Abstract
Following developments of corporate malpractices and unethical activities, there has also been a growing presence of scrutiny on the role played by boards of directors and senior management in the banking industry, on how the industry is curbing, if at all, unethical behaviour in corporate governance structures and business processes.
The current financial services corporate governance systems have not been ensured to perform as expected, and as a result, have failed to curb unethical behaviour and corporate governance deficiencies in the South African banking industry.
This study investigates corporate governance mechanisms and business processes in South Africa’s financial institutions, especially in relation to unethical behaviour and corporate governance deficiencies in the South African banking industry. The study describes the fundamental causes of unethical behaviour as perceived by board members, management, and other educated participants with knowledge and experience in the South African banking industry.
The study adopts phenomenology as its method of inquiry and utilises a qualitative research design. The researcher conducted semi-structured interviews with board members, senior management, and participants in South Africa’s financial services market who have expertise, experience, and knowledge in corporate governance and ethics. In addition to individual interviews, a focus group was conducted as a secondary data collection method. This provided an opportunity to capture multiple points of view.
During the time of this study, all the focus group participants worked in the financial services industry and were chosen based on their industry expertise and experience. As this study is specific to the South African context, all participants were found in South Africa at the time of the study. As a result, the researcher was able to collect the data required conveniently.
This study contributes to a more comprehensive understanding of the unique context and complexities of embedding an effective corporate governance framework in South Africa’s banking industry.
The major barriers to enforcing ethical and effective corporate governance in the banking industry were found to be managerial interference in the work of assurance providers, the complexity of the ethics concept, and, at times, an over-reliance on auditors. The results revealed managerial
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interference, particularly in the work of assurance providers, both internal and external. This is in direct opposition to the concepts of integrity, independence, and transparency, which are foundations in sound corporate governance.
Furthermore, the study found that the notion of ethics is not clearly articulated. In one organisation, sector, or environment, what is ethical might not be ethical in another. Therefore, this blurs what ethical behaviour is.
The study also found that the fundamental causes of the perceived lack of implementation of ethical and effective corporate governance practices in the banking industry in South Africa were greed, shareholder pressure, arrogance and ignorance, and pressure to reach targets. Selfishness drives people to seek personal gain, usually monetary gain, which manifests as greed.
Greed is the result of selfishness, which leads people to seek personal gain, usually in monetary terms. This has ramifications for implementation of ethical and effective corporate governance.
Whistleblowing, good human resource practices, ethics surveys, and training were found to be key enablers of good corporate governance in the banking industry in South Africa.
The study concludes with recommendations and a proposed governance and ethics framework aimed at strengthening or establishing effective corporate governance in South Africa’s banking industry.