ETHICS, PROFESSIONALISM AND

CORPORATE GOVERNANCE IN
BANKING BUSINESS

BY

DEJI OLANREWAJU LLB, (HONS), LL.M, BL, BA, M.SC, FCIB, FIMA, FCMR.

PIONEER HOD DEPARTMENT OF INTERNATIONAL LAW, SCHOOL OF

LAW AND SECURITY STUDIES, BABCOCK UNIVERSITY, ILISAN

BEING A PAPER DELIVERED ON THE 19TH JUNE 2014 AT CONFERENCE

ORGANISED BY CIBN AT DIPLOMAT HOTEL, IKEJA - LAGOS
INTRODUCTION

BANKS AND OTHER FINANCIAL INSTITUTIONS

ARE THE MOST REGULATED ECONOMIC
UNITS. THE TRIPOD UPON WHICH
REGULATION IS CONSOLIDATED IS ETHICS,
PROFESSIONALISM AND CORPORATE
GOVERNANCE. BANKING IS BUILT on
CONFIDENCE, WHICH CAN GENERALLY BE
GUARANTEED BY ETHICAL PRACTICES
WHICH IS VERY KEY IN BANKING
OPERATIONS.
 CONT’D
DUE TO FINANCIAL SCANDALS AROUND THE
WORLD, THE NEED FOR THE PRACTICE OF
GOOD CORPORATE GOVERNANCE HAS
BECOME MORE EXPEDIENT IN ORDER TO
INCREASE SHAREHOLDER VALUE AND
MEETING THE EXPECTATIONS OF THE
OTHER SHAREHOLDERS.
 CONT’D

THIS PAPER IS AN ATTEMPT TO EXPLAIN

SOME KEY CONCEPTS, ESTABLISH THE
SYMBIOTIC RELATIONSHIP BETWEEN
ETHICS, PROFESSIONALISM AND
CORPORATE GOVERNANCE. THE IMPACT OF
THE CONCEPTS ON BANKING OPERATIONS
WILL BE CRITICALLY EXAMINED. I SHALL
CONCLUDE THE PAPER BY MAKING
REQUISITE SUGGESTIONS.
 CONCEPTUAL CLARIFICATIONS
ALL THESE CONCEPTS IN OUR DISCOURSE
ARE DEVOID OF A UNIVERSALLY ACCEPTED
DEFINITIONS. HOWEVER, WE ARE GOING TO
ADOPT THE FOLLOWING WORKING
DEFINITIONS.
ETHICS:- A SET OF MORAL PRINCIPLES OR
VALUES, USED BY ORGANISATION ITSELF
AND ITS EMPLOYEES, IN ALL THEIR
ACTIVITIES, BOTH INTERNAL AND IN
RELATION TO THE OUTSIDE WORLD. IT
CONNOTES A SET OF MORAL PRINCIPLES
OR RULES OF BEHAVIOUR.
 CONT’D
PROFESSIONALISM:- IS ALL ABOUT
COMPETENCE AND SKILL ATTACHED TO A
PROFESSION ON VOCATION. IT CONNOTES A
COMMITMENT TO EXCELLENCE AND HIGH
ETHICAL STANDARDS IN RENDERING OF
PROFESSIONAL SERVICE.

CORPORATE GOVERNANCE:- IS THE SET OF

PROCESSES, CUSTOMS, POLICIES, LAWS
AND INSTITUTIONS AFFECTING THE WAY A
CORPORATION (OR COMPANY) IS DIRECTED,
ADMINISTERED OR CONTROLLED.
 ETHICAL ISSUES IN BANKING
OPERATIONS
• DUE TO THEIR KEY ROLE IN THE
ECONOMY, WHILE WORKING UNDER THE
PRINCIPLES OF PROFITABILITY AND
PRODUCTIVITY, BANKS ARE OBLIGED TO
OBEY ETHICAL PRINCIPLE OF THE
BANKING PROFESSION.
THE CBN MAKES IT A DUTY BY CHECKING
THAT THE BANKS;
• OPERATE IN A RESPONSIBLE,
HONEST AND BUSINESS LIKE
MANNER;
 CONT’D
• PROMOTE AND ENCOURAGE PROPER
STANDARDS OF CONDUCT AND SOUND AND
PRUDENT BUSINESS PRACTICES;
• SUPPRESS ILLEGAL, DISHONOURABLE OR
IMPROPER PRACTICES.
ETHICAL ISSUES CAN ARISE IN THE FOLLOWING
WAYS;
• CUSTOMER SATISFACTION (KYC)
 CONT’D
• CONFLICT OF INTEREST
• GRATIFICATION
• AVOIDANCE OF AN ATTEMPT TO ‘FAKE’
ETHICS AS PART OF AN IMAGE BUILDING
CAMPAIGN
• COMPROMISE FOR SHORT TERM GAIN E.G.
(DR. PAT ROBERTSON AND BANK OF
SCOTLAND).
• ACCUSATION OF EXCESSIVE CHARGES BY
CUSTOMERS E.G. 75% OF CASES
BROUGHT BEFORE THE SUB-COMMITTEE
ON ETHICS AND PROFESSIONALISM OF
THE BANKERS COMMITTEE CONSISTS OF
ALLEGATIONS OF EXCESSIVE BANK
CHARGES.
 CONT’D

