Ethics in Management - Organizational Analysis - Bank of Montreal Financial Group.
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McGILL UNIVERSITY Faculty of Management MGPO 450 - Ethics in Management Organizational Analysis Bank of Montreal Financial Group TABLE OF CONTENTS 1.0 Introduction 3 2.0 BMO's Code of Ethics: First Principles 4 2.1 The development of the Code 4 2.2 Analysis of the Code 5 3.0 Training, Communication and Control 8 3.1 Training 8 3.2 Communication 8 3.3 Control 9 4.0 Evaluation of BMO's Ethics Program 10 4.1 Values or compliance 10 4.2 Trends and Challenges: 11 5.0 Recommendations 13 5.1 Formal and specific ethics training 13 5.2 Despite industry shift to compliance, remain values-based 14 5.3 Introduce employees to the corporate compliance office 14 5.4 Exchange of information 15 6.0 Conclusion 16 Bibliography 17 Appendix A: The Bank of Montreal Financial Group 18 1.0 Introduction Ethics has recently become an important topic of discussion amongst directors across North America's boardrooms. Whether this is a response mainly to prevent their company from being involved in the next 'scandal' or whether it is driven by changing societal values and increased competition, there is no doubt that today ethics are a more important factor in business decision making. Many companies have implemented or revised codes of ethics, and the Bank of Montreal (BMO) is no different. Operating in a number of markets around the world offering personal, corporate and commercial financial services across a variety of business units (see Appendix A), BMO is one of the hundreds of financial institutions in North America that society relies on to protect their life savings. Thus, BMO has many stakeholders and like the majority of its competitors, has a code of ethics in place to try and prevent employees acting unethically and harming those stakeholders. While in the financial sector there is a wide array of rules that must be complied with, BMO has taken a surprisingly values-based approach to its code of ethics, with the corporation trusting its employees' judgments in taking the best decision when faced with an ethical issue.
Thus, there is organization-wide communication that ethics is important at BMO. The catchphrase 'Is it fair? Is it right? Is it legal?' is also important in communicating to employees the approach taken by BMO with regard to ethics. By providing this guideline within the primary communication tool regarding ethics (that is, the First Principles document), employees understand how the company tackles ethical decision-making at a practical level. The code of ethics also has references to other company documents and policies which outline in greater detail expected levels of conduct and expand on particular issues and discuss issues that go beyond ethics - for example norms of service, legislative requirements and so on. In total, the effect of all this communication is that employees realize that ethics is a serious concern for BMO, and the commitment to ethical behavior starts at the top of the organization, and is expected from all employees. 3.3 Control Organizational structure plays an important part in reinforcing the ethical behavior of employees (James, 2000). While the Bank of Montreal emphasizes the promotion of its employees' good judgment, control plays an important part within the organization, and the creation of a specific department that deals with Corporate Compliance, and in particular ethics, again communicates to employees that ethics is given more than just lip service across the organization. Thus, BMO uses its organizational structure to have a great influence in developing a culture of ethical behavior within the firm. In terms of reporting ethical breaches and how they are dealt with, BMO has a strategy that ensures fairness and equity. When a breach is filed, two lines of reporting become active - one progresses up the chain of management, whilst another heads out to the Corporate Compliance Department. In this way, the compliance department can monitor the progression of the report up the hierarchy, and has wide ranging powers to reopen a file, encourage both sides of the issue to be heard, and act in the best interests of all parties to ensure that ethical breaches are dealt with in a fair yet confidential manner.
This idea would also contribute to the corporate culture of ethical behavior that BMO are trying to engender amongst their employees. The chat facility could be anonymous if need be, and it could also be monitored by the corporate compliance office if the company thought that this was appropriate. 6.0 Conclusion Throughout this presentation, the ethics program at the Bank of Montreal has been discussed. By examining the code of ethics, identifying the training, communication and control initiatives of the bank, evaluating the ethics program, and presenting recommendations for the improvement of the program, we have observed that the values-based approach to ethics at BMO is successful, but could be improved. The success of the program is based on good communication - it is evident from the first page of the code of ethics that the higher levels of management see ethics as an integral factor in the company's success, with the Chairman and CEO setting the standard. The 'is it fair? Is it right? Is it legal?' catchphrase is successful in encouraging employees to think before they act, whilst the six First Principles show employees the standards that are expected of them. Furthermore, by implementing ethics into standard training, and providing open yet fair control systems, and encouraging a corporate culture of sound ethical behavior, employees' are trusted to make sound judgments when it comes to making ethical decisions in order to minimize the harm to stakeholders. However, it must be kept in mind that there are still external regulations that must be abided with, and that employees must also be educated about these within the framework of a values-based approach to ethics. Although the values-based approach towards ethics at BMO is successful, there is room for improvement. By offering more specific ethics training, resisting the trend away from a values-based strategy towards compliance, introducing employees to the corporate compliance office, and encouraging the exchange of information, BMO can increase the awareness of ethical issues across the organization, and further encourage employees to exemplify and uphold the core standard of integrity within the organization.
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