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August 6, 2015 By Richard Bowen

Behavioral Ethics: Too Big To Fail and the Financial Crisis

Behavioral Ethics: Too Big To Fail and the Financial CrisisThis coming week, I will be speaking at the annual conference of the American Accounting Association (AAA). AAA is the largest community of accountants in academia; key experts in that field on leading-edge research and publications. They are well known and respected as thought leaders and for shaping the future of accounting through teaching, research and their powerful network.

I’ve been asked to give my presentation on Behavioral Ethics: Too Big To Fail and the Financial Crisis to their Ethics Research Symposium. Part of my time will be spent on my story: the story of what I discovered at Citigroup when I was Business Chief Underwriter during the housing bubble financial crisis meltdown and the fraud I saw within the company of certifying poor mortgages as quality mortgages and then selling them to Fannie Mae, Freddie Mac and other securitizations. I’ll tell of the actions I felt compelled to take, the warnings I repeatedly issued to management and the board of directors on what I discovered was consistently covered up.

I’m honored to be in front of this group and well aware of the huge responsibility it brings. These are the thought leaders, the teachers, the writers of case studies, in some ways the voice of accounting ethics and what accounting is and must be. And so I am going to tell my story and talk about the implications of what happens when a company loses its moral compass.

The dictionary defines ethics as rules of behavior based on what is morally good and bad; what’s morally right or wrong. Ethical behavior is about acting in ways that are consistent with what society and individuals think are good values. 

There has been much attention given to research in behavioral ethics. People may think of themselves as good people, yet still lie, cheat and steal. Behavioral ethics takes us one step further to an understanding of why we make the moral decisions we do.

Citigroup, after all, had and has many reliable, accountable, conscientious, committed and ethical employees, good people. On the surface we had a culture of doing the right thing. The bottom line though — what governed — was “what will it take to bring in the money?”

Sales and profits trumped everything else.

Max H. Bazerman and Francesca Gino, in their Harvard Business Review paper on the subject, ask, “What makes even good people cross ethical boundaries? Society demands that business and professional schools address ethics, but the results have been disappointing.”

Their paper argues that a behavioral approach to ethics is essential because it leads to understanding and explaining moral and immoral behavior in systematic ways. They believe “behavioral ethics is better suited than traditional approaches to address the increasing demand from society for a deeper understanding of what causes even good people to cross ethical boundaries.”

We can argue that ethical behavior is good for business. We can say that demonstrating respect for key moral principles is fundamental.  And, we can state that the principles of honesty, fairness, equality, dignity, diversity and individual rights are a critical element to business and society. That’s not enough.

We need more forthright action on what is a national issue and a breakdown in moral behavior.

[tweetthis url=”http://buff.ly/1KU9jeq”]”What happens when a company loses its moral compass?” ~ @RichardMBowen #citigroup #citi #tbtf[/tweetthis]

I’m going to be bold in this presentation. I’m going to engage this group of thought leaders with the case study written by Professor Adam Waytz and Visilia Kilibarda of the Kellogg School of Management on Sherry Hunt. Sherry reported to me at Citigroup and “after I left” took my warnings very much to heart. Four years later she, too, blew the whistle on Citigroup. The case study on Citigroup’s mortgage fraud was the topic of a previous post. My audience will have received it ahead of time, hopefully have read it and we will dissect it as part of this presentation.

Thought leaders in accounting are part of the solution. Yet accountants have also been part of the problem. More than one or two accounting firms have “missed” ethical violations. In some cases more than missed — completely failed to report on egregious accounting behavior even when faced with the evidence.

Yet, who better than the professionals in this field to call for accountability? More than call … demand.  Teaching ethics in school, asking for our students to study case studies in ethics is important. It gives us a framework for understanding how honest, successful, business ventures need to be run. Yet, until we have a solid foundation of ethical behavior that employees within a company are expected to follow, expected to — not just pay lip service to, the Citigroups, the WorldComs, the Bernie Madoff accountants will still exist.

[tweetthis url=”http://buff.ly/1KU9jeq”]The bottom line @Citi? Sales and profits trumped everything else. ~ @RichardMBowen #citigroup #tbtf[/tweetthis]

My client’s role in this is huge. They have the power to change our society…for the better.

This is a big assignment.

