Being ethical is a personal choice because the decision-making process involves evaluating and choosing among alternatives in a manner consistent with moral and ethical principles. Moreover, people arrive at ethical decisions by perceiving and eliminating unethical options before selecting the best alternative. Nonetheless, there is a wide-ranging debate about ethics within the banking industry with some arguing the lack of ethics is due to rogue trades while others view it as a consequence of the entire industry being rogue. This paper will review the Adoboli case to develop an in-depth understanding of the individual factors set out in models of ethical decision-making. The analysis will help explain how these and other factors may have caused Adoboli to make unethical decisions. The primary argument is that although the underlying organization culture and industry practices in banking can have a significant influence on an employees’ decision-making process, being unethical is a personal choice reinforced by individual factors that pertain to character, moral development, and psychological influences. The first section provides a brief overview of the individual factors in Adoboli case while the subsequent ones will critically review these factors as set out in models of ethical decision-making to explaining his actions.
Adoboli got his job as an analyst at UBS Group AG shortly after graduating. However, his career was short-lived and was soon branded as one of the most sophisticated fraudsters by the City of London Police (Crane and Matten, 2016, p.158). Although the media portrayed Adoboli as a lone trader who had committed fraud to enrich himself, a critical analysis reveals that he acted unethically at his job and may have not been to profit directly from the unauthorized trades. Nonetheless, Adoboli disregarded the individual factors set out in models of ethical decision-making and ended up accumulating $2.3 billion in losses for UBS due to his unethical decisions to engage in unauthorized trading (Crane and Matten, 2016, p. 158). Therefore, although Adoboli stood to gain indirectly from the higher bonus paid when the trades paid off, in reality, it was a simple case of choosing the unethical alternative to leverage illegal avenues to try and make his employer more money.
Adoboli’s unethical conduct earned him the third position in the all-time Rogue Trader Top 10. However, some critics such as Davis (2016, p. 23) argue that the lack of ethics in banking is reinforced by the rogue nature of the entire industry. Adoboli’s case partly supports Davis’s view because he hardly fits the stereotype of a fraud mastermind that the mainstream media portrays him to be. Instead, Adoboli was a young and ambitious trader who was revered as polite and loyal to his employer. Moreover, his landlord and neighbors spoke highly of him (Crane and Matten, 2016, p. 158). The fact that Adoboli had attended a private school and graduated from a respectable university (the University of Nottingham) suggests that he was cultured and not a criminal. Moreover, Jérôme Kerviel, who is currently at the top of the Rogue Trader Top list, notes that most employers in the banking industry are more likely to tacitly endorse such unethical trades as long as they are making profits but turn on the individuals responsible when losses are made. Therefore, it is likely that the lack of ethics in banking is reinforced by the rogue nature of the entire industry and not the personal choices made by employees such as Adoboli. Additionally, it was not the banks that blew the whistle on the unauthorized trades but rather an individual trader suggesting a level of complicity.
It is imperative to explore both sides of the wide-ranging debate by examining the alternative viewpoint in Adoboli’s case, which perceives the lack of ethics as being reinforced by individual factors that pertain to his character, moral development, and psychological influences rather than the moral and ethical lapses in the entire industry. This is partly because, at the time of the trading, he was the director of the bank’s Global Synthetic Equities Trading team based in London. Therefore, despite being in a position of power, the individual factors that pertain to Adoboli’s character, moral development and psychological influences did not prompt him to make an ethical decision. Consequently, the moral and ethical culture in the banking industry cannot be entirely responsible for the $ 2 billion dollars UBS rogue trader scandal because it was a result of Adoboli’s individual’s moral weakness that untimely determined his unethical actions as the bank’s trading director.
This section will critically review the individual factors in Adoboli’s case as set out in models of ethical decision-making to explain his actions. Ferrell and Fraedrich (2015, p. 22) developed a model to help identify the factors that cause professionals to act unethically (Figure 1). The author’s model of ethical decision making holds that people choose the ethical alternative based on individual and organizational factors as well as the intensity of the ethical issue. The model is significant in Adoboli’s case because it not only explores the individual factors but also other factors that may be at play such as organizational issues and the nature of the decision.
Figure 1. Shows Ferrell’s and Fraedrich’s models of ethical decision-making
Source: (FM Link, 2018)
Crane and Matten (2016, p. 148) further state that the individual factors set out in Ferrell’s and Fraedrich’s model of ethical decision-making helps explain why individuals such as Adoboli’s with exemplary jobs sometimes behave unethically. According to the model, there are three primary individual factors that reinforced Adoboli’s unethical personal choices, which include character, moral development, and psychological influences.
Character is defined as the combination of traits such as moral force, integrity, and empathy, which distinguish one’s nature from others. It is one of the main individual factors because it guides a person’s moral strength. The critical review conducted on Adoboli’s pattern of actions over time indicates that although he had a strong character, he lacked the moral strength necessary to make consistent ethical decisions. For example, Adoboli’s decision to engage in unauthorized trading was done over a long period of time and involved billions of dollars suggesting he was cognizant of his actions. Moreover, Adoboli had taken the necessary steps to conceal his actions rather than seek counsel from his superiors and find a solution to the problem. While the case review suggests Adoboli was viewed as an honest and respectful ambitious man who upholds the rights of others, this may not be the case when no one is watching because none of his neighbours, friends, and landlord knew about his duplicitous actions at the bank. Therefore, although the underlying organization culture and industry practices may have had a significant influence on Adoboli’s decision-making process, being unethical was a personal choice reinforced by his character.
