Analysis of Ethics and Corporate Governance in the Banking Sector

This report delves into the critical intersection of ethics and corporate governance, particularly within the banking sector, using Lloyds Banking Group as a key example. It provides a comprehensive overview of corporate governance, including its rules, processes, and practices aimed at balancing the interests of stakeholders such as customers, shareholders, and the community. The report explores the significance of business ethics, examining ethical principles and moral considerations in the business environment. Key issues discussed include unauthorized use of social networking sites, lack of transparency and accountability, and their impact on customer trust and loyalty. The report further analyzes ethical challenges such as employee behavior, working conditions, and discrimination. It also highlights the importance of corporate culture, compliance with laws, and transparency in building a strong corporate governance framework. The report emphasizes the need for organizations to learn from corporate failures and to continuously improve their ethical practices to maintain stakeholder confidence and achieve long-term success.

ETHICS AND
CORPORATE
GOVERNANCE ISSUES

Table of Contents
INTRODUCTION...........................................................................................................................1
Ethics and Corporate governance................................................................................................1
Issues in corporate governance and ethics..................................................................................3
Ethical issues in business............................................................................................................4
Behavioural aspects of the processional.....................................................................................6
Working of Banking professionals..............................................................................................7
Factors that increases customers integrity and trust in the Banking industry ............................7
Ways to improve corporate governance, ethics with integrity and trust.....................................9
CONCLUSION................................................................................................................................9
REFERENCES..............................................................................................................................10

INTRODUCTION
Corporate governance is the system where the organisation set some rules, process and practices
and well as control and direct them in the proper way. The key purpose of managing the
corporate governance so that company can able to keep balance between the interest of their
stakeholders such as customers, shareholders, suppliers, government, community and financiers.
Whereas business ethics is the professional ethics that examines the ethical principles and moral
that are arises in the business environment. The report includes different issues in corporate
governance and ethical conduct such as unauthorised use of social networking sites, lack of
transparency and accountability which reduce the customer integrity and loyalty. For this report
Lloyds Banking Group have been selected, which is the largest banking organisation in the UK.
The report includes how the bank have cope up the different issues and retain trust and loyalty of
customers.
Ethics and Corporate governance
Ethics is the set of moral principles or the system of the moral values which deals with
what is good or bad with the moral obligation and duty. In simple words it can be said that is the
basic fundamental principles and concepts which helps to detect the human conduct that whether
he or she does right or wrong. It consists of the study of the universal values such as required
quality of all males and females, natural and human rights, follow of the law to the land, being
concern for the safety or health and connected to the natural environment (Dimopoulos and
Wagner, 2016). Most of the people in the words relates ethics with their feelings but behave in
the ethical manner id not the matter of following the ones feelings.
Some people finds that ethics is connected with the religion, at that situation Advocates is
the person who have high ethical standard. From this statement it is analysed that the ethics is
confined with the religion, but then it applies to all the people whether he or she may be atheist.
Religion can be made from the ethical standard and that can serve the motivation for the ethical
behaviour of the individual. However, ethics is not confined with the religion not it is similar
with the religion. Again ethics is not connected with the following of law. The legislation is often
incorporated with the ethical standard to which all the citizen subscribe (Yu and Bruton, 2016).
But the law similar to the feeling can deviate from what is the ethics. Thus, Ethics consist of the
two things, one it is refers to the well founded standard of what is right and wrong and that
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prescribe what human being ought to do. This is usually in terms of the obligations, rights,
fairness, specific virtues and benefits to the society. These are the standard that are made to stop
some bad activities such as refrain the stealing, rape, assault, rape, fraud and slander. These are
the moral principles by which some rights are made such as right to the freedom from the injury,
right to life and privacy. Other than that it is the study and development of the one's ethical
standard. It is very important find the one's standard so that surety can be made that they are well
formed and reasonable (Samra, 2016).
