Bankers fail honesty test, according to Swiss researchers

IS THIS the proof that what you’ve suspected is true? Are bankers more dishonest that the rest of us?

Michael Douglas as Gordon Gekko in a scene from film 'Wall Street'.

THE banking industry seems to bring out dishonesty in people, a new study suggests.

A team of Swiss economists tested the honesty of bank employees in a lab game that would pay off in cash if they cheated. When workers at an unnamed bank were asked about their home life, they were about as honest as the general public. But employees who had just been asked about work at the bank cheated 16 per cent more.

“Bank employees are not more dishonest than others,” said Ernst Fehr of the University of Zurich, author of the study published Wednesday by the journal Nature. But he said when reminded of their job they become more dishonest, so something about the culture of banking “seems to make them more dishonest.”

Crooked bankers love the high life.

They gave them what is a fairly standard honesty test. They were told to flip a coin 10 times; each time they flipped they could earn $20 if it matched what researchers had requested — sometimes heads, sometimes tails. An honest person would report matching the requested flip result about 50 per cent of the time. But when workers were asked questions about their work at the bank, placing their work at the forefront in their minds, they self-reported the result that paid off 58 per cent of the time.

When researchers repeated the test with more than 350 people not in banking industry, job questions didn’t change honesty levels. Researchers tested 80 employees of other banks and they came up with about the same results as those from the main bank.

Six outside experts in business ethics and psychology praised the study to various degrees. Duke University behavioural economics professor Dan Ariely, author of the book “The Honest Truth About Dishonesty,” said he agreed with the study authors that one possible solution is an honesty oath for bankers, like doctors’ Hippocratic oath.

Gordon Gekko really didn’t learn his lesson between the first and second movies.

University of Louisville psychologist Michael Cunningham said while the study is intriguing, it is too broad in its conclusions.

Fehr said recent multi-billion dollar international banking scandals convinced him that he had to test scientifically public perceptions about bankers not being honest.

The study’s findings ring true to Walt Pavlo, though he is not a banker — he was in finance at telecom giant MCI and pleaded guilty to wire fraud and money laundering in a multi-million dollar scheme. Pavlo said before joining his company he had worked in the defence industry where ethics were stressed and wasn’t tempted to cheat. That changed in his new job where he was “paid for performance” and was told to be aggressive.

That culture “influenced me in a way that initially I thought was positive,” but led to prison, said Pavlo, who now teaches business ethics and writes about white-collar crime.

Originally published as Bankers fail honesty test, according to Swiss researchers