BUSINESS ETHICS 01 AND SUSTAINABLE …›...Business Ethics and Sustainable Development...
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BUSINESS ETHICS AND SUSTAINABLE DEVELOPMENT Interdisciplinary theoretical and empirical studies Sustainable finance and sustainable corporations ISSN 2451-456X
Transcript of BUSINESS ETHICS 01 AND SUSTAINABLE …›...Business Ethics and Sustainable Development...
BUSINESS ETHICS AND SUSTAINABLE DEVELOPMENT
Interdisciplinary theoretical and empirical studies
No. 01
Sustainable finance and sustainable corporations
ISSN 2451-456X
Silesian Center for Business Ethics and Sustainable Development
BUSINESS ETHICS AND SUSTAINABLE DEVELOPMENT
Interdisciplinary theoretical and empirical studies
No. 1
Sustainable finance and sustainable corporations
edited by
Anna Doś
Zabrze 2017
Business Ethics and Sustainable DevelopmentInterdisciplinary theoretical and empirical studies
No. 1Sustainable finance and sustainable corporations
NUMBER 1 EDITED BY:Anna Doś
SCIENTIFIC BOARD: MinRat Prof. DDr. Heinrich Badura (Federal Ministry of Science, Research and Economic, Vienna, Austria) Prof. Dr. Gerhard Banse (Berlin Center for Technic & Culture, Germany) Assoc. Prof. Dr. Habil. Małgorzata Baron-Wiaterek (Silesian University of Technology, Gliwice, Poland) Assoc. Prof. Dr. Habil. Wiesława Caputa (Silesian University of Technology, Gliwice, Poland) Assoc. Prof. Dr. Habil. Agata Chudzicka-Czupała (SWPS University of Social Sciences and Humanities, Poland) Assoc. Prof. Dr. Habil. Tomasz Czakon (University of Silesia, Katowice, Poland) Assoc. Prof. Dr. Habil. Janina Filek (Cracow University of Economics, Poland) Prof. PhDr. Daniela Fobelová, PhD. (Matej Bel University, Slovakia) Prof. PhDr. Pavel Fobel, PhD. (Matej Bel University, Slovakia) Prof. Dr. Habil. Eng. Wojciech Gasparski (Leon Kozminski Academy in Warsaw, Poland) Assoc. Prof. Dr. Habil. Izabela Jonek-Kowalska (Silesian University of Technology, Gliwice, Poland) Prof. Dr. Habil. Eng. Andrzej Karbownik (Silesian University of Technology, Gliwice, Poland) Prof. Dr. Habil. Aleksander Kholod (State University of Culture and Arts in Kiev, Ukraine) Prof. Dr. Habil. Andrzej Kiepas (University of Silesia, Katowice, Poland) Assoc. Prof. Dr. Habil. Aleksandra Kuzior (Silesian University of Technology, Gliwice, Poland) Prof. Dr. Habil. Anna Lewicka-Strzałecka (Polish Academy of Sciences, Poland) Dr. Habil. Eng. Mariusz Ligarski (Silesian University of Technology, Gliwice, Poland) Prof. Dr. Habil. Alla Lobanova (State University of Kryvyi Rih, Ukraine) Assoc. Prof. Dr. Habil. Eng. Anna Michna (Silesian University of Technology, Gliwice, Poland) Prof. Dr. Habil. Zofia Ratajczak (University of Silesia, Katowice, Poland) Prof. Dr. Meir Russ (Austin E. Cofrin School of Business at University of Wisconsin- Green Bay, USA) Dr. Habil. Danuta Szwajca (Silesian University of Technology, Gliwice, Poland) Assoc. Prof. Dr. Habil. Danuta Ślęczek-Czakon, prof. UŚ (University of Silesia, Katowice, Poland) Assoc. Prof. Dr. Habil. Radosław Wolniak (Silesian University of Technology, Gliwice, Poland) Dr. Habil. Mariusz Wojewoda (University of Silesia, Katowice, Poland) Assoc. Prof. Dr. Habil. Mariusz Zieliński (Opole University of Technology, Poland)
EDITORIAL BOARD: Assoc. Prof. Dr. Habil. Aleksandra Kuzior (chief editor) Dr. Anna Piekacz (assistant editor) Assoc. Prof. Dr. Habil. Izabela Jonek-Kowalska Dr. Eng. Anna Kochmańska Assoc. Prof. Dr. Habil. Radosław Wolniak Assoc. Prof. Dr. Habil. Mariusz Zieliński
© Copyright by Silesian Center for Business Ethics and Sustainable Development, 2017
Graphic design, language editing, composition, cover design: REMAR, www.remar-sosnowiec.pl
ISSN 2451-456X ISBN 978-83-61975-54-0
Publisher: Silesian Center for Business Ethics and Sustainable Development41-800 Zabrze, Roosevelt Str. 26-28 www.polsl.pl/organizacje/scebizr/strony/Witamy.aspx
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Contents:
Introduction ..........................................................................................................................................7
PART I SUSTAINABLE FINANCE
Ruben DE BRUYNE, Katarzyna POPCZYK, Daniil RODIONOV
Fiscal regulations and monetary policy during financial crisis .................................................. 11
Celia CAMPO, Petr LAJSEK, Veronika BORODAI
Banking 2020 and beyond .............................................................................................................. 23
Sylwia CHRAPEK, Kwint KRAMER, Fernando BRIOSO DE LA RICA
Remuneration schemes and bonuses in banking sector.
