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Lloyds Bank Employees: Victims or Villains?

December 12, 2013

Another day, another record fine for a banking group. This time it is Lloyds Banking group being fined £28m for incentive schemes that led to the mis-selling of individual savings accounts and income protections products between 2010 and 2012. In some cases staff were offered bonuses of up to 35% of their monthly salaries, in others £1000 in cash. On the flip side, employees who failed to meet targets were threatened with demotion – the Financial Conduct Authority (FCA) highlights the case of the individual who sold to himself, his wife and a colleague to avoid this fate.

In reporting of the case, employees of the bank are portrayed as victims, trapped into aggressive, demoralising sales practices by a dysfunctional sales regime. The villain is, of course, ‘the group’ which in practice is no-one in particular. In a statement ‘the group’ apologises for adverse customer impacts, adding that ‘we’ will ensure that customer impacts are dealt with swiftly. The £28m fine will, presumably, be borne by shareholders.

This is a very unsatisfactory state of affairs, and it is unclear how the penalty from the FCA in any way targets those whose conduct was at fault. So what could be done differently? As a start, there is a clear case for holding those senior managers responsible for designing and managing the incentive schemes accountable (I will leave aside how they should be held accountable for the moment).

But what about the rank and file employees to whom the scheme applied? There is clearly a sense in which it is unreasonable to expect them not to have participated in the scheme, given the penalties that they would have incurred. Equally, in some cases, employees were clearly treated very badly. In these ways they might be thought of as ‘victims’. On the other hand, however, the kind of aggressive sales culture – the value system – that is at the root of this problem only develops within an organisation over time, and requires the active participation of organisation members to take root and flourish.

Many sales staff did very well out of this scheme and others like it; even those that did not, through their acquiescence to the demands that it made, showed a willingness to go along with the values that it exemplified. Culture may be shaped from the top of an organisation, but it only grows and takes hold from the bottom. To the extent that any employee of Lloyds bent to the demands of this incentive scheme they were not only influenced by, but also contributed to, the malign culture that it represented and so may themselves bear some responsibility for its outcomes.

Of course, if such employees couldn’t be expected to quit their jobs in protest of the scheme, it is important to specify exactly what they should have done in order to get off the moral hook. This may vary from employee to employee depending on their situation, but could be quite modest – for example registering concern with their superior(s) or even providing anonymous feedback through the organisation (assuming such channels were available). They could, perhaps, have only done the minimum required of them under the scheme. This at least would go some way towards holding back the cultural tide.

Registering concern with regulators or external watch dogs could be an alternative course of action. This point also highlights the importance of making such formal and informal feedback channels available. In some cases more extreme action – such as refusing to engage in certain working practices – could be required.

The important point here is that rank and file employees in an organisation like Lloyds cannot avoid all responsibility for engaging in mis-selling practices by pointing out that they were incentivised to do so. The ‘Nuremberg Defense’ – that they were only obeying orders – may be offered in mitigation, but cannot absolve completely. ‘Business organisations’ are too often used as shields against individual responsibility, and not only by senior management, but also by those at the sharp end of corporate wrong doing.

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