Can 158 words give the banking industry a moral core? That’s the question that the Netherlands will attempt to answer next year when it implements a requirement that its private bankers (all 90,000 of them) take an oath of good behavior. Bankers in the Netherlands, like those in America, have developed a reputation of recklessness and self-interest after the global financial crisis, and the chairman of the Dutch Banking Association believes an oath is what's needed to inspire bankers to get in touch with their better selves.
People have been taking oaths for a while—they preceded the first human religion—so the Dutch faith in oaths is understandable. And it never hurts to think creatively about responding to what many view as a deeply-rooted ethical deficiency in the banking industry.
But this oath is perhaps a little too hopeful (even considering that violating it could result in fines). It tries to provide the tools for dealing with complex moral quandaries through simple, vague language—which will have a hard time doing its job as long as destructive behavior continues to go unpunished. The original Hippocratic Oath (377 words) has been so effective not because it is particularly enlightening as a text, but because it exists in the context of a culture that already prioritizes and honors ethical behavior.
Kara Tan Bhala, the founder of the Seven Pillars Institute, a nonprofit focusing on ethics in finance, is enthusiastic about the Netherlands’ new requirement. “Taking an oath is not quixotic at all,” she says. “Bankers are human and affected by symbolism and purpose.” Even if it’s not the only step that should be taken to change banking culture, it is a good first one, she thinks. She warns of being overly reliant on regulations to save the industry’s soul: “There cannot be a rule for every possible wrongful act in banking,” she says.
John Boatright, a professor of business ethics at Loyola University Chicago, is less optimistic. It’s not that oaths won’t work, he says, but that they won’t work in the absence of broader changes. “They are most significant as a signal, as an indication of an intent on the part of government and the industry to get serious,” he says. Boatright’s concern is that once bankers have telegraphed their good intent by taking an oath, there might be a sense that the industry’s ethical mess has been tidied up once and for all. That won’t be true, he argues, until bankers can sense the threats of significant prison sentences or fines in response to unsavory conduct.
Moreover, as Boatright argued in a May 2013 paper in the Review of Social Economy, banking would have a hard time with a Hippocratic-like oath because its moral questions have murkier answers than those in medicine. Patients’ needs are one-dimensional, in that it’s the doctor’s job simply to help them and ease their suffering. Banking is more complicated, as Boatright lays out:
“A bank’s relationships with all its clients fall on a continuum from a very strong fiduciary duty to act solely in a client’s interests in some matters to pure arm’s-length transactions with counterparties, who may be regarded as ‘sophisticated investors’ whose mistakes may be ruthlessly exploited as trading opportunities.”
A one-size-fits-all ethical guideline is of limited use in such a complex industry, and efforts would probably better be channeled toward more thoroughly teaching would-be bankers how to think through ethical dilemmas when they’re still in school.
Whether symbolic or substantive, this oath is still a commitment one is making to oneself, and some research suggests that voluntary commitments can induce better decision making, encouraging the sluggish to get into the gym or the unhealthy to eat more-nutritious foods. Tulane University's Janet Schwartz studies voluntary “commitment contracts.” “There is some experimental evidence that such oaths can work to prevent cheating—at least if people are reminded of them right before the chance to cheat,” she said. “It remains to be seen, however, whether taking a professional oath once, or on some infrequent basis, has a profound effect on behavior over time.”
Schwartz has found that even in mundane commitments, such as the decision to exercise, what matters is that the contract is enforceable. “In our study people couldn’t just like the idea of pre-commitment and show improvement. There had to be a real threat of loss,” she said. So when it comes to something less mundane—say, the management of trillions of dollars—it’s all the more important that consequences of bad behavior are constantly palpable.
The efficacy of the Dutch oath remains to be seen. It might work, but it probably won't. It's a symbolic gesture—here's to hoping it isn't a hollow one.
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