Comparative analysis – European perspective ........................................................................... 35
Tomáš TURNA, Aleksandra TRZASKA, Mike ALTENA, Brando STILLACCI
After Crisis Financial Regulation on Ethics and Anti Money Laundering.
Comparative Analysis .......................................................................................................................49
Kinga KOWALCZYK
Sustainability of Polish pension system in the light of selected social
and demographical aspects ............................................................................................................ 67
PART II SUSTAINABLE ORGANISATIONS
Zuzana ČMELÍKOVÁ
Toward Ethical Organizations – Ethics Officers and Ethical Leaders as Moral Agents ....... 81
Andrea KLIMKOVÁ
Ethics of care and sustainable development in context of applied ethics ............................. 91
Bibiána MARKOVÁ
Using case studies in the network approach to solve ethical problems
in nanotechnologies ...................................................................................................................... 103
Radosław WOLNIAK
Verbal and nonverbal communication in the recruitment process ....................................... 111
SPECIAL SUPPLEMENT
Paulina KUZIOR
Sustainable development of Silesia - panel discussion at the fairs and conference
InfoENERGIA 2017 ..........................................................................................................................121
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Spis treści:
Wstęp .....................................................................................................................................................7
CZĘŚĆ 1 ZRÓWNOWAŻONE FINANSE
Ruben DE BRUYNE, Katarzyna POPCZYK, Daniil RODIONOV
Regulacje fiskalne i polityka monetarna podczas kryzysu finansowego ................................ 11
Celia CAMPO, Petr LAJSEK, Veronika BORODAI
Bankowość 2020 i dalej ................................................................................................................... 23
Sylwia CHRAPEK, Kwint KRAMER, Fernando BRIOSO DE LA RICA
Systemy wynagrodzeń i premii w sektorze bankowym.
Analiza porównawcza z pespektywy europejskiej ...................................................................... 35
Tomáš TURNA, Aleksandra TRZASKA, Mike ALTENA, Brando STILLACCI
Pokryzysowe finansowe regulacje w zakresie etyki oraz przeciwdziałaniu
„praniu” pieniędzy – analiza porównawcza .................................................................................49
Kinga KOWALCZYK
Zrównoważony rozwój polskiego systemu emerytalnego w świetle
wybranych aspektów społecznych i demograficznych ............................................................. 67
CZĘŚĆ II ZRÓWNOWAŻONE ORGANIZACJE
Zuzana ČMELÍKOVÁ
W kierunku organizacji etycznych - doradcy etyczni i etyczni przywódcy
jako wzorce moralne ....................................................................................................................... 81
Andrea KLIMKOVÁ
Etyka troski i zrównoważony rozwój w kontekście etyki stosowanej ..................................... 91
Bibiána MARKOVÁ
Korzystanie z badania przypadkowego w przypadku sieciowym dla rozwiązywania
problemów etycznych w nanotechnologiach .......................................................................... 103
Radosław WOLNIAK
Komunikacja werbalna i niewerbalna w procesie rekrutacji .................................................... 111
DODATEK SPECJALNY
Paulina KUZIOR
Zrównoważony rozwój Śląska - panel dyskusyjny na targach i konferencji
InfoENERGIA 2017 ...........................................................................................................................121
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Sustainable development is articulated as a long-term goal for almost all societies across
the world. Sustainable development requires reaching the balance between three main
pillars of macro-system: economy – society – natural environment. Unfortunately
for past decades the economical development has been achieved to the detriment of
social development and at a cost of the environment The pope Francis in his apostolic
exhortation Evangelii Gaudium („The Joy of the Gospel”) writes: „Today everything comes
under the laws of competition and the survival of the fittest, where the powerful feed
upon the powerless. As a consequence, masses of people find themselves excluded and
marginalized: without work, without possibilities, without any means of escape”. Pope
Francis criticizes economic interests who “accept every advance in technology with a view
to profit, without concern for its potentially negative impact on human beings.” They show
“no interest in more balanced levels of production, a better distribution of wealth, concern
for the environment and the rights of future generations. Their behavior shows that for
them maximizing profits is enough.”
