The study of more than 200 international bankers put their honesty to the test and found them to be fundamentally decent human beings, until they were reminded about what they did for a living.
At that point, the research team discovered they began cheating on their tests.
Interestingly, that result was not replicated when sample groups from other professions were asked to complete similar tests.
Behavioural economists Alain Cohn, Ernst Fehr and Michel André Maréchal laid out their findings in a report entitled Business Culture and Dishonesty in the Banking Industry.
In the wake of a series of finance industry scandals, the team set out to test the bankers’ honesty with a simple coin-tossing test.
“They were asked to flip a coin 10 times and to self-report the outcomes of the coin flip,” Mr Cohn explained to The World Today.
“Their behaviour in the coin tossing task is a measure of their dishonest behaviour.”
In order to test that behaviour, the researchers also gave the bankers a financial incentive to lie about their results.
“They could cheat to increase their earnings,” Mr Cohn said.
“For example, in the first coin flip they knew that heads would give them $US20 and so, because they knew that heads would give them a good outcome, they could easily cheat and hide behind chance.”
But the researchers knew that, given half a chance, the promise of easy money could result in many non-bankers cheating on their results as well.
So, to refine their methodology, they first split their cohort of bankers into two groups.
Mr Cohn said the first control group was tested after being asked a series of questions unrelated to their occupation, for example “questions about tea consumption or favourite leisure activities”.
The second experimental group was asked a series of questions about their careers.
“In the experimental group we manipulated the saliency of participants’ occupation and role as a bank employee by asking a few questions about their professional background,” he said.
“So for example, we asked them what banks they worked for or how many years of professional experience they have.”
Bankers started cheating when reminded of their job
When the two groups were then asked to perform the coin-flipping task, the results were revealing.
The bankers who had been primed to think about their jobs were more likely to cheat than those whose minds were still occupied with thoughts about their homes and families.
The results suggest bankers are not inherently dishonest.
“They were very honest in the control condition,” Mr Cohn said.
“[It was] only when we rendered their professional role more salient [that] they began to cheat.”
It was a technique used by researchers previously with another segment of society suffering reputational problems, according to co-author Mr Maréchal.
“Everything actually started with an opportunity to conduct an experiment on cheating with inmates at a maximum security prison,” he said.
“The inmates cheated more when they were reminded of the fact that they were criminals. So we used a similar approach in this study to examine the business culture in the banking industry.”
‘Unwritten rules’ of industry promote dishonesty
When the researchers sampled a range of non-bankers – those employed in manufacturing, telecommunications and the pharmaceutical industries – they found no variation between control and experimental groups.
“We ran the same experiment with professionals from other occupations or in other industries,” Mr Cohn pointed out.
“We didn’t find any difference between the control and the experimental group, so this implies that there is something specific in the banking industry that promotes dishonest behaviour.
“It’s about unwritten rules of behaviour in the financial services industry that encourage or maybe tolerate dishonest behaviours.”
The research makes for uncomfortable reading for bankers, but the study received support from those inside the finance industry, conscious that recent scandals reflect a serious problem with banking culture.
One international bank allowed 128 of its staff to take part in the research on condition of anonymity. Another 80 participants were drawn from a range of other banks.
So if there is a genuine will to change the culture of banking, what can be done to encourage more scrupulous behaviour?
The researchers said the payment of bonuses for those generating high profits first needed to be closely scrutinised.
“It shouldn’t be that financial incentives reward employees for dishonest behaviour,” Mr Cohn said.
He also questioned the efficacy of forcing bank staff to sit through honesty training courses.
“If the ethics training remains in the abstract, it will not help much. Just pledging integrity is not enough. We think you have to exactly name and be very concrete about the behaviour deemed desirable.”