Business culture and dishonesty in the banking industry

Journal name:
Nature
Volume:
516,
Pages:
86–89
Date published:
DOI:
doi:10.1038/nature13977
Received
Accepted
Published online

Trust in others’ honesty is a key component of the long-term performance of firms, industries, and even whole countries1, 2, 3, 4. However, in recent years, numerous scandals involving fraud have undermined confidence in the financial industry5, 6, 7. Contemporary commentators have attributed these scandals to the financial sector’s business culture8, 9, 10, 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.

At a glance

Figures

  1. Distribution of earnings in the coin tossing task claimed by the bank employees.
    Figure 1: Distribution of earnings in the coin tossing task claimed by the bank employees.

    a, b, Each successful coin toss yielded approximately $20. a, Distribution of earnings in the control condition in comparison to the binomial distribution implied by honest reporting. On average, bank employees reported 51.6% successful coin flips, which is not significantly different from 50% (P = 0.415, two-sided t-test; n = 67). b, Distribution of earnings in the professional identity condition in comparison to the binomial distribution. Bank employees in the professional identity condition reported 58.2% successful coin flips, which is significantly above chance (P = 0.002, two-sided t-test; n = 61) and significantly higher than the reported success rate in the control group (P = 0.033, two-sided rank-sum test; n = 128).

  2. Professional identity, materialism and cheating.
    Figure 2: Professional identity, materialism and cheating.

    a, Materialism measured by the extent to which bank employees endorse the statement “Social status is primarily determined by financial success” on a scale from 1 (not at all agree) to 7 (fully agree). Subjects in the professional identity condition show a significantly stronger endorsement of this statement (P = 0.034, two-sided rank-sum test; n = 128). b, Percentage of successful coin flips for participants with a below-median or median level of materialism compared to those with an above-median level of materialism. Above-median subjects are substantially more dishonest (P = 0.010, two-sided rank-sum test; n = 128). Error bars indicate standard error of the mean (s.e.m.).

  3. Dishonest behaviour and beliefs about dishonest behaviour of different social groups.
    Figure 3: Dishonest behaviour and beliefs about dishonest behaviour of different social groups.

    a, Comparison of treatment effects in the coin tossing task between bank employees, non-banking employees and students. The salience of professional identity caused an increase in dishonest behaviour in bank employees (P = 0.033, two-sided rank-sum test, n = 128). By contrast, no significant treatment effects were found in non-banking employees (P = 0.128, two-sided rank-sum test, n = 133) and students (P = 0.390, two-sided rank-sum test, n = 222). b, Results of a survey of individuals from the general population. Participants guessed the reported percentage of successful coin flips of either physicians (n = 44), bank employees (n = 48), prison inmates (n = 45) or the general population (n = 46). Bank employees are perceived to be less honest than physicians (P = 0.005, two-sided rank-sum test) and people from the general population (P = 0.080, two-sided rank-sum test). Bank employees are believed to behave about as dishonestly as prison inmates (P = 0.558, two-sided rank-sum test). Error bars indicate s.e.m.

  4. The impact of professional identity on bank employees/' intrinsic competitiveness.
    Extended Data Fig. 1: The impact of professional identity on bank employees’ intrinsic competitiveness.

    Competitiveness is measured by the bank employees’ answers to the question “How important is it to you to be the best at what you do?” on a scale from 1 (not at all important) to 7 (very important). We find no significant difference in competitiveness between the professional identity and the control condition (P = 0.861, two-sided rank-sum test, n = 128). Error bars indicate s.e.m.

  5. Bank employees/' beliefs about other bank employees/' percentage of successful coin flips.
    Extended Data Fig. 2: Bank employees’ beliefs about other bank employees’ percentage of successful coin flips.

    Incentivized belief elicitation experiment with bank employees. The professional identity condition had no significant influence on beliefs (P = 0.921, two-sided rank-sum test, n = 142). Error bars indicate s.e.m.

  6. Distribution of earnings in the coin tossing task claimed by the non-banking employees.
    Extended Data Fig. 3: Distribution of earnings in the coin tossing task claimed by the non-banking employees.

    a, b, Each successful coin toss yielded approximately $20. a, Distribution of earnings in the control condition and binomial distribution (implied by honest reporting). b, Distribution of earnings in the professional identity condition and binomial distribution. The rate of successful coin flips is 55.8% (12% misreporting) in the professional identity condition, and 59.8% (20% misreporting) in the control condition, which is not significantly different (P = 0.128, two-sided rank-sum test, n = 133).