Financial system is often seen as a bastion for economic interets logic, where numbers
in balance sheets prevail over any other purpose or interest. Fortunately, something has
started to change. New types of consumers, new types of intruments, new types of policies
and governance mechanisms are being introduced in financial institutions and in financial
management of business firms. Corporations seek for balancing non-financial purposes
with financial goals in order to become legitimate members of the society. In this issue of
„BUSINESS ETHICS AND SUSTAINABLE DEVELOPMENT Interdisciplinary theoretical and
empirical studies” the international authors contribute to the widespreading of knowledge
about how financial institutions, governments and corporations try to implement financial
instruments, policies and concepts in order to reorient toward sustainable development
Introduction
Wstęp
Wstęp
BUSINESS ETHICS AND SUSTAINABLE DEVELOPMENT
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and make financial system and financial management more ethical and more human.
Many papers provide with interesting case studies showing problems and solutions from
the perspective of different countries, which allow for learning from best examples.
The inancial perspective is mixed with non-financial perspective to make the logic
of profit less powerful. The papers constitute a reach mix of ideas and perspectivs which
demonstrate, that sustainability of financial systems and sustainability if corporations
is multifaceted problem and requires complex and long-term strategies. Reader will
certainly be inspired about what possibilities exist to reform the financial imperative.
Anna Doś
Część 1
Zrównoważone finanse
Part I
Sustainable finance
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Abstract
Financial crisis has shown us that every European country financial system needs changes.
Banks and financial authorities must make use new and non-standard instruments
in their activities. It leads to the new era of finance expressed especially in new forms
of convergence between fiscal and monetary policies. This paper includes the most
important ideas on the history of changes in fiscal and monetary policies, propose
modifications and helps to understand main problems in fiscal and monetary policies.
Keywords: central banks operations, fiscal union, financial risk
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Regulacje fiskalne i polityka monetarna podczas kryzysu finansowego
Streszczenie
Kryzys finansowy pokazał, że systemy finansowe wszystkich krajów europejskich
wymagają zmian. Banki i instytucje nadzoru finansowego muszą wykorzystywać nowe
i niestandardowe instrumenty w swoich działaniach. Prowadzi to do nowej ery finansów
wyrażanej poprzez nowe formy konwergencji pomiędzy polityką fiskalną i monetarną.
Artykuł wskazuje najistotniejsze pomysły w historii zmian fiskalnych i monetarnych polityk,
proponuje modyfikacje oraz opisuje najważniejsze problemy w zakresie obu polityk.
Słowa kluczowe: Operacje banku centralnego, unia fiskalna, ryzyko finansowe
1 University College Ghent2 University of Economics in Katowice3 University of Finance and Administration in Prague
Ruben DE BRUYNE1
Katarzyna POPCZYK2
Daniil RODIONOV3
Fiscal regulations and monetary policy during financial crisis
BUSINESS ETHICS AND SUSTAINABLE DEVELOPMENT
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Introduction
First of all, in this paper the authors will discuss and give their opinion on several
compelling topics such as taxation and fiscal regulation during the financial crisis
in 2008/09. The main questions in this paper are; could the financial crisis has been
inevitable?; what Central Banks or financial authorities could have done differently
in terms of preventive operations, to be more efficient during ex-ante period ? Secondly
the topic of fiscal regulations will be analysed more deeply, it will be discussed whether
these regulations could prevent some of the risk that consumers took in the past, or not.
