Tag Archives: banking

Nepotism, alive and well.

We have always been told that America is the land of opportunity. That if you work hard, and remained focused you can rise to the top. It is what, seemingly, draws so many people to migrate to the United States. The reward of high salaries for hard work makes sense. However, in one of the nations most sought after industries, banking, that seems to not be the case.

Recently, J.P. Morgan Chase & Co. has come under a great deal of controversy after hiring the son of China’s Commerce Minister Gao Hucheng despite his poor performance during interviews, which included sending a sexually explicit email to human resources (http://www.wsj.com/articles/in-j-p-morgan-emails-a-tale-of-china-and-connections-1423241289?mod=trending_now_5). A definite no-no, and an easy way to get let go in most cases.

“The hiring has drawn scrutiny from U.S. prosecutors and regulators who are investigating the Asian hiring practices of J.P. Morgan and several other banks, according to people briefed on the investigation” (http://www.wsj.com/articles/in-j-p-morgan-emails-a-tale-of-china-and-connections-1423241289?mod=trending_now_5).

So why are these banks, or companies in general, hiring people that may not necessarily be the most qualified? Just smart business practices it seems. Although in some cases it is illegal.

“J.P. Morgan hasn’t been accused of wrongdoing in the investigation, which focuses on the Foreign Corrupt Practices Act, a U.S. law that bars giving anything of value to foreign government officials for a business advantage” (http://www.wsj.com/articles/in-j-p-morgan-emails-a-tale-of-china-and-connections-1423241289?mod=trending_now_5).

In an industry focused on satisfying the needs of clients and establishing a good rapport, hiring a client’s son or daughter may be the best way to do that.

This is a very difficult issue to address, in my opinion, with firms receiving hundreds if not thousands of applicants a year from so many people having similar, if not identical qualifications. It is easy for a company to find a way to justify hiring the relative of someone, even if they are slightly less qualified.

You may be asking yourself what you can I do to fix this system of favoritism based on whom you know, rather than what you know. Well, there does not seem to be an easy fix in the immediate future. Wealthy and powerful individuals have the means to ensure that their family remains that way. My suggestion, work hard, really hard and hope that one day you can attain enough education and know enough people to get your son or daughter their dream job. Once you are in, it seems increasingly difficult to fall from grace.

Reversing the Culture of Wall Street

The culture at large banks must be drastically changed to drive industry growth and success. In-house adjustments will have a greater long-term positive impact on financial systems than new outside regulations that may only be impactful short-term.

“As they emerge from years of bruising fines, layoffs and losses, big banks are trying more than ever to monitor employee attitudes and values to avoid future problems” (http://www.wsj.com/articles/as-regulators-focus-on-culture-wall-street-struggles-to-define-it-1422838659?mod=WSJ_hp_Markets3up).

Large banks are trying to fix their culture issues on their own, although they are pretty much forced to due to fear of drastic government intervention and regulation. There are many regulations in the banking industry, but in such a complex system like ours there is always the possibility of employees attempting to cheat the system by disregarding those regulations or through the use of regulatory loopholes.

“One consulting firm hired by a major bank determined it was a red flag when employees used the word “workaround” in internal communications, indicating a willingness to bypass set rules or policies” (http://www.wsj.com/articles/as-regulators-focus-on-culture-wall-street-struggles-to-define-it-1422838659?mod=WSJ_hp_Markets3up).

This is one of the reasons why, I believe, the change needs to come from the inside. Simply changing the system of regulation will not do enough, that has been happening for years and issues are still arising. If banks, or any company for that matter, have a corrupt culture, employees will always have an incentive to work hard to cheat the system. Doing whatever it takes to standout to senior management and the people that will eventually be determining whether or not they receive a promotion. If banks have a system that promotes and rewards ethical behavior exhibited by their employees, the incentive to cheat the system seems like it would be greatly reduced.

“The concern, the banks say, isn’t so much the black-and-white issues, like whether to take money from the till. The problems arise with the more nuanced situations, like whether to report a trading loss right away or to try to fix it before anyone else notices” (http://blogs.wsj.com/moneybeat/2015/02/02/what-banks-are-doing-to-improve-their-culture/).

It seems how banks measure success plays the largest factor in their employees’ behavior. Everyone wants to attain that “big” promotion, or standout amongst their colleagues, and I believe, especially in finance, they will do whatever it takes to achieve that goal. If taking large risks, or disregarding the rules and regulations is the method of achieving success, then that will be the type of behavior and performance exemplified by a company’s employees. However, like I mentioned above, if success is measured as people who behave ethically, for example by not ignoring unethical actions and going as far as actually reporting those actions to managers, then employees will strive to behave in that way when they are trying to climb to corporate ladder. It seems that all people want be successful and most of the time they will do whatever it takes to achieve success, no matter how it is defined. Changing the way individual banks measure success, in-house, could go a long way in changing the culture of Wall Street as a whole.