• MISUSE OF INFORMATION
• DISTORTION OF RECORDS
• VIOLATION OF CONFIDENTIALITY
• CORPORATE SOCIAL RESPONSIBILITY (CRS)
 POSITIVE IMPACT OF ETHICS ON
BANKING OPERATIONS
• GUIDE BANKING BUSINESS CONDUCT
ALONG THE LINE OF MORALITY
• ENSURE CUSTOMER SATISFACTION
• ENSURE STEADY AND FUNCTIONAL
GROWTH OF THE BANKING BUSINESS
• ENSURE THAT EFFECTIVE
POLICIES/PRACTICES ARE FOLLOWED.
 PROFESSIONALISM

PROFESSIONALISM IS ALL ABOUT

COMPETENCE AND SKILLED ATTACHED TO A
PROFESSION OR VOCATION. INCULCATION
OF PECULIAR SKILLS AND VALUES, STRICT
ADHERENCE TO UNIVERSALLY
ACKNOWLEDGED STANDARDS THAT GUIDE
PERFORMANCE.
 POSITIVE IMPACT OF PROFESSIONALISM IN
BANKING BUSINESS
• ADHERENCE TO SOUND AND GENERALLY
ACCEPTED BANKING PRACTICE.
• ENSURING STRONG COMMITMENT TO
GOOD BANKING PRACTICE.
• PROTECTION OF DEPOSITORS AND
INVESTORS.
• PREVENTION OR MINIMIZING OF SYSTEMIC
FAILURE
• PROMOTION OF MARKET INTEGRITY AND
DISCIPLINE
• MAINTENANCE OF UNIFORMITY AND
STANDARDIZATION OF PRACTICE.
 CONT’D
• MAINTENANCE OF RESPONSIBLE CORPORATE
GOVERNANCE.
• MAINTENANCE/RESTORATION OF PUBLIC
CONFIDENCE IN THE SYSTEM.
• DEVELOPMENT OF CONFIDENCE IN THE BANKING
SYSTEM
CORPORATE GOVERNANCE AND
BANKING OPERATIONS
GIVEN THE CENTRAL ROLE OF THE BANKING
SYSTEM AS THE PRIMARY MOBILIZER AND
ALLOCATOR OF FINANCIAL RESOURCES,
PROVIDER OF PAYMENTS AND THE CHANNEL
FOR THE TRANSMISSION OF MONETARY POLICY
EFFECT TO THE REAL SECTOR IN THE
ECONOMY, THE ISSUE OF GOVERNANCE
BECOMES EXPEDIENT.
 CONT’D
THERE IS ALSO GLOBAL FOCUS ON
CORPORATE GOVERNANCE IN THE
AFTERMATH OF ENRON CORPORATION
FAILURE, RUSSIAN FINANCIAL SCANDAL,
ASIAN FINANCIAL CRISES AND OF RECENT
GLOBAL MELTDOWN.
 THE FUNDAMENTAL PRINCIPLES OF
CORPORATE GOVERNANCE
THE FOLLOWING AMONG OTHER THINGS
REPRESENT SOME FUNDAMENTAL
PRINCIPLES OF CORPORATE
GOVERNANCE. THEY ARE:

