Thursday, 20 November 2014

Bankers become dishonest when reminded of their professional identity

The "Natwest 3" jailed
for wire fraud in 2008.
Picture a banker tossing a coin ten times. She knows the more tails she gets, the more money she wins (up to $200), so long as she gets more tails than a rival playing the same game. She performs her coin tossing in private and reports her number of tails. Do you think she'll be honest?

When a team of researchers surveyed the general population about the likely dishonesty of bankers and other groups in this scenario, they found the bankers had the worst reputation, even compared with prison inmates. On average, the public thought that bankers would exaggerate their performance by 27 per cent.

What's the reality? Alain Cohn and his colleagues tested 128 employees from a large international bank on the coin flipping task, including private bankers, asset managers, traders, and support staff such as those in HR and risk management (61 per cent were male). Crucially, half were reminded of their professional identity through questions about where they worked and what their duties were. The other half were asked irrelevant questions, such as how much TV they watch.

The bankers asked the irrelevant questions played mostly honestly - on average, they didn't report performing any better than you'd expect given the probabilities involved in flipping a coin. By contrast, the bankers who were reminded of their professional identity displayed inflated levels of dishonesty - exaggerating their success by 16 per cent, on average. Not as bad as the public had anticipated, but still high, and it's worrying that it was reminders of being a banker that led to this level of cheating.

It's not just that being reminded of one's professional identity leads anyone to become more dishonest. The researchers checked this by repeating the experiment with participants from a range of professions including IT and pharmaceuticals. Being reminded of their professional identity made no difference to the honesty of these participants.

Maybe it's just that thinking about being a banker prompts bankers to think of money, which is known to inspire competitiveness and selfishness? Not so - when the coin flipping task was repeated with university students, those asked to name a bank, and to describe banking duties, did not become more dishonest.

Further tests also ruled out the possibility that being reminded of their professional identity led bankers to feel more competitive, or to think that other bankers are more dishonest (both of which might have provoked them to cheat in the coin game).

Instead, the reason that a banker's professional identity encourages him or her to behave more dishonestly appears related to the materialistic culture fostered in that world. Cohn and his team found that bankers prompted to think about their professional identity tended to agree with the statement that social status is primarily determined by financial success, more than did bankers who were not primed in this way (they were asked irrelevant questions instead). Also, greater endorsement of this materialistic view correlated with more dishonesty in the coin game.

"These findings substantiate current concerns about the influence of materialistic values in the banking sector," the researchers said, "and indicate that the professional identity prime may have increased dishonesty through an increase in materialistic values."

Dishonesty and unscrupulous behaviour in the banking world contributed to the recent financial crisis, and the dire reputation of bankers continues to undermine confidence in our financial institutions. This new research provides some of the first empirical evidence for why bankers stray from integrity.

"Our results suggest that banks should encourage honest behaviours by changing the norms associated with their workers' professional identity," the researchers concluded. "For example, several experts and regulators have proposed that bank employees should take a professional oath analogous to the Hippocratic oath for physicians."


Alain Cohn, Ernst Fehr, & Michel Marechal (2014). Business culture and dishonesty in the banking industry Nature.

--further reading--
Threaten a man's masculinity and he becomes a short-sighted risk taker
The cheater's high - how being bad feels good
Does greater competition improve performance or increase cheating?
Psychologically safe teams can incubate bad behaviour

Post written by Christian Jarrett (@psych_writer) for the BPS Research Digest.

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