Lastly, growth opportunities on the financial markets will be presented. Authors will try
to find solutions for the Central Banks and financial authorities in terms of fiscal policy
to solve above mentioned problems.
Could the financial crisis has been inevitable, and what Central Banks or financial authorities could have done differently in terms of preventive operations, to be more efficient during ex-ante period?
Banks are financial institutions, so they have a huge impact on economic growth. Loan is
one of the most important instrument in the economy (Dalio, 2013). Consumers will
always spend more money than they earn, this is not necessarily wrong (???). Exceeding
loan possibilities should bring positive economic stimulation, as long as, borrowed
money are efficiently invested, so the debt can be paid off. Loans which are used for
overconsumption can be very dangerous to economy. From one side, it will help to grow
the economy, but from the other hand they can’t be paid off.
To be able to understand these processes better, the term of debt cycles must be
explained. It will also help to answer for the first question: could the financial crisis
has been inevitable? There are short-term debt cycles and the long-term debt cycles.
The short-term debt cycle is a cycle between 5 to 8 years, while the long-term debt
cycle is a period between 75 to 100 years. When the amount of spending money grows
faster than the production of goods, prices rise and this leads to inflation. The role
of The Central Bank is to prevent excessive inflation because it can have bad effects
on economy.
To decrease the inflation on the short-term debt, the Central Bank raises interest rates,
so consumers would have limited access to loans. Overconsumption should slow down
and the processes of normalizing the prices on the market should start. (Davidson
2006). However, due to use of this instrument, the costs of existing debts will rise. It.
When consumers spend less (because they earn less money), prices decrease and it leads
to deflation. During the deflation, the economic activity decreases and the next step
INTERDISCIPLINARY THEORETICAL AND EMPIRICAL STUDIES. NO. 1/2017
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is recession. When this happens the Central Bank normally starts to decrease interest
rates, so consumers get the possibility to take new loans, and supply will start to increase.
This process is called the short-term debt cycle.
As it was stated above, the negative trend of spending more than earning is still a huge
problem in nowadays. It leads to gap in balance between consumers’ debts and incomes,
and this situation is called a long-term debt cycle. Lenders even more freely extend
debt lines because everybody thinks things are going great, consumers feel wealthy.
This creates bubbles, incomes are rising, asset values are going up, the stock market grows.
Even though debts are growing as fast as incomes. On the some point prices of asset values
are growing, consumers borrow higher amounts of money to buy them as an investment,
causing the prices increasing even higher. This situation obviously cannot last forever.
At some point, debt repayments become higher than potential income, forcing consumers to
cut on their spending’s. At this moment incomes starts to drastically go down and consumers
are losing the debts availability. If the debt availability goes down and the debt interests
are rising on previous debts , it will lead to limits on future spending’s. Above mentioned
situation happened during the financial crisis in 2008/09 (Dickerson 2009).
Debt interests have simply become too high. Markets all over the world stopped to buy/
sell from each other, when the housing bubble burst in 2008. Information presented above
conclude that according to Dalio, financial crisis is inevitable because consumers have
strong tendencies to consume more than they can afford.
Short-term cycle is very common to finance business loans. Possible solutions given
by Dalio for the short-term debt cycle is steering the interests’ rates (increasing and
decreasing them). Long-term cycle consists of few lever (it lasts about 50 years),
depression (it lasts about 3 years) and reflation (it lasts between 7 – 10 years). The main
problem of long-term cycle is that debt interests are too high and they must be decreased.
For the leveraging operations in long term debt cycle Dalio gives four solutions.
Firstly, the spendings’ cut (austerity), normally it leads to unemployment, no income
and the income decreases faster than amount of debts. The second step will be to
reduce debts by defaults and restructuring. Banks do not want that value of their assets
to decrease, so they agree to restructure their debts. It is very efficient for longer period,
decrease interests’ rates and debt amount. Sometimes restructuring can bring also
deflation. Thirdly the wealth will be redistributed and the wealthier consumers must
pay more taxes than other ones. Central Banks can also use their money for stimulating
programmes and unemployment claims. But it also can lead to deflation.
