It was hard to ignore the red-and-gold elephant in the middle of the auditorium on Thursday at Federal Reserve Bank of New York.

Though only a few participants mentioned Wells Fargo by name, the details of its phony account scandal — in which 5,300 employees created fake accounts to meet sales goal — were clearly fresh in the minds of attendees.

A key focus of the conference was the importance of workplace incentives. Throughout the day, panelists emphasized that senior executives set the ethical tone for their companies in the way they pay, promote and punish their employees.

"In my experience, people respond far more to incentives and clear accountability than to statements of virtues and values," said President William Dudley in his opening remarks. "The latter are worthy and necessary, but remain aspirational or even illusory unless they are tied to real consequences.

Panelists included several prominent bankers and regulators in the industry, including Baroness Onora O'Neill, member of the U.K. Banking Standards Board and professor at the University of Cambridge; Preet Bharara, U.S. attorney for the Southern District of New York; and Stephen Cutler, vice chairman at JPMorgan Chase.

Here are a few takeaways from the day:

It's not just senior executive pay that matters

Executive pay gets a lot of attention in the industry, but compensation for low and middle-level employees are just as important to upholding corporate ethics.

The same principles that are used to set compensation in the C-Suite — such as encouraging long-term performance — should apply across the company, said Norman Chan, chief executive of the Hong Kong Monetary Authority.

"An incentive system should not be confined to top management," Chan said. "How do you translate those values into middle management?"

A key cause of the Wells scandal were low-level employees trying to meet sales goals, which boosted their own bottom lines.

Still, scaling back short-term incentive pay for mid-level employees is not always feasible. It can put lower-paid employees in an unnecessarily tight spot. In many cases, it's more effective to use the promotion process to reinforce ethical behavior, according to Chan.

At a number of large banks, compliance officers are given veto power on the promotions for managing directors. Choosing promotions is important, given that younger employees often emulate the behavior of their managers.

"Promotion prospects will provide incentives for people to move forward," Chan said.

Banks shouldn't let problem employees move to another bank

Problem employees represent a potential contagion to the entire industry.

For instance, traders at the center of the recent Libor and foreign-exchange scandals changed jobs and moved between banks before getting caught. In the process, they created social networks where collusive misconduct became a norm.

Making sure bad employees don't move freely to other banks should be a priority for the industry, many argued.

But it's a difficult issue to tackle. Sharing information about employees can expose companies to legal liability.

Two years ago, President Dudley said that regulators should create a central database of traders and other financial employees. The proposal, he said, would give banks a way to verify the performance histories of prospective employees.

Dudley made the case for the database again Thursday, but said he would like to see the industry — rather than regulators — find a way to move it forward.

Dudley said the idea would likely require legislation, to create a safe harbor for banks to share certain employee information. He also said a database would need to have an appeals process in place.

But the proposal could go a long way to preventing the problem of so-called "bad apples."

"I think it's in the industry's self-interest," Dudley said.

Banks should look for enablers of bad behavior

More worrisome than "bad apples" are rule-following employees who don't speak up when they see a problem.

Most corporate crimes occur in workplaces where people refuse to speak up about the ethics violations they see, Bharara said.

It was a key element in the prosecution Bernie Madoff, who was charged in 2009 for running a Ponzi scheme. Bharara noted that it was also a factor at the sex-abuse scandal at Penn State.

It's a difficult issue to address, given that most people overestimate their ability to speak up during a crisis. But the executives are nonetheless responsible for creating workplaces that foster candor — where employees feel empowered to challenge colleagues and managers.

"In the shadows of the most massive frauds are lurking all kinds of enablers," Bharara said. "You need to figure out who those people are."

Enablers are hard to spot. They attend ethics training sessions and sign compliance policies. They don't commit crimes, but play a part in the cover up and concealment, according to Bharara.

"They are ticking time bombs," he said.

Bharara said it's a common theme in white-collar crime: someone provides "easy comfort" for an opinion that pushes the boundaries of propriety.

Time goes by, and eventually the envelope-pushing gets more aggressive, controls get less strict, and ultimately "bad stuff hits the fan" in the form of major reputational damage, he said.

"Unfortunately, with the economic pressure to perform higher than ever...cultures conducive to corruption can develop with relative ease," he said.

A bank's corporate value statement is not a panacea

Most values statements in the industry look exactly the same.

That was a point made throughout the day Thursday. Bankers and regulators said repeatedly that there is a disconnect between the values employees are directed to uphold, and how they react in day-to-day situations.

Performance goals and more subtle social incentives — such as fitting in with a team — play a bigger role in a company's corporate culture, panelists said.

"What does it mean for a firm to profess to putting the customer first, if employees are compensated and promoted regardless of what's good for customers?" Dudley said.

Big numbers matter, even if they are proportionally small

Wells Fargo has been ridiculed for repeatedly emphasizing that the 5,300 employees fired represented just 1% of its workforce and the 2 million accounts were a relatively small number of total accounts.

That may be true, but thousands of employees engaging in widespread fraud is large by any objective standard.

Panelists said bankers need to beware of being numbed by the logic of statistics. But just because a company fires 1,000 people one year, and 700 people the next, doesn't mean the company culture is improving.

Bank behavior may never be perfect, but it needs to improve

Nearly a decade after the financial crisis, the banking industry has struggled to regain its trust with the general public.

Improving corporate culture can help the industry accomplish that goal. Most panelists agreed that regulators have a role to play in enforcing ethical standards.

But regulations only set the minimum standard for behavior. In some cases, formal rules can also be counterproductive, providing a boundary for employees to push.

During his remarks, Bharara talked about a recent lecture that he gave to students at Harvard Business School. The lecture was about the importance of aspiring to uphold ethical principles, rather than meeting the minimum standards.

One of the students in the lecture stood up and asked a question. "He said, 'You know you talked about making sure you don't cross the line, and how it's dangerous to get too close to the line?'" Bharara said, recounting the story.

The student then asked a humorous, and troubling, follow-up:

"'So, my question is to you, just how far from the line do you recommend?'"

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