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Tagged With: American Accounting Association, behavioral ethics, Citigroup, ethical leadership, moral behavior, Richard Bowen

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Richard Bowen is widely known as the Citigroup whistleblower. As Business Chief Underwriter for Citigroup during the housing bubble financial crisis meltdown, he repeatedly warned Citi executive management and the board about fraudulent behavior within the organization. The company certified poor mortgages as quality mortgages and sold them to Fannie Mae, Freddie Mac and other investors.

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William D. Cohan"Richard Bowen is one of my heroes. His is a story of human fortitude at its best and Wall Street at its worst."

~ William D. Cohan, NY Times Best Selling Author
2017-06-30T10:08:59-05:00
"Richard Bowen is one of my heroes. His is a story of human fortitude at its best and Wall Street at its worst." ~ William D. Cohan, NY Times Best Selling Author
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Eileen McDonnell"Richard Bowen reinforced my motto that "there is no right way to do a wrong thing.” Long after his presentation, the conversation has continued about personal responsibility and the courage to challenge things that appear to be wrong. We encourage this dialog and rely on it to help make our business stronger."

~ Eileen McDonnell, Chairman, CEO, & President, Penn Mutual
2015-02-13T19:51:19-06:00
"Richard Bowen reinforced my motto that "there is no right way to do a wrong thing.” Long after his presentation, the conversation has continued about personal responsibility and the courage to challenge things that appear to be wrong. We encourage this dialog and rely on it to help make our business stronger." ~ Eileen McDonnell, Chairman, CEO, & President, Penn Mutual
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"Richard Bowen, you are a star and a hero." ~ Ben Stein, Economist and Political Commentator
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Jim Farrell"Richard's speech at the April Financial Executives International dinner was informative, interesting, riveting, and fast moving.  The feedback from members was overwhelming positive, and Richard received one of the few standing ovations given by our membership."

~ Jim Farrell, Program Chairman, Dallas Chapter, Financial Executives International
2014-12-28T19:48:17-06:00
"Richard's speech at the April Financial Executives International dinner was informative, interesting, riveting, and fast moving.  The feedback from members was overwhelming positive, and Richard received one of the few standing ovations given by our membership." ~ Jim Farrell, Program Chairman, Dallas Chapter, Financial Executives International
https://richardmbowen.com/testimonials/532/

Dennis McCuistion"Richard Bowen has been there, done that, and has the scars to prove it, and his message of corruption at the highest levels of industry and government needs to be heard. I only wish that more bankers had the courage that Bowen exhibits. He is not only one of the most talented bankers I have ever met, he has more integrity than all the bankers on Wall Street put together. If his former employer had listened to him taxpayers would not have had to bail out Citi for the third time in the last 30 years."

~ Dennis McCuistion, Host of the McCuistion TV program
2014-12-28T19:48:06-06:00
"Richard Bowen has been there, done that, and has the scars to prove it, and his message of corruption at the highest levels of industry and government needs to be heard. I only wish that more bankers had the courage that Bowen exhibits. He is not only one of the most talented bankers I have ever met, he has more integrity than all the bankers on Wall Street put together. If his former employer had listened to him taxpayers would not have had to bail out Citi for the third time in the last 30 years." ~ Dennis McCuistion, Host of the McCuistion TV program
https://richardmbowen.com/testimonials/533/

Betty Garrett"Richard Bowen is a dynamic, entertaining speaker and story-teller - a CPA with a great personality!"

~ Betty Garrett, Garrett Speakers International
2014-12-28T19:47:50-06:00
"Richard Bowen is a dynamic, entertaining speaker and story-teller - a CPA with a great personality!" ~ Betty Garrett, Garrett Speakers International
https://richardmbowen.com/testimonials/531/

fred-timmons"I believe Richard Bowen is the only keynote speaker to ever receive a standing ovation from the Texas Society of CPA’s at any of its annual conferences."

~ Fred Timmons, Chairman of The Texas Society of CPA's
2014-12-28T19:47:22-06:00
"I believe Richard Bowen is the only keynote speaker to ever receive a standing ovation from the Texas Society of CPA’s at any of its annual conferences." ~ Fred Timmons, Chairman of The Texas Society of CPA's
https://richardmbowen.com/testimonials/530/

Presentation Topics

Playing for High Stakes: The Principles and Practice of Ethical Leadership

Dark Citi: The Story of a Whistleblower

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Now an ethical leadership speaker, Richard Bowen was Citigroup's Business Chief Underwriter during the housing bubble.

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