Business Ethics: An Analysis of the Adoboli Case and its Implications

This report analyzes the 2011 UBS rogue trader scandal involving Kweku Adoboli, examining the breakdown of business ethics and unethical decision-making within the financial institution. It explores the individual factors influencing Adoboli's actions, including personal goals, values, knowledge, personality, and morals, as well as the impact of organizational culture. The report compares the Adoboli case with similar instances of rogue trading and discusses the role of risk management and the need for revised compensation systems to encourage ethical conduct. The analysis highlights the importance of critical thinking, ethical leadership, and the creation of a culture that discourages unethical behavior to prevent future financial misconduct and protect stakeholders' trust. The report emphasizes the need for financial institutions to promote ethical behavior and scrutinize decision-making processes to avoid self-interest and ensure the safety of funds.

Running head: BUSINESS ETHICS
Business Ethics
Name of the Student
Name of the University
Author Note

1BUSINESS ETHICS
The substantial facts of the case was with regard to the 2011 UBS rogue trader
scandal, which resulted into a loss amounting to exceeding $2 billion US dollars at the Swiss
Bank UBS (Bbc.com 2018). This case was based on the conduct of business ethics. The
professional conduct and ethics in the business area can be explained in this context to
analyse the case. This was the consequence of an unauthorised trade performance by Kweku
Adoboli, who was the director of the Global Synthetic Equities Trading Team of the Bank in
London. The CEO of UBS and the co-heads of Global Equities at UBS resigned, on assuming
the responsibility for the unauthorised trade incident. Later it was emerged that UBS failed to
take any step after they received a warning that was issued by their computer system about
the trade practice by Adoboli (Shirbon 2018). Though he was released on a conditional bail,
but he was convicted later for the two counts of fraud and false accounting. He appealed
against the sentence and conviction. The ethical break down in Adoboli case was the breach
of business ethics as he his actions and behaviours are in violation of the business standard
and set of values. This study intends to discuss the Adoboli case in terms of the individual
factors set out in the model of unethical decision making. It further analyses the factors to
explain the action of Adoboli.
An UBS trader, Kweku Adoboli was ordered to deport from UK to his birth country
Ghana on the ground that Adoboli was a foreign criminal. In 2011, he was arrested for the
suspicion of fraud with regard to a loss of estimated $2 billion US Dollar (Moore 2018).The
38 year old trader Adoboli claimed himself as a British, as he had spent the most part of his
life and attended school in the United Kingdom before working in UBS. He was sentenced
for seven years jail in 2012 for alleged fraud (Ludlow 2018). He made an application for
overturning the order of deportation, which was brought against him. He lodged an
application for judicial review of the deportation order before the High Court claiming that
the Home Office unlawfully ordered him sentence. He had served sentence for three and half

2BUSINESS ETHICS
years for two accounts of fraud charges and then the deportation order was brought against
him. An example of a similar story was identified, when a rogue trader, Jerome Kerviel,
caused a loss to the second largest bank of France, of an amount of $7.1 billion. This incident
sent a shockwaves through the struggling economic market of Europe.
The condition was nothing but just an unethical behaviour flourishing beneath the
organisation. Ethical decision can be made under the conditions of certainty, uncertainty and
risk. The unethical decision making of an individual is motivated by several factors, such as:
personal morality, motivation, moral development and other personal factors. In the Adoboli
case, the individual factors which affect the unethical decision making are, knowledge,
personal goals, values, culture, personality and morals. Knowledge of a person determines the
type of ethical decision made by a person. The knowledge may include the academic and
positional awareness and skills of a person. It also includes a self-knowledge which prevents
a persons from a situation where conflict has occurred. It provides a person with a firmer idea
and capability to deal with the ethical dilemmas in work practices. Individual needs to
examine their cultural background while seeking out the knowledge associated with their
gender, race, class, age and others. If an individual has sufficient information or knowledge
of a thing, they are like to adopt and learn the information. Additionally, development of
knowledge about the attribute of subject are deemed to have an effect on the economic
decision (Cohn, Fehr and Maréchal 2014). If a person learns about the desirable characteristic
of a subject, they would value it more irrespective of how they used to value the subject. This
is how access to information affects the knowledge and the knowledge affects the ethical
decision making of an individual. Another important factor in this scenario is the personal
goals, which may cause differ in the behaviour of an individual. Personal values helps in
determining the goals and outcomes of the conduct. Goals are the outer expressions of the
personal values. Personal goals govern the behaviour, and also colour the way an individual