When the ethics is made in the corporate world then it is said that these are the ethics in
which all the business policies and practices are studied in the proper way which is related to the
controversial issues. These issues consist of the inside trading, corporate governance,
discrimination, corporate social responsibility and fiduciary responsibilities. Laws are often
made so that they can able to guide the business ethics and these ethics serve the framework that
the organisation may select to follow in order to gain the acceptance of the public. Business
ethics ensure that there is certain level of trust between the consumers and different form of
market publication. Such as the portfolio manager will give some importance to the portfolio of
family members as well as to the small investors which ensure that the stakeholders receives the
fair treatment from the organisation. Business ethics is made in the every department of the
organisation say marketing department where the manager need to ensure that they follow all
such practices which does not harm the customers in any way, they also follow different laws
such as labelling and advertisement legislation. When it is talked about the production
department, the quality of the good and service should be at the standard level so that it does not
cause any health problem to the customers (Boreiko and Murgia, 2016). When it comes to the
human resource department, the organisation should treat all the employees in the fair manner
and provide regular training and development programs so that workers can enhance their skills
and knowledge.
Corporate governance is the system where the organisation set some rules, process and
practices and well as control and direct them in the proper way. The key purpose of managing
the corporate governance so that company can able to keep balance between the interest of their
stakeholders such as customers, shareholders, suppliers, government, community and financiers.
Hence, it is also maid so that the company can able to gain their objectives. There are several
members that are involved in the corporate governance from which Board of Directors are the
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person who plays the key role in influencing it. These are the person who are appointed by the
board members and elected by the shareholders. These are the general principles and techniques
that help the company to manage and direct which simply communicate that these are carry out
for the desires of the stakeholders. It is interaction between the different participants that are
stakeholders which helps in shaping the corporate performance. There must be cardinal
relationship with the mangers and owners of the organisation and there must not be any conflict
between them. Corporate governance guarantee to the investors that they will get the standard
interest in their investment. It deals with identification of the different strategic decision which
help to serve the best interest to the company's stakeholders. In the today economy, which is
oriented, there is need of the corporate governance, these are considered that they add value to
the stakeholders (Coffee and Palia, 2016). There are several benefits of the corporate governance
that are helps in economic growth and corporate success, increase the confidence of the investors
by which firm can find more capital, reduce the capital cost, serve positive impact on the price of
shares, helps in brand development and formation etc.
Issues in corporate governance and ethics
There are several issues that may arises in the corporate governance and that play very
significance role, these issues are inter-related to each other as well as they are independent
while dealing. Every organisation have priorities to deal with the corporate governance so they
decide some sequence to solve them, the issues are as follows:
Difference between the Board of directors and management of the organisation:
Board of directors play a key role while developing the corporate governance in the company.
That governance is implemented by the management, if that are not according to the skills and
knowledge of the workers and managers, they will find several difficulties while executing them.
BOD develops such plans which serve the best interest to the stakeholders of the company and
the managers will not able to follow that plans. This may cause the biggest problem in the
corporate governance (Agrawal and Cooper, 2017).
Corporate culture based on the values: to run the organisation in the effective and
efficient way, they need some ethics, value, long and short term business wants and that are
based on the culture of the organisation. Corporate culture which is based on the values will help
the organisation to follow good practices for the corporate governance. There must be some
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motto of the venture that must be unique, and if there is absence of that motto or it is not clear,
that will cause the dis-balance in the corporate governance, and the firm will not able to serve
maximum interest to their stakeholders.
Compliance with the laws: The organisation who follow the different laws, ethics such
as Security Board Of Exchange, Foreign Exchange Regulation Act, Banking Laws, Cyber laws
etc., which will able to manage their corporate governance. If there are any issues in these laws
or the organisation are not following these legislations in the proper way, they may face various
issues while developing and implementing the corporate governance in the organisation. If the
company wants that their business should goes for the long run, they need to satisfy the interest
of their stakeholders which can be done through these corporate laws (Abdullah and Nachum,
2016).
Improper transparency, accountability and discloser: These are the three factors that
which is significant for the good corporate governance. The organisation should communicate
the information to their stakeholders on the timely basis. The information which is disclosed
should be accurate and it should not consist any faulty message and statement. All the data
related to the financial position such as profits, assets, market share etc. so that investor can able
to analysis that they can invest in the company or not? If the firm maintains the transparency, all
the shareholders will have faith on the corporate bodies. There is very large competition in the
market, if the venture will not communicate the true information, customer will not able to
compare and select that what products is best and this will create dis-balance in the corporate
governance (Dimopoulos and Wagner, 2016).
Human resource management with the corporate governance: The organisation
manage their employees as a family. For the success of the company, human resource
management become very vital. Both corporate governance and employees of the venture are
directly linked with each other because workers are those who produce the quality goods for the
customers so that they can be satisfies. Whereas the key motive of corporate governance is to
cater the interest of the stakeholders. If the firm will not maintain good relationship with the
employees, the corporate governance will not be executed properly (Yu and Bruton, 2016).