Whether perceived as good or bad, Adoboli’s moral character is an individual factor which he took to his workplace every day. Crane and Matten (2016, p. 148) note that such factors have significant ethical implications on the people’s choices, especially within an organization. Therefore, although Adoboli’s moral character was perceived as good by those who were close to him, he exhibited a lack of ethical behavior, which was detrimental to his employer and career. Being caring, respectful, and mindful of other people is not enough to make an ethical decision-making, but rather moral character is essential in ensuring one takes the best ethical alternative. Therefore, Adoboli’s actions were reinforced by his lack of moral character.
The psychological influences include the individual factors that elicit one to take action and satisfy an inherent human need. These factors can have a significant impact on the set of moral principles that guide people’s ethical behavior. Psychological influences are often shaped by cultural practices, social norms, and religion among others and serve as a compass to direct how an individual should conduct themselves. Moreover, psychological influences help people make the decisions necessary to fulfil their obligations to their employer and society. Therefore, an employee’s perception towards his or her employer can have a significant impact on his decision-making process.
There are two main psychological influences that played a crucial role in Adoboli’s unethical decision making which include conformity and commitment. Firstly, conformity refers to compliance with the standards, rules, and norms of doing things. Therefore, employees who conform to the workplace are more likely to exhibit behaviors that are in accordance with the organization’s accepted conventions. However, in today’s highly globalized and competitive economy, employees no longer strive to conform, but strive to not be seen as different and valuable than the majority of the workforce. An effective strategy is one that guarantees employees within the banking industry promotions and pay rises but also places them at a high risk of making unethical decisions in an attempt to please their employer. For example, Adoboli’s decision to engage in unauthorized trading was not emboldened by the desire to become rich but rather by the need to try and make his employer more money.
Moreover, employees in the banking industry are often victims of conformity because they are more likely to try to fit in rather than change the current systems and ways of doing things. Therefore, if engaging in unauthorized trading, filing false expense reports, or cutting corners among others was how most of UBS’ employees operated, the pressure on Adoboli to conform may have been great. According to the Moodys rating agency, there was an on-going weakness in UBS’ risk management with the then C.E.O Oswald Grübel advocating for an increase in risk-taking (Crane and Matten, 2016, p. 158). As a result, Adoboli who was responsible for the bank’s Global Synthetic Equities Trading team might not have felt restricted as a trader.
Secondly, commitment is closely linked to conformity because organizational members are required to remain devoted to the set goals often at the expense of their needs. Therefore, Adoboli may have been made to conform and take the risk of engaging in unauthorized trading since the top management at UBS believed its employee would be out of step with the bank’s goals if they failed to embrace a culture of high-risk taking.
Finally, moral development is an essential individual factor that involves the sophistication that a person has when trying to discern whether an action is morally and ethically right or not. According to Bandura’s (2014, p. 68) theory of moral development, people undergo a series of stages throughout their life with each reinforcing their ability to reason about morally good and bad decisions (Figure 2).
Figure 2. Shows Bandura’s theory of moral development
Source: (Bandura, 2014, p. 68)
Figure 2 show that people are more capable of understanding the broader impacts of their decisions when their level of thinking is highly developed. Adoboli joined UBS when he was fresh from campus and rose among the ranks to become a team leader. Moreover, he was young, which places him in the transitioning phases between the early and middle stages in the theory of moral development (Figure 2). Therefore, Adoboli’s reasoning involved judging between right and wrong based solely on how his co-workers and employer would respond rather than how it affects him or the society at large. As a result, his unethical actions lead to negative consequences for himself, the society, as well as his employer.
While the underlying organization culture and industry practices in banking are some of the other factors that had a significant influence on Adoboli’s decision-making process, being unethical was his personal choice, which was reinforced by individual factors that pertain to character, moral development, and psychological influences. These factors are set out in various models of ethical decision-making and they help explain why Adoboli decided to engage in unethical and unauthorized trading. Ferrell’s and Fraedrich’s model indicate that a weak moral character, psychological influences related to conformity and commitment to Adoboli’s employer, as well as a lack of moral development may have been the primary reasons for his actions.
Bandura, A., 2014. Social cognitive theory of moral thought and action. In Handbook of moral behavior and development. Philadelphia: Psychology Press.
Crane, A. and Matten, D., 2016. Business ethics: Managing corporate citizenship and sustainability in the age of globalization. Oxford: Oxford University Press.
Davis, E.P., 2016. Ethics and banking; comparing an Economics and a Christian perspective. [online] Available at: <https://bura.brunel.ac.uk/handle/2438/13909> [Accessed 1 November 2018].
Ferrell, O.C. and Fraedrich, J., 2015. Business ethics: Ethical decision making & cases. Scarborough, ON: Nelson Education.
FM Link, 2018. An ethical decision-making model. Fmlink. Available at: <https://fmlink.com/articles/ethical-decision-making-model/>[Accessed 1 November 2018].