3BUSINESS ETHICS
responses to a situation. If the personal goal is influenced by ethics, that impacts the ethical
decision making of an individuals. Personal goals that is influenced by unprincipled ideas,
may have a reverse effect on decision making. Values as defined as a belief of an individual,
is also a significant factor that helps in ethical decision making. It helps to determine the way
an individual would perceive a particular situation. Values many be given to different subject
matter by different people, like safety, excitement and others (Crossan, Mazutis and Seijts
2013).Values may include ethical, social and ideological values and the ultimate choice
response. Value is an inherent substance in the individual that induces them to act in a
manner. It may be influenced but not regulated by anyone other than the individual. Value
can change over the time, and represent a significant impact on the decision making. Through
individual value, the culture can be defined. Corporate culture in this respect plays a
significant role to shape and influence the conduct of people. Culture has an affect over the
nature of the interactions within the organisation. It is influenced by the norms associated
with the behaviour, communication and management within the organisation (Craft 2013).
Improving the business culture can help in reducing misconduct in the organisation. The
employees who have a favourable perception towards the culture of the company, are less
likely to commit misconduct than the employees who are not favourable of the norms of the
company. Sense of morality can be provoked by conflicting goals. Organisational injustice
gives an opportunity to display the personality and morals of an individual. Individual needs
to infuse their morality and ethical personality in everyday activities and in order to achieve
that, the policies should be designed in a way to keep ethics at the top of the mind.
The factors like knowledge, personal goals, values, personality and morals had
affected the unethical decision making by Adoboli, where he was alleged to commit false and
fraud accounting to hide rogue trades. Adoboli had the risk of deportation for long but did not
take any steps to avoid it. To avoid the risk he should have become a British citizen prior

4BUSINESS ETHICS
before happening of this situation. Adoboli had been previously violated the trading rules and
served almost a half of a seven years sentence. In this case, the values of Adoboli were driven
away by his unethical sense of behaviour. He made such an approach that easily caused the
biggest loss in the history. Fear of punishment is an instinct value which resides within the
human being. Adoboli was drove off the attribute and engaged into unethical behaviour. It is
required for ethical decision making that the individual work for the goal of the organisation
rather than the personal goal. When the means of the individual are consistent with their
desired goals, their decision making shall be guided by ethics and value. Adoboli, in this
case, applied his personal goals above the goal of the Bank where he was the manager. As a
manager, it can be expected from Adoboli that he would act for the best interest of the
organisation and not for the self-interest. Here the principle of justice in the person has its
effect on the decision making of the person (Kuntz et al. 2013). Acting in an ethical way, is a
deliberate decision chosen by a man and requires critical thinking. Adoboli should have
involved in critical thought while making the two transaction, considering, the impact it
would have over the organisation. It was his responsibility as a manager to think about the
consequence if his conduct goes wrong. Organisational culture in this Adoboli case, helped
him taking unethical decision. He booked a fake deal to hide the risk he took up. As a result
he was declared as a master fraudster at the time of his trial. It can be observed from his
activities that he was the part of the culture of risk despite the fact that he was convicted
earlier for his conduct. The bank did not take an active part in bringing a change in the
culture of the company to discourage unethical behaviour. The money we give to bank, is
under the belief and trust that it will be safe with them. No matter how many times he was
convicted before the order of deportation, his obligation as the manager was to refrain from
committing such an act that can lead the organisation to loss. Despite of that, a global
institution should not be organised in such a way to impose the responsibility of the loss of $2

