Social Performance, Part 2

Third Federal Bank is a medium sized bank that was established in 1938 and it has a commitment to providing the best rates on their products. Ben and Gerome Stefanski established the bank and their son Mark A. Stefanski is the current CEO. It gained the status of a public company in 2007. They offer products such as savings, loans and mortgages at competitive rates and with excellent service in their 21 and 17 branches in Ohio and Florida respectively (Reavia, 2013). The company has employed almost 2000 people and registers an average yearly turnover of $300 million. It also operates a health social responsibility program that assists children without medical insurance.

Citizens Bank has a code of conduct detailing the ethical standards by which the company operates. It outlines that the company functions with integrity in protecting employees, customers and the communities that interact with the bank. The code provides guidelines for employees in making ethical decisions when they are faced with dilemmas. It also has a disclaimer that employees are required to use good judgment because the code may not outline all the possible ethical dilemmas. Citizens bank code of conduct outlined details for its application such as the people involved in offering guidance and the procedures for reporting violations, upholding confidentiality, addressing conflicts of interests, employees’ conduct while participating in outside activities, employees’ conduct in personal trading and investments, employees’ personal behavior, using company’s time and property, other employees obligations for managing accounts and records and a section that detail procedures for approval of the code of conduct by all parties (Citizens Financial Group, 2011).

Sumner Bank and Trust is another medium sized bank that emphasizes that a code of conduct plays a significant role in safeguarding its reputation. It outlines its code of conduct provides guidance in the exercise of personal judgment while interacting with customers and shareholders. It has a bank policy section detailing employees conduct in relation to trading and soliciting personal gifts courtesy of the bank, an exceptions section that details circumstances under which bank officials may accept valuables from the company’s customers or partners, a section detailing confidentiality, a section for conflict of interest, a section on disclosure and a section on compliance (Sumner Bank & Trust, 2007).

Heritage Bank and Trust capitalizes on maintaining public trust as the most important factor in keeping a reputation in abiding to regulations for financial institutions. Its code of conduct clusters issues such as confidentiality, receiving gifts, preferential treatment, use of company property, documenting payments and transactions and personal relationships under the section on policies on legal and Ethical Standards. Its other sections include conflict of interest, securities and disclosures, a section detailing competition and compliance to antitrust laws and finally a section on administration of the code of conduct, reporting breaches and amendment (Heritage Bank & Trust, 2013).

Ethical challenges affect financial institutions in numerous ways. The most challenging ethical issue for banks is in representatives upholding confidentiality, avoiding conflict of interest, compliance to competition and antitrust laws and disclosures. Codes of conduct work to assist representatives to exercise integrity, honesty, impartiality and refrain from preferential treatment to any person in business operations. Third Federal Bank‘s code of conduct shall have sections that cover these aspects to promote public trust in the company and retain its reputation as a law abiding institution.

The conduct shall have a confidentiality section that outlines employees’ duty to safeguard information obtained from the company. Employees will safeguard customer information such as social security numbers by only disclosing such information to authorized people. They will also disclose financial information in appropriate ways and abide by consumer privacy policy that requires all sensitive and confidential information is attended to in appropriate ways. This will enhance the ethics program because the federal and state law requires that customer and financial information be kept confidential.

Competitor interaction, compliance with antitrust laws and securities section of the code of conduct requires that Third Federal Bank representatives keep accurate books, records and accounts that detail transactions and assets of the bank. It will also require them abide with the prevailing tax laws and to present truthful financial and accounting information. It will also require representatives to engage competitors in fairness and without colluding with them to unlawfully control prices or disclosing future plans of the company. The company is also required to abide by antitrust laws by ensuring that customers are not compelled to obtain extra services from the bank or from another bank or obtain other forms of services or products from competitors.

