong, and maybe I am insisting on standards that are too high, but given the Western world’s wealth and standards of education, shouldn’t we now expect and insist on that level of self-command from our leaders?

Maybe not from our sports stars or from everyone in our local community, or our kids, but certainly from our political and business leaders.

But then, if we want to be free of the kind of frustration most of us seem to experience daily, maybe we ALL need to learn a bit of self-command?

But back to our leaders….

I want to ask some questions here…and yes, they are loaded.

1.       How does everyone feel about the CEO of an organisation that uses its market position and power to negotiate terms with suppliers that put those suppliers out of business?

2.       What should be the fate of the CEO of a major organisation if that organisation is found to have made mistakes that have enabled financing of criminal activities to the tune of hundreds of millions of dollars?

3.       Would it be deemed appropriate, as the leader of a major organisation, to have an affair with a subordinate, and then see that subordinate’s employment terminated and her reputation destroyed in the media?


1.       Richard Goyder of Wesfarmers, Australia’s largest employer.  Widely regarded as one of best performing and most ethical CEOs in Australian business.  Retained his job and has just finished up at Wesfarmers earning $12.09 Million in his final year ($3.5 Million base salary and $8.59 Million on cash bonus and share entitlements).

2.       Ian Narev of CommBank, Australia’s largest bank and Australia’s largest tax payer. Retained his job and full base salary.  CommBank Board ruled that all senior executives were ineligible for their 2017 short term incentive payments (bonuses).

3.       Tim Worner, CEO of Seven West Media.  Retained his job, but was not considered for a 2017 short term incentive payment due to poor company performance.  Had his 2014 short term incentive payment reduced by $100k as a direct result of his employer becoming aware of the affair.

I know I have said this before, but it seems the single rule of the game is “make as much money as you can.”  Or, retain as much power as you can.

And yet we still regard ourselves as above that, as better than that.  Don’t we?  I mean, I fall into that trap.  I carry on in a holier-than-thou manner all the time.  Must sound like a complete tool…

And here is why; it’s called self-licensing.   Here is another link that explains what this is:


In a nutshell, self-licensing is where you feel OK with committing immoral acts because of the moral credit you have from another moral act.

But then, it doesn’t even have to be morality we are talking about.

It could be that you feel OK about eating a bag of lollies after going for a run, or that you state online that you support same-sex marriage but then discriminate in practice in other ways, or that you voted for Barrack Obama but then post online that supporters of “Black Lives Matter” should just get over it…..

So, there you have it.  We ALL appear to be caught in a vicious, rather than virtuous cycle.

I suspect our leaders also are victims of this pitfall, pursuing shareholder interests relentlessly, or convinced they are acting in the public interest, or protecting their family from the bitter truth.

And it’s ugly, and that’s why everyone is upset, because we know it’s ugly and we hate that it’s ugly but we don’t have any choice but to play the game because it’s the only game in town.

And after all, it’s just basic human nature…

I mean, that’s what Greg Medcraft, Chairman of the Australian Securities and Investment Commission (ASIC) said about finance brokers just a couple of weeks ago.

There has been a lot of heat on finance brokers over the past 2 years, with a lot of talk about and investigations into whether the way brokers are paid (commissions paid by the banks based on a percentage of loan size) incentivises them to work for or against their customer’s interests.

In a nutshell, if I get paid 0.60% commission for a loan, and the loan is $1 million, then I make $6,000 from that loan.  So, the larger the loan, the larger the payment.

Gregor was saying that this payment system leads to brokers recommending higher loans than they otherwise would.  I think his comments went something like “If I was a broker that’s what I’d do.  It’s human nature…”

And it is.  I have just shown above that it is.

But here is where I diverge from G-dog. 

I worked for 2 major banks.  I saw unethical behaviour daily.  On occasion, I was party to it.

Like what, you ask??

Oh, I don’t know…how about:

-          Charging customers establishment fees 5 times the usual amount simply because they asked for something to be done quickly?

-          Colluding with brokers to charge higher fees in return for convincing customers to fix rates for longer terms (fees create more revenue for the broker and fixed rates create more revenue for the bank).

-          Using misinformation, ignorance and fear to get customers to agree to fix rate loans.

-          Using the same to convince customers to hedge foreign exchange positions.

-          Not providing transparent pricing to customers on rates.

-          Forcing customers to have properties revalued at their expense simply due to changes to bank policy.

-          Forcing customers to refinance away to other banks, at their considerable expense, due to changes bank policy.

Now, I am no bank basher.  Far from it.  I am student of the banking industry and the first to state that without debt, we wouldn’t have any of the creature comforts we enjoy in the First World.

But what bugs me is unethical behaviour.

A guy I know and owe a lot to, whom I will call The Fisherman, told me not long after I left the banks and started doing this that I would have my Jerry Maguire moment…and I did.


Less customers, less money, more heart, more self-command.

So, my message to the illustrious Chairman of ASIC is “I hear you on the human nature bit, man.  But I think I got this self-command bit; I really do…”