• THE CORPORATE VALUES, CODES OF

CONDUCT AND OTHER STANDARDS OF
APPROPRIATE BEHAVIOUR AND THE
SYSTEM USED TO ENSURE COMPLIANCE
WITH THEM;
 CONT’D
• A WELL – ARTICULATED CORPORATE
STRATEGY AGAINST WHICH THE SUCCESS
OF THE OVERALL ENTERPRISE AND THE
CONTRIBUTION OF INDIVIDUALS CAN BE
MEASURED;
• THE CLEAR ASSIGNMENT OF
RESPONSIBILITIES AND DECISION –
MAKING AUTHORITIES, INCORPORATING A
HIERARCHY OF REQUIRED APPROVALS
FROM INDIVIDUALS TO THE BOARD OF
DIRECTORS;
 CONT’D
• ESTABLISHMENT OF A MECHANISM FOR THE
INTERACTION AND COOPERATION AMONG THE
BOARD OF DIRECTORS, SENIOR MANAGEMENT
AND THE AUDITORS;
• STRONG INTERNAL CONTROL SYSTEMS,
INCLUDING INTERNAL AND EXTERNAL AUDIT
FUNCTIONS, RISK MANAGE MERIT FUNCTIONS,
INDEPENDENT OF BUSINESS LINES, AND
OTHER CHECKS AND BALANCES;
• SPECIAL MONITORING OF RISK EXPOSURES
WHERE CONFLICTS OF INTEREST ARE LIKELY
TO BE PARTICULARLY GREAT, INCLUDING
BUSINESS
 CONT’D
RELATIONSHIPS WITH BORROWERS
AFFILIATED WITH THE BANK, LARGE
SHAREHOLDERS, SENIOR MANAGEMENT
OR KEY DECISION – MAKERS WITH THE
FIRM;
• THE FINANCIAL AND MANAGERIAL
INCENTIVES TO ACT IN AN APPROPRIATE
MANNER OF FORCED TO SENIOR
MANAGEMENT, BUSINESS LINE
MANAGEMENT AND EMPLOYEES IN THE
FORM OF COMPENSATION, PROMOTION
AND OTHER RECOGNITION; AND
• APPROPRIATE INFORMATION FLOWS
INTERNALLY AND TO THE PUBLIC.

20
 POSITIVE IMPACT OF CORPORATE
GOVERNANCE ON BANKING OPERATIONS.

ANY BANK THAT EMBRACES GOOD

CORPORATE GOVERNANCE WILL BENEFIT
POSITIVELY IN THE FOLLOWING WAYS.
• GOOD CORPORATE GOVERNANCE ENSURE
CORPORATE SUCCESS AND ECONOMIC
GROWTH.
• STRONG CORPORATE GOVERNANCE
MAINTAINS INVESTORS’ CONFIDENCE, AS A
RESULT OF WHICH, COMPANY CAN RAISE
CAPITAL EFFICIENTLY AND EFFECTIVELY.
 CONT’D

• IT LOWERS THE CAPITAL COST.

• THERE IS A POSITIVE IMPACT ON THE
SHARE PRICE.
• IT PROVIDES PROPER INDUCEMENT TO
THE OWNERS AS WELL AS MANAGERS TO
ACHIEVE OBJECTIVES THAT ARE IN
INTERESTS OF THE SHAREHOLDERS AND
THE ORGANISATION.
• GOOD CORPORATE GOVERNANCE ALSO
MINIMIZES WASTAGES, CORRUPTION,
RISKS AND MISMANAGEMENT.
 CONT’D

• IT HELPS IN BRAND FORMATION AND

DEVELOPMENT.
• IT ENSURES ORGANIZATION IN MANAGED
IN A MANNER THAT FITS THE BEST
INTERESTS OF ALL.
 CONCLUDING REMARKS

• ETHICS, PROFESSIONALISM AND

CORPORATE GOVERNANCE PLAY VITAL
ROLES IN BANKING BUSINESS.
• THERE IS A SYMBIOTIC RELATIONSHIP
BETWEEN ETHICS, PROFESSIONALISM AND
CORPORATE GOVERNANCE
• CONSTANT TRAINING ON THE SYMBIOTIC
RELATIONSHIP VIS-À-VIS BANKING
PERFORMANCE CANNOT BE OVER-
EMPHASIZED.
 CONT’D
• BANKING OPERATIONS BUILT ON ETHICS,
PROFESSIONALISM AND CORPORATE
GOVERNANCE WILL ULTIMATELY LEAD TO
ROBUST BANKING SYSTEM WITH
SUSTAINABLE GROWTH AND DEVELOPMENT.
THANK YOU FOR YOUR RAPT ATTENTION.