Silence isn’t always golden

Rex is being recruited to train the team advising borrowers who are in difficulties. But Judith knows one of his secrets from her previous job. Should she blow the whistle? BOB SOUSTER discusses her dilemma.

Judith works in the lending administration department at the head office of HYG Bank plc. The bank is a strong regional lender, proud of its record in maintaining the quality of its lending book and, even in bad times, has been able to keep arrears and defaults to an acceptable level.

Recently, though, the executives have become concerned that the number of problem loans is increasing significantly, because of the economic downturn and the closure of two major employers located near important bank branches.

The head of lending administration has announced that more resources will be committed to advising borrowers in arrears with four specialist advisers to help borrowers experiencing difficulties plan a way forward.

He also says he’ll be asking Rex, a young, enthusiastic external consultant, to train the specialist advisers and members of the lending administration team directly involved with giving first-line advice on the telephone and in interviews. His memorandum has a very impressive summary of Rex’s career and achievements, which include working successfully with large financial institutions on similar initiatives.

Judith is concerned about Rex’s engagement. Before joining HYG Bank three years ago, Judith worked for KLN Bank Ltd in a similar role to her present one. While she was there, Rex left the company to start his own consultancy. Judith knows he had major problems, including personal financial difficulties.

When working as a financial adviser, Rex had been transferred from his duties because his personal credit check disqualified him under the company’s internal rules from giving advice. After joining the collections team, Rex had delivered impressive results dealing with customers experiencing financial difficulties, but his high pressure tactics resulted in many complaints from customers.

Judith feels it’s wrong for a person who cannot manage his own finances to advise others how to do so. She also feels that HYG Bank’s culture is incompatible with the approach to arrears management Rex would favour. Should she ‘blow the whistle’ on Rex, or keep quiet?

Judith’s ethical dilemma has two perspectives: duty and consequences.

Her concerns arise from the moral  high ground she feels all professional bankers should occupy. She regards Rex to be hypocritical, and considers someone with his ‘colourful’ financial background is hardly in the best position to preach to others.

Holding these values dear, she could try to dissuade her manager from engaging Rex, though his briefing suggests it might be too late to do so. Having high moral values (or integrity) is fine, but where did Judith get the inside information on Rex? If she didn’t have previous experience with KLN Bank, she wouldn’t know anything about him. As an employee, she had a duty of confidentiality which most would accept continues after she left the previous employer.

Most ethical decision-taking models start with ‘Gather the facts’. What exactly does Judith know about Rex? She knows that, more than three years ago, he had some problems with his own finances and intimidated others to get them to tidy up their own affairs.

She actually knows nothing about Rex’s personal circumstances now, and overlooks the fact that, in the intervening period, the Financial Services Authority has reinforced the standards expected of those advising borrowers experiencing difficulties. If Rex advocates high pressure techniques, he’ll be quickly shot down by those who know the rules.

But Judith also needs to look at the alternative consequences of ‘blowing the whistle’ or keeping quiet. If she discusses her concerns, she’ll immediately compromise her own integrity, as her manager will be aware that secrets obtained during previous employment should be sacrosanct.

She may succeed in taking Rex off the consultancy work, but in doing so the bank may lose the benefits that he can bring – he apparently has a proven track record. If Rex is the wrong person for the job, this will quickly become apparent.

If Judith keeps quiet and Rex proves a disaster, she’ll feel she should have spoken out. But that is not a good reason for pre-empting the problem. To appease her conscience, Judith could suggest that all consultants be routinely credit checked, as some companies do.

In practice, there are many examples of these incompatibilities. One of the most famous authors on dieting died obese. An equally famous property expert had to liquidate his property company during the credit crisis. A well-known consultant on how to make companies profitable met a similar fate.

Ask the spouses of any number of celebrity chefs who does the cooking at home! Maybe they’re all better at telling others how to deliver than putting it into practice themselves.  

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