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ROLE OF LEADERSHIP, FINANCIAL ETHICS AND ESPONSIBILITY IN THE FINANCE INDUSTRY

Executive Summary

The financial industry has a large impact on global development levels and thus, leaders in the industry are under a constant responsibility to uphold strong leadership skills. Due to the increasing role of leaders in such organizations, leadership styles and decisions are increasingly shaping the manner in which the industry is achieving its goals (towards global development). In this case study, Barclays Bank is clearly depicted as a global leader in the financial markets. For this reason, its leaders like Diamond, are granted the authority to influence the activities of influential financial organs like the London Inter-Bank Offered Rate (LIBOR). Although the large banks in the UK had the authority to influence the base reference rates that would influence the financial transactions in the financial markets, they were expected to operate within the allowable LIBOR standard rates. Such regulations ensure fair trading while maximizing market opportunities for all traders. Nonetheless, Barclays Bank, through its leader, Bob Diamond, takes responsibility for manipulating the rates and conducting transactions beyond the stipulated standards set by LIBOR and other UK and US regulators. Based on Diamond’s career progress, it is also evident that he may have been a greedy leader who only focused on selfish gains for himself and his company with limited regards to professional ethics. This study therefore begins by emphasizing the role of leadership to abide to their duties and uphold strong professional ethics through their preferred leadership styles. Barclays, just like other banks is also expected to operate within the acceptable standards. The second factor discussed is therefore the need for banks to respect business ethics as members of banking institutions and thus abide to the set regulations. Finally, the report emphasizes that companies have a responsibility to the societies in which they operate. This is part of the corporate social responsibility and has to be upheld towards ensuring people do not lose faith in these financial institutions. Barclays’s case was therefore characterized by lack of professional leadership that led to misconduct among the low level managers and this led to a sense of irresponsibility by the entire organization, thus the need for the institution to pay the fine. Such misconducts cannot go unnoticed since financial institutions are regulated for fair trade and customer protection. This report concludes by encouraging increased emphasis on leadership and business ethics in financial institutions as part of the corporate social responsibility in the industry for continued quality performance.

Introduction

            Financial markets have over the years been responsible for some of the main economic challenges seen since the first financial crisis. Although regulations have continued to protect traders across the globe, leaders in the sector are at times unable to remain objective to their mandate and this continues to affect the progress made in the sector (Roulet, 2015). Barclays Bank Group is one of the financial institutions, in the banking sector, that has in the recent times been penalized for failing to abide to industry regulations. Inasmuch as industry regulations are not aimed at punishing but controlling the extent to which traders can trade, measure have to be set to include penalties since some organizations tend to have more influence in the financial industry, than others. For instance, in the Barclays case study, the bank was considered one of the largest in terms of capital, revenues and investments, and thus was allowed to influence the reference rates of the London Inter-Bank Offered Rate (LIBOR). This would ordinarily be considered an opportunity to engage industrial best performers for the sake of improved competition and quality trading.

However, Bob Diamond, the CEO of Barclays Plc until 2012, misused this opportunity to set reference rates that only favored Barclays, allowing it to make huge profits and eliminate risks and other conditions that would have affected the company’s performance. Due to the strong financial monitoring and regulatory systems in the UK and the US, the bank was found guilty and was fined. According to Brown and Trevino (2006), such a case presents an opportunity to question the extent to which leadership ethics issues have been addressed by scholar and industries at large.  According to Brown and Trevino (2006), there seems to be an increase in poor leadership ethics amidst the critical role of business leaders to accomplish their organizational roles. This report reviews this and other two critical issues emerging through the Barclays case study: Business ethics and corporate social responsibility. To address these issues effectively, it uses illustrations from other organizations in different industries to illustrate how strong leadership ethics can ensure good business ethics and improved corporate social responsibility for improved faith in financial institutions.

Conclusion

            In conclusion, Barclays Plc failed in its responsibility as a financial institution when it opted to influence the LIBOR to its favor. This continued manipulation was also effected by the mid-level managers and some junior staff, illustrating the inability of the then leadership to ensure professional conduct and business ethics. For this reason, Bob Diamond, the then CEO of the organization bears the highest responsibility and therefore lacks professional and leadership ethics. The entire leadership of Barclays Plc, also failed in its role to uphold corporate social responsibility as it allowed its staff, including the CEO to manipulate industrial privileges. This caused reduced faith in the institution by its customers. For this reason, this report emphasizes the need to abide to the duties of leadership and professional ethics. Banks as members of financial institutions also abide by the ethics of financial institutions. Finally, companies should be responsible to society as this would increase the customers’ faith in the institutions. To achieve all these, there has to be continuous and consistent review of business and leadership ethics in financial institutions as part of the corporate social responsibility in the institutions.

Sewdas et al.’s (2017) study employed, there are very little room for generalizing the study’s findings.