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Trust in the ethics of the finance sector drops

Trust in the ethics of the finance sector drops

Continuing scandals and revelations from the financial services royal commission and inquiries are further eroding Australians’ trust in the ethical behaviour of companies, according to the findings of a new ethics index.

Governance Institute of Australia’s annual Ethics Index is derived from Governance Institute research which measures Australians’ expectations and perceptions of ethics across a wide range of sectors and industries.

The research, conceived by C3 Content and conducted by research firm Ipsos between 25 May and 7 June 2018, sampled around 1,000 people from across Australia.

Overall, Australians believed that Australian society was “somewhat ethical” (with an ethics index score of 35), while the overall importance of ethics received a score of 78.

While most sectors were found to have remained relatively constant, the corporate and finance sectors saw significant falls of 6 and 12 points, respectively, pulling down the overall index by 6 points, from 41 to 35.

The report for 2018 showed that the banking, finance and insurance sector now has the lowest ethics index score of all sectors, dropping from -3 to -15, with bank managers, financial planners and mortgage brokers seeing their net ethical score drop on last year.

Looking at the banking, finance and insurance sector, it was found that bank managers, financial planners and mortgage brokers all saw their net ethical score drop this year, with brokers suffering the greatest drop in figures, from -3 last year to -12 this year.

Only accountants (net ethical score of 31) and tax agents (18) had a positive net score in the sector this year.

According to the GIA’s chief executive, Steven Burrell, the drop in the trust in the ethical behaviours of the banking, finance and insurance sector comes down to the negative attention and cases of misconduct highlighted by the financial services royal commission.

“Australians expect high standards from their financial institutions, but our research suggests that these are far from being met,” the chief executive said.

“The community’s faith in some of the country’s biggest corporations has been sorely tested, following a turbulent 12 months in Australia’s banking finance and insurance industry. 

“The index suggests numerous high-profile scandals and the alarming corporate breaches being revealed on a daily basis by the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry, are undermining confidence in the sector,” Mr Burrell said.

He continued: “For the third year in a row, Banking, Finance and Insurance was the lowest category in the index. Its net score has dropped dramatically from last year with a score of -15.

“It has never before scored this badly; 55 per cent of respondents consider the sector unethical and only 28 per cent view it as ethical.”

In 2018, one in two Australians perceived life insurance companies as unethical, while payday lenders were seen as the most unethical (68 per cent).

“Australians perceive life insurance companies (-26) and retail banks (-17) as unethical, arguably influenced by Commissioner Hayne’s hearings,” the GIA CEO said. 

“In contrast, the Education (80) and Health (70) sectors continue to hold the highest perceived level of ethical behaviour.” 

The most trusted professions were found to be ambulance officers (88), fire fighters (85) and nurses (84), while the most ethical organisations were primary schools (71), medical charities (68) and pathology services (68).

“The message here is clear: those who are seen to be working selflessly for others are generally more trusted,” Mr Burrell said.

“If corporations like the banks and other financial institutions continue to be exposed for pursuing profit to the detriment of their customers, we can expect confidence in them to drop even further,” the GIA chief executive concluded.   

The survey found that the most important elements to ensure ethical conduct in society are “accountability”, followed by “transparency” and “highly ethical leaders”, along with “whistleblower protection”.

The top issues relating to unethical behaviour were “corruption”, “company tax avoidance” and “misleading and deceptive advertising”.

[Related: Consumers have less trust in the big four banks, study finds]

Trust in the ethics of the finance sector drops
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