Lastly the Central Bank can print money but it cannot print too much because this will
create the inflation. When the Central Bank prints money it can buy assets, goods and
services, but only for the public sector. The four measure introduced separately would
not help to decrease the debt burdens. But all measures correctly balanced can maintain
the stability of the economy.
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The fall in the stock market and in the value of owner occupied real estate has depressed
household wealth by about $10 trillion. The estimated wealth effects imply a decline of
annual consumer spending by $400 billion or more. Young and middle-aged minority
households—suffered the most. That reduction in consumer spending implies reduced
production, lower incomes, and therefore further reductions in consumer spending.
This could reduce aggregate demand by an additional $200 billion a year or more.
The government in USA was the first to take responsibility for Central Banks policy to
maintain law interest rates. The government can’t influence interest rates directly,
however, it is empowered to control taxes and public spending .A broad program of fiscal
stabilisation was started (Dolls ate al. 2012). Automatic stabilizers – i.e., the reductions
in personal and corporate taxes and the increases in unemployment insurance and
other transfers – probably offsets about one-third of this, leaving a net GDP gap of
about $400 billion. Aizenman and Jinjarak (2011) found that automatic stabilizers absorb
38 per cent of a proportional income shock in the EU, compared to 32 per cent in the U.S.
In the case of an unemployment shock 47 percent of the shock are absorbed in the EU,
compared to 34 per cent in the U.S.
During his campaign, candidate Obama promised a permanent tax cut of $500 per
employed person. That would generate an annual tax cut of about $70 billion and would
probably raise annual consumer spending by about $50 billion.
However not only tax cut level matters. It is also important to implement fiscal policy,
which would not harm the resilience of tax system and its functions. Experience confirms
that some form of investment tax credit could stimulate business investment, especially if it
is not recaptured later. A larger R&D tax credit could help to offset the currently predicted
decline in private R&D spending. And lowering the corporate tax rate to that of other
industrial countries would encourage more business investment and job creation in the
United States.
Finally, the taxes on dividends and capital gains are also scheduled to rise in the near
future. A promise to leave those tax rates unchanged would raise share prices, offsetting
some of the fall in the stock market, which would lead to more consumer spending and
increased business investment.
But while good tax policy can contribute to ending the recession, the heavy lifting will
have to be done by increased government spending. To be effective, that spending should
be big, quick, and targeted at increasing aggregate activity and employment. How big
depends on the form of the spending and the timing.” (Feldstein 2009)
Above reasoning supports the point of view that a crisis is not inevitable. However,
not everybody agrees with this opinion. For instance, Frederic S. Mishkin (1999) believes
the crisis in East Asia could have been avoided.
INTERDISCIPLINARY THEORETICAL AND EMPIRICAL STUDIES. NO. 1/2017
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Once restrictions were lifted on both interest-rate ceilings (the maximum interest rate that
a financial institution can charge a borrower for an adjustable rate mortgage) and the type
of lending allowed, lending increased dramatically. Once financial liberalization is adopted,
foreign capital flows into banks in emerging market countries because it earns high yields.
These funds are likely to be protected by the government safety net, whether it is provided
by the government of the emerging market country or by international agencies such as
the IMF. The result is that capital inflows can fuel a lending boom which leads to excessive
risk-taking on the part of banks. This lead to the crisis in East Asia in 1997.
Here we can conclude the government in the East Asian countries made the mistake of
lifting the restrictions on interest-rate ceilings and the type of lending allowed all at once.
They had no experience with risk-taking before lifting these restrictions. If the government
used another approach, maybe, the financial crisis would have been avoided.
A possible approach according to us could be to first research more into risk-taking and
having the knowledge before changing the regulation.
Would tight fiscal discipline prevent some of the risk-taking behaviour?
One of the measures that was taken to prevent banking collapse during financial crisis
of 2007-2008 was an injury of huge amount of liquidity by FED and ECB. This decision
seemed to be optimal for saving banking sector, but huge liquidity injections with quite
low policy rates at the same time, increases the risk that when the US and Eurozone
economies return to normal, there would be a high increase of the inflation unless most
of the liquidity is accomplished. To minimize these risks there is a need for central banks
to choose the right timing of exit after larger liquidity injections. But the optimal timing
for starting a narrowing the cycle is very uncertain nowadays. This uncertainty is the main
problem of active discussion between politicians and economists.