5BUSINESS ETHICS
billion US dollars upon only one individual. The organisation had no sufficient knowledge
and skill to prevent the risk of loss. As per the confession made by Adoboli, He had the urge
to take up risks, and in the meetings the manager kept on insisting the traders to increase the
profits by pushing the boundaries. Personality and moral of a person acts as a factor for
ethical decision making. Even though a decision is legal, it might not be ethical for an
organisation. As an investment manager it can be expected from Adoboli that he possess
morality to determine, whether his course of action comes under the acceptable standard of
professional behaviour, which has been outlined in the code of conduct of the organisation.
The other factors influencing rouge trading are the need of revision of activities to
ensure ethical behaviour and promotion of a culture to recognise the part of situational
influence. Firstly, financial institutions should review and rather restructure the compensation
system within the organisation so that the ethical conduct, and ethical decision making
procedure are rewarded (Scholten and Ellemers 2016). The organisation and managers need
to set up the kind of behaviour they expect their employees to observe and exhibit. They
should also consider the system of compensation or rewards payment that would motivate or
encourage the behaviour of the employees. Secondly, the unusual and rare situations helps us
to make ethical decision and take prompt actions. Individuals who engages into rogue trading
are those people who lost their ethical and moral bearings and made bad decision and got
entangled in a cycle which they had no idea to how to break (Bagdasarov et al. 2013). The
factors like goals of the organisation to inspire and reward positive behaviour and discourage
the bad behaviour should be given more emphasise to avoid unethical decision making. When
it comes to self-interest, individual tends to overlook bad and unethical choices. In respect to
that, the means of a decision making should be scrutinised critically in the organisation.
When it comes to a manager, they should accept that they are placed in a position higher than
the other. They should be cautious while making a decision, not just about their intentions,

6BUSINESS ETHICS
but also about the interpretation of their behaviour. They set an example for the others about
how a decision should be taken in a situation. Organisations should scrutinize their decision
from time to time.
Risk management is another factor that can be applied in the Adoboli case. Intentional
action of employee is the main result of non-compliance of the codes of employees. Risk
management systems and processes can be effective only, if the people controlling them are
proficient to maintain it (L.P. 2018). Non-compliance of conduct stem from the
organisational culture for risk management. The employees should possess the ability to
justify their intentional act for misconduct in the business practice in an intellectual way. The
main components that makes an individual to take up risk is their unrealistic targets and the
pressure to achieve a result at any cost and etc. Individuals tend to initiate risk, if they feel
that they can escape the consequence if they are being unethical while taking the risk. It is the
comfort that the individual feel with which they can commit a misconduct, induces the person
to take up the risk. Employees may face pressure on them to commit misconduct.
Organisational justice mechanism and poor corporate governance practices in an
organisation, may make the employee acquire a feeling that they would be able to get away
for non-compliance of the standard of conduct set by the company (Worstall 2018). The
employees who are not engaged with in the misconduct activities, have the better ability to
rationalize these kind of unethical behaviour that are targeted against the company. Excessive
pressure on the employees to achieve goals or result, make them justify their act of taking
short cut and risks (Bryant 2018). Integrity in the relationship of the employees and
employers, is also a factor that plays an important role in the in this context. A positive
relation between the corporate integrity and business performance leads to a strong
management practice in the company to avoid culture conflict and unethical decision making.

7BUSINESS ETHICS
In Adoboli case, a strong relationship between the business performance and the
integrity of employee would make the employees speak-up to honesty (Mohan 2016). The
roles of the managers are critical to improve and increase new ideas in the organisation, to
avoid any pitfalls in risk management. As per the conversation of Adoboli, employees are at a
great pressure at investment banks to generate high returns, which led the employees to break
the rule (Farell 2016). If the investment banks carries on to rush behind the profitability as
they once had, the employees will be left with no option other than taking risk to achieve that.
Therefore, UBS needs to consider these individual factors for ethical decision making to
avoid rogue trading.

