Over the phone, one could almost hear Jordan Thomas' heart sink.
The former assistant director of the Securities and Exchange Commission was pouring over the results of a new survey of 500 senior people in the U.S. and U.K. financial services industry.
Nearly a quarter of them, the poll showed, believed that financial services professionals had to engage in unethical or illegal conduct to succeed in the business. A similar number had observed or had first-hand knowledge of wrongdoing in their workplace, and 16 percent even said they would commit a trading-related crime if they could get away with it.
"Overall, the results were troubling," says Thomas, who is now in private practice representing corporate whistleblowers for Labaton Sucharow, the New York law firm that commissioned the survey. "It appears the financial services industry has lost it way."
That may be nothing extraordinary to the most jaded observers of the business, but even Thomas-who was a top lawyer in the SEC's division of enforcement-admits to being taken aback by the level of cynicism and complacency that many of the survey respondents had toward criminal or unethical behavior in their midst.
It wasn't just the high number of people who think competitors cheat (39 percent) or the 20 percent who were unsure if their own company would deal with impropriety appropriately. It was also the low numbers (30 percent) who thought the SEC or the U.K.'s investor-protection body, the Serious Fraud Office, would effectively deter, probe and prosecute criminal activity even with the benefit of recent regulatory reforms.
Thomas was floored, too, that 30 percent admitted to believing that their firms' compensation practices create pressure to compromise ethics-or worse.
"I think there is a debilitating trust problem in corporate America, where people just don't trust the people who can and should be fixing some of the problems that exist," Thomas says. The number of financial professionals who feel that pay practices encourage wrongdoing "suggests there is a disconnect between what the financial services industry preaches and what it actually does."
It should be noted that Thomas and his firm represent whistleblower plaintiffs, and arguably have an interest in painting a landscape of widespread corporate corruption. But Labaton's survey isn't the only poll to suggest shaky ethical underpinnings in corporate America.
The latest National Business Ethics surveys by the nonprofit Ethics Resource Center show that 47 percent of employees at U.S. companies-and 41 percent of employees at Fortune 500 firms-don't believe that their companies have strong ethical cultures. The poll data also indicates that 16 percent of workers at Fortune 500 companies feel pressure to engage in illegal conduct-but that's well below the 26 percent who felt so in the banking and securities industries. "It seems that the financial services industry has a higher degree of cultures that are not strong," says Thomas. "Obviously this is something financial services professionals should be paying attention to."
Labaton's survey was conducted in June by the British polling firm Populus, which compiled online interviews with bankers, fund managers, analysts and other financial sector employees described as being in "senior" positions. The results were released in July along with Labaton's whistleblower "eligibility calculator," an online tool to help people assess whether their tips about corporate wrongdoing would make them eligible for federal protection-or rewards-through the SEC's whistleblower program.
Neither the American Bankers Association nor the Securities Industry and Financial Markets Association offered up spokespeople to refute the findings of the survey. (SIFMA's own chairman, Jerry del Missier, stepped down this summer after the Libor scandal caused him to resign as the chief operating officer of Barclays.)
For Thomas, one of the few heartening responses in the survey was the overwhelming majority (94 percent) who said they would report wrongdoing by superiors if federal law would protect their jobs or offer rewards for whistleblowing. But even that number came with a somber surprise: only 44 percent knew that this already is the case. More than half had no knowledge that such protections exist under the SEC whistleblower program established under the Dodd-Frank Act.
"We're missing out on literally half" of the potential cases the SEC could be filing if more people understood or learned about the program, Thomas says.
Already, the whistleblower program is credited with producing about two of every seven tips resulting in official inquiries by regulators. The ratio could rise, as the SEC this fall is expected to announce its first monetary rewards to whistleblowers, allowing them to share in some of the fines levied against wayward firms.
With such financial incentives, Thomas says, more people should be encouraged to step forward.