  7. Distribution of earnings in the coin tossing task claimed by the students.
    Extended Data Fig. 4: Distribution of earnings in the coin tossing task claimed by the students.

    a, b, Each successful coin toss yielded approximately $5. a, Distribution of earnings in the control condition and binomial distribution (implied by honest reporting). b, Distribution of earnings in the banking condition and binomial distribution. The rate of successful coin flips is 57.9% (16% misreporting) in the control condition and 56.4% (13% misreporting) in the banking condition, which is not significantly different (P = 0.390, two-sided rank-sum test, n = 222).

  8. Gallup survey of honesty standards of people in the banking industry.
    Extended Data Fig. 5: Gallup survey of honesty standards of people in the banking industry.

    Fraction of US citizens thinking that bankers have very low or low honesty or ethical standards from 1977 to 2013. This graph is an interpretation of data compiled by Gallup, Inc. However, Gallup, Inc. had no part in the creation of this graphic interpretation.

Tables

  1. Effect of professional identity on cheating in bank employees
    Extended Data Table 1: Effect of professional identity on cheating in bank employees
  2. Effect of professional identity/banking condition on cheating in bank and non-banking employees/students
    Extended Data Table 2: Effect of professional identity/banking condition on cheating in bank and non-banking employees/students
  3. Competitiveness, professional identity and cheating in bank employees
    Extended Data Table 3: Competitiveness, professional identity and cheating in bank employees

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Author information

  1. These authors contributed equally to this work.

    • Alain Cohn &
    • Michel André Maréchal

Affiliations

  1. Department of Economics, University of Zurich, 8006 Zurich, Switzerland

    • Alain Cohn,
    • Ernst Fehr &
    • Michel André Maréchal

Contributions

A.C. and M.A.M. developed the research idea; A.C., E.F. and M.A.M. designed the study; A.C. and M.A.M. conducted the experiments, and analysed data. A.C., E.F. and M.A.M. wrote the manuscript.

Competing financial interests

The authors declare no competing financial interests.

Corresponding authors

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Author details

Extended data figures and tables

Extended Data Figures

  1. Extended Data Figure 1: The impact of professional identity on bank employees’ intrinsic competitiveness. (113 KB)

    Competitiveness is measured by the bank employees’ answers to the question “How important is it to you to be the best at what you do?” on a scale from 1 (not at all important) to 7 (very important). We find no significant difference in competitiveness between the professional identity and the control condition (P = 0.861, two-sided rank-sum test, n = 128). Error bars indicate s.e.m.

  2. Extended Data Figure 2: Bank employees’ beliefs about other bank employees’ percentage of successful coin flips. (88 KB)

    Incentivized belief elicitation experiment with bank employees. The professional identity condition had no significant influence on beliefs (P = 0.921, two-sided rank-sum test, n = 142). Error bars indicate s.e.m.

  3. Extended Data Figure 3: Distribution of earnings in the coin tossing task claimed by the non-banking employees. (98 KB)

    a, b, Each successful coin toss yielded approximately $20. a, Distribution of earnings in the control condition and binomial distribution (implied by honest reporting). b, Distribution of earnings in the professional identity condition and binomial distribution. The rate of successful coin flips is 55.8% (12% misreporting) in the professional identity condition, and 59.8% (20% misreporting) in the control condition, which is not significantly different (P = 0.128, two-sided rank-sum test, n = 133).

  4. Extended Data Figure 4: Distribution of earnings in the coin tossing task claimed by the students. (89 KB)

    a, b, Each successful coin toss yielded approximately $5. a, Distribution of earnings in the control condition and binomial distribution (implied by honest reporting). b, Distribution of earnings in the banking condition and binomial distribution. The rate of successful coin flips is 57.9% (16% misreporting) in the control condition and 56.4% (13% misreporting) in the banking condition, which is not significantly different (P = 0.390, two-sided rank-sum test, n = 222).

  5. Extended Data Figure 5: Gallup survey of honesty standards of people in the banking industry. (99 KB)

    Fraction of US citizens thinking that bankers have very low or low honesty or ethical standards from 1977 to 2013. This graph is an interpretation of data compiled by Gallup, Inc. However, Gallup, Inc. had no part in the creation of this graphic interpretation.

Extended Data Tables

  1. Extended Data Table 1: Effect of professional identity on cheating in bank employees (86 KB)
  2. Extended Data Table 2: Effect of professional identity/banking condition on cheating in bank and non-banking employees/students (74 KB)
  3. Extended Data Table 3: Competitiveness, professional identity and cheating in bank employees (65 KB)

Supplementary information

PDF files

  1. Supplementary Information (1014 KB)

    This file contains Supplementary Methods, Supplementary Analysis, Supplementary Robustness Checks, Supplementary Materials, Supplementary Tables 1-8 and additional references.

Additional data