Lesson for the corporate failure: There are several reason behind the failure of the
corporate governance of the organisation so if the failure will not there, the organisation will not
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able to learn. There are some policies which get failure in the corporate words, so that need some
learning. The failure can be both internal and external so good corporate governance should learn
from that and move ahead to the path of achievement and success (Samra, 2016).
Ethical issues in business
In year 1994 to 2000, the national Business Ethical Served have found that there are
numerous companies that have been establishing that provide formal ethical training have been
increased. As every organisation is finding several problems related for behaving ethically, that
issues are as follows:
Employees behaviour and working conditions: There are large people that are
involved in the every department and level of the organisation and they face several ethical
issues regard with their behaviour. Such as an employee who is accessing personal main in the
office time and premises so it is very difficult for the manager to identify the behaviour or every
employees as he is having his own work in the organisation. So this behaviour will conduct
unethical behaviour of the employee in the company. Other than that if the manager discriminate
the employees on the basis of gender and caste for the promotion and incentives is also
considered as unethical conduct (Boreiko and Murgia, 2016). Other factor is related to the
working conditions, if the employer is distributing the work unequally then it will create the
burden on the people who have more work and this will reduce the efficiency of workers in the
venture.
Supplier and customer relationship: in addition to that the organisation need to
maintain cardinal relationship with the customers and suppliers. The organisation should ensure
that the company's suppliers is not doing any unethical practices. If the organisation will not
check the inventory that it is of the standard quality or not, then the finished goods that is
produces out of raw material will have bad quality. Other than that if the organisation will not
communicate true information with the customers then it will reduce the brand name (Coffee and
Palia, 2016).
Social networking: These are the site which is most commonly feature of the internet
used by the organisation to promote and sell their products. There are several issues arise by the
employees while using them such as Facebook, Twitter, Instagram etc. These may arise several
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issues such as breach of confidentiality, conflicts due to more interest, damage of organisation
reputation, communication of private information etc.
Environmental production: It is very significant for every organisation to engage in the
environment sustainable practices which is now practising the common knowledge. The
companies are keeping their motive to earn large revenue, with this they are focusing on the
customers needs and the environment, continuously pollution with the rubbish and waste. These
practices are unethical and reduce the brand image of the companies.
Behavioural aspects of the processional
Professional is the individual who belongs with the certain profession by the moral
excellence of having the required and completed course of practice ans studies as well as the
person's competence is measures with the established set of standard. The person required
different skills to be the professional and that is included in the behaviour of the individual, that
skills and behavioural aspects are as follows:
Appearance: All the professional is neat in appearance such as in the proper
organisation's dress code and be at the proper visual when meeting with the clients and different
stakeholders.
Reliability: It is responsibility of the professional to get the job done in the effective and
efficient way. All the task and activities which is allotted to him, should be done at the proper
time frame with the effective utilisation of all resources (Agrawal and Cooper, 2017). The person
should respond in the proper way for his responsibilities and accountability and follow all the
promises in the reliable manner
Ethics: All the professionals should adhere to the strict codes of conduct, even all the
organisation should have written codes so that all the professional of the company follow them in
the proper way.
Display honesty: Professional is the individual who never falsifies and misinterprets the
action and information and does not engage in any unethical conduct.
Proper interaction and communication: Professional should have good communication
and influencing skills so that he can express his or her views, ideas and message in the proper
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way. He or she should interact with the workers of the organisation so that he can able to find
what problems and solve them at the same time (Abdullah and Nachum, 2016).
Responsible: He is the person who is responsible for his progress by being prepared for
the different labs, classes and meetings. The person who take responsibilities for his work will
always care for the consequences for his work and find how his actions will affect others in the
organisation.
Group maker: Organisation need different type of group in their structure, where the
task is distributed among the group, professional is the person who manage and lead. He
motivates the members to find the effective solution of the problem and guide them to use
resources in the proper way.
Working of Banking professionals
There is no doubt that bank and bankers and the whole industry is facing the worst crises
that is confidence. In the year 2008 and 2009, UK played the major role in the lack of trust even
seven years later, there is still lack of trust. There are number of scandal that have been done
such as manipulation of the LIBOR rates, tax evasion, fraud behaviour of the knave traders, large
taxpayer bailouts of banks, misconduct in the selling of mortgages etc. have affect the trust of the
customers. These scandals have affect the banking sector in many ways such as reduce the
proper functioning of the bank, improper allocation of the resources, it hampers the growth and
leads to instability and cost crises (Dimopoulos and Wagner, 2016).