8BUSINESS ETHICS
References:
Bagdasarov, Z., Thiel, C.E., Johnson, J.F., Connelly, S., Harkrider, L.N., Devenport, L.D.
and Mumford, M.D., 2013. Case-based ethics instruction: The influence of contextual and
individual factors in case content on ethical decision-making. Science and Engineering
Ethics, 19(3), pp.1305-1322.
Bbc.com 2018. [online] Bbc.com. Available at: https://www.bbc.com/news/business-
20492017 [Accessed 14 Oct. 2018].
Bryant, B. 2018. [online] telegraph.co.uk. Available at:
https://www.telegraph.co.uk/finance/financial-crime/9543191/UBS-rogue-trader-Kweku-
Adoboli-almost-cost-the-bank-7.4bn-court-hears.html [Accessed 14 Oct. 2018].
Cohn, A., Fehr, E. and Maréchal, M.A., 2014. Business culture and dishonesty in the banking
industry. Nature, 516(7529), p.86.
Craft, J.L., 2013. A review of the empirical ethical decision-making literature: 2004–
2011. Journal of business ethics, 117(2), pp.221-259.
Crossan, M., Mazutis, D. and Seijts, G., 2013. In search of virtue: The role of virtues, values
and character strengths in ethical decision making. Journal of Business Ethics, 113(4),
pp.567-581.
Farell, S. 2016. [online] Theguardian.com. Available at:
https://www.theguardian.com/business/2016/aug/01/banks-still-at-risk-of-huge-frauds-warns-
rogue-ubs-trader-kweku-adoboli [Accessed 14 Oct. 2018].
Kuntz, J.R.C., Kuntz, J.R., Elenkov, D. and Nabirukhina, A., 2013. Characterizing ethical
cases: A cross-cultural investigation of individual differences, organisational climate, and
leadership on ethical decision-making. Journal of Business Ethics, 113(2), pp.317-331.

9BUSINESS ETHICS
L.P. 2018. [online] Economist.com. Available at:
https://www.economist.com/schumpeter/2012/09/24/risk-seeking [Accessed 14 Oct. 2018].
Ludlow, J. 2018. [online] Thetimes.co.uk. Available at:
https://www.thetimes.co.uk/raconteur/business/companies-ignoring-risk-matters/ [Accessed
14 Oct. 2018].
Mohan, H. 2016. [ebook] Iiauae.org. Available at:
https://www.iiauae.org/writereaddata/Portal/ConferencesDownloads/1e0df67e-3507-45ff-
aed4-366f428bf63f.pdf [Accessed 14 Oct. 2018].
Moore, J. 2018. [online] Independent.co.uk. Available at:
https://www.independent.co.uk/news/business/comment/rogue-trader-kweku-adoboli-ubs-
banking-home-office-immigration-theresa-may-hostile-environment-a8500676.html
[Accessed 14 Oct. 2018].
Scholten, W. and Ellemers, N., 2016. Bad apples or corrupting barrels? Preventing traders’
misconduct. Journal of Financial Regulation and Compliance, 24(4), pp.366-382.
Shirbon, E. 2018. [online] Reuters.com. Available at: https://www.reuters.com/article/us-ubs-
trial/ubs-rogue-trader-the-man-not-the-machine-idUSBRE8AJ0U520121120 [Accessed 14
Oct. 2018].
Worstall, T. 2018. [online] Forbes.com. Available at:
https://www.forbes.com/sites/timworstall/2011/09/16/kweku-adeboli-how-did-he-lose-ubs-2-
billion/#ecbde85c10e5 [Accessed 14 Oct. 2018].