Third Federal Bank shall have a section detailing conflict of interest and disclosure terms. Employees are required to refrain from participating in transactions with people that they have financial interests with or with close friends and relatives. Employees are also required to refrain from outside activities such as taking employment with the banks competitor, serving as accountants for the bank, using the bank equipment and facilities for personal gain and other activities that are perceived to be in conflict with the Third Federal Bank. Regarding disclosure, employees are required to disclose all gifts that exceed $25 received due to their business and friendships with customers and competitors. This will ensure the bank promotes fairness in all its dealings in conformity with financial regulations

The last section outlines compliance where various efforts shall be made to ensure that employees comply with the code of conduct. All employees must submit a written acknowledgement and declaration to abide by its standards. Ethics and Compliance officers in coordination with the human resources top officials shall also organize and conduct periodic trainings to foster a strong ethical culture within the bank. A strong ethical culture is essential in fostering compliance through deterrence and rewards for good conduct.

The ethics program is influenced by chapter eight of the sentencing guidelines that outlines that fraud, violation of tax laws and breaches of antitrust laws are some of the applicable violations in the financial services industry (Desio, 2013). It is very important to establish clauses that address each of these issues as the guidelines require organizations to encourage compliance with the set laws or risk facing various forms of punishment. It was also influenced by the knowledge that companies with self-policing mechanisms are less guilty and they get lower fines. It is important to establish a compliance program that also encourages the representatives to cooperate during investigations and practice diligence to identify felonies (Murphy, 2002).

The guidelines also influenced the code of conduct to set procedures to deter criminal activity, ensure that top level executives participate in oversight, and ensure training of employees on compliance programs, establishing auditing systems to safeguard against recurrence and its effective enforcement (Murphy, 2002). The code of conduct is also in the spirit of safeguarding innocent people from harm that emanate from misconduct by companies.

One of the anticipated problems in the implementation of the code of conduct is in the area of self-reporting. This is because many people are fearful about losing their employment and other benefits when they report felonies. The best way to address this challenge is through the establishment of a dedicated line where individuals can anonymously whistle blow. Professional compliance and ethics officials shall handle the reported cases with utmost discretion. This will encourage compliance because people can report without fear of retaliation.

Another setback in the implementation of the code of ethics is recurrence of similar offences. There is a tendency or temptation for people to engage in an offence that has been committed before such as fraud or non-disclosure in the hope of covering the trails better than the predecessors. To counteract the recurrence, of such activities Third Federal Bank shall establish systems to periodically monitor and audit the company’s operations to act as a deterrent. It will also engage in quarterly code of conduct trainings to instill ethical values among its representatives.

The code of conduct will remain relevant amidst numerous economic, political, cultural and technological changes. This will be realized through vigorous activities to embed the compliance program as the most important aspect of the company’s organizational culture. There shall be a new department staffed with compliance and ethics officials that will coordinate their work with the human resources department to instill a strong ethics program. This is will foster a perception that employees work in a strong ethical culture and promote integrity among the company’s representatives.

References

Citizens Financial Group. (2011, March 28). CFG Code of Business Conduct and Ethics. Retrieved November 26, 2013, from Citizens Financial Group: http://www.citizensbank.com/pdf/code_of_ethics.pdf

Desio, P. (2013). An Overview of the Organizational Guidelines. Retrieved November 26, 2013, from United States Sentensing Commission: http://www.ussc.gov/Guidelines/Organizational_Guidelines/ORGOVERVIEW.pdf

Heritage Bank & Trust. (2013). Code of Conduct. Retrieved November 26, 2013, from Heritage Bank & Trust: http://www.heritagebankandtrust.com/codeOfEthics.aspx

Murphy, D. E. (2002). The Federal Sentencing Guidelines for Organizations: A Decade of Promoting Compliance and Ethics. Iowa Law Review, 608-719.

Reavia, D. (2013, September 5). Third Federal Savings and Loan Celebrates 75 Years by Ringing the NASDAQ Stock Market Closing Bell. Retrieved November 26, 2013, from Market Wathch: http://www.marketwatch.com/story/third-federal-savings-and-loan-celebrates-75-years-by-ringing-the-nasdaq-stock-market-closing-bell-2013-09-05

Sumner Bank & Trust. (2007, June 11). Code of Conduct. Retrieved November 26, 2013, from Sumner Bank & Trust: http://www.sumnerbankandtrust.com/codeofconduct.pdf

 

 

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