Traditionally the core working of the bank to advance the loan and take the deposits, after
some time they have performs three function. That are serve settlement services and payment to
the companies, households, entrepreneurs and other financial institution. Secondly they help the
savers to reap the advantage of the long run investment and thirdly they monitor and assess the
payment behaviour and credit worthiness of the borrowers in the effective manner. With these
three activities bank can able to reduce these scandals. They collect the information and find the
solution of the problem between who borrow the money and those who save the money. This the
only channel where the bank add value and contribute to the economic development and growth
(Yu and Bruton, 2016).
Lloyds Banking Group is the major financial institution which was formed with the
acquisition of the HBOS and Lloyds in the year 2009. It is the UK's largest financial institution
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which have more than 30 million customers. The organisation motive is to become the best bank
for their clients and their stakeholders by effective utilisation of their skills, resources,
professionals and people. They believe to deliver the sustainable and superior return to their
stakeholders. The company high amount to the workers and management team so that they can
serve best services to the customers. By this organisation can able to generate the trust and
integrity among the customers.
Factors that increases customers integrity and trust in the Banking industry
It is very important for the baking industry to retain the trust of their clients, as banking is
the service industry, they do not offer products so it is difficult for the banking professional to
create trust and integrity. Lloyds Banking Group have made a chain by which they create
integrity and trust that is creating distinctive value for the customer through unique and effective
service proposition, simple tailored products which address customer needs and enabling suitable
value creation by helping Britain prosper. The organisation have adopted different factors that
enhance customer integrity and trust, that are as follows:
Effective business model and strategy: The organisation's business model use the low
risk, low cost and customer focus UK's commercial and rental bank with the with he multi
channel and distinctive multi brand. The put the customer at the heart for everything they operate
and do. They work with operating sustainability and responsibility, with the key objective is to
help the people of Britain and create value for the customers. The organisation have adopted
such strategy so that they can become the best bank of the customer by enabling proper trust and
integrity (Samra, 2016).
Group values: The organisation have given the first priority to the group value rather
than personal one, they have defined some standard according to the values such as putting
customer at first and keeping all the values clear and simple.
Proper ethical codes and policies: They have made several responsibilities and ethical
codes which helps them to operate in the responsible manner with the groups and individuals.
The pillars of their responsibilities are as follows:
 Putting customers needs and wants at the first priority and made them as the heart of
business.
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 Work in the responsible manner and serve maximum interest to their internal and external
stakeholders.
 Aim to be the great organisation in the eyes of the customers.
 Proper investment in the communities to help them grow and prosper (Boreiko and
Murgia, 2016).
 Work in the continuous manner to reduce the environmental impacts
Corporate governance: Their governance framework enables them to be responsible,
accountable and strategic in the decision making. The company's Board of Directors, community
plays the key role in ensuring the good governance and define the responsible business
objectives.
Helping the Britain prosper plan: Their key focus is on the helping the home buyers,
people for planning the future life, lending to the business, serve expert training for the
individual and businesses.
Ways to improve corporate governance, ethics with integrity and trust
There are several issues in the corporate governance and ethical conduct that have been
addressed above such as Difference between the Board of directors and management,
compliance with the laws, supplier and customer relationship, social networking etc. These
issues reduce the trust and integrity in the banking sector organisation. There are several ways by
which the Lloyds Banking Group will enhance the customer trust and integrity, that are as
follows:
 All the members of the organisation should have proper communication with the Board
of directors so that they can reach at the specific ethical code of conduct (Coffee and
Palia, 2016).
 All the values should be decided in such way that it serve the best interest to all the
stakeholders of the company.
 Employees should not access personal email in the office premises and time and does not
disclose the personal information about the organisation (Agrawal and Cooper, 2017).
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CONCLUSION
It can be concluded from the project report that ethics and corporate governance plays
very significance role in creating customers trust and integrity in the service industry like Lloyds
Banking Group. The report includes different issues related to the ethical conduct and corporate
governance such as different values of management team and Board of director, unauthorised use
of social networking sites in the office, disclose of personal information of the organisation.
There are several measures taken by the company so that they can reduce these issues such as
effective business model and strategy, proper ethical codes and policies etc.
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