According to Cukierman (2013) “the first major task to find a reasonably good exit time for
monetary policy involves the identifications of changes in the demand for liquidity. As long
as this demand matches the large increase in the supply of liquidity, the risk of inflation
is likely to be low. The large initial expansions in the balance sheets of the Fed and of the
ECB were largely in response to dramatic increases in this demand from the side of the
banking sector.” (Cukierman 2013)
After the 2008 Lehman Brothers bankruptcy the increased demand for liquidity was
caused by the drying out of the US interbank market, because of the fact that banking
sector lost a lot of capital after subprime mortgages bubble bursted (Brunnermeier 2009).
The same effect for Eurozone was caused by losses of European banks because of situation
in Greece and other countries with huge debts (Mink, de Haan 2013). Even though the
reasons of these losses were different, the result for both US and EU financial markets was
BUSINESS ETHICS AND SUSTAINABLE DEVELOPMENT
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the same. There was a huge increase in the demand for liquidity on the banking sector
side, and reduction in banking credit to potential customers at the same time. Nevertheless
despite substantial liquidity injections by central banks have not translated into substantive
increases in credit to the economy (Greenstone at al. 2013).
Fig 1. Total US commercial bank’s credit (billions of $).
Source: Bloomberg – Ticker ALCBBKCR Index.
From the Fig. 1 we can see a big change before and after Lehman Brothers bankruptcy
on the US banking sector in banking credit policy. It can be clearly seen that, after fast
increase between the eighties and middle 2008, credit immediately slowed down after
September 2008. An even more dramatic change then around September 2008 can be
described by expending of total amount of US banking reserves. Their annual long-term
average increase rate between 1999 and August 2008 is 0,5 %. Following Lehman Brothers
bankruptcy just until April 2011, this rate grew up to 100%.
INTERDISCIPLINARY THEORETICAL AND EMPIRICAL STUDIES. NO. 1/2017
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Fig. 2. Total reserves of US depository institutions (billions of $).
Source: Board of Governors of the Federal Reserve system Website.
On the Fig. 2 we can see a huge increase of total US banks reserves after September 2008.
At the end of August 2008, they raised on the amount of $ 46 billion. And in a year their
increase was eighteen times larger. Highly leveraged borrowing through nominal debt
backed by real estate collateral greatly magnified the decline in output and house prices
during a liquidity trap recession (Mertens & Ravn 2011).
Eurozone is decentralized so there is a need to find different solution, because bailouts
have to be negotiated. A big number of different institutions, governments, ideologies and
local laws can make this process much less effective and longer. The second problems
the Eurozone may seem similar to the first, because there are many local Central
Banks, which are responsible for financial stability of their countries, but ECB is mostly
concentrating on price stability. The third is that some countries can stay without ECB
or other EU member’s support, which can lead to their insolvency.
Analysing this problems Cukierman (2013) comes to conclusions: “The experience of the
last few years has demonstrated that outright sovereign defaults can be achieved or at least
postponed by large injections of liquidity from the CB, accompanied by fiscal bailout
packages. But continuous liquidity injections have fiscal implications. Bailout operations,
whether carried out indirectly through the ECB or by direct agreement of the Eurozone
governments, will have to involve the fiscal authorities of the area. Agreement about who
will foot the costs of necessary future bailouts is hard to achieve and leads to a protracted
political bargaining process (Cukierman 2013) . The crisis shed a harsh spotlight on
the weak fiscal foundations of the Union and on the now-pressing need for collaborative
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adjustments in national macroeconomic policies. Unfortunately during the crisis of 2007,
leading states proved to be strongly motivated by the dynamics of financial stabilization
and, once again, only weakly drawn to the co-ordination (Pauly 2009). The limitations
of the framework for fiscal policy in the euro area are well known and have been debated
for years. Under ordinary circumstances a fiscal expansion in any one country has two
effects on its partners: A positive one as it increases demand for imports, and a negative
one as a fiscal expansion puts pressure on euro area interest rates, which will tend to lower
demand in the entire area. However, under special circumstances, the interest rate is
effectively very close to the lower bound, and the interest channel mentioned above seems
to have lost its importance. It is clear that interest rates and central bank liquidity injection
are already now not the main factor affecting the availability of credit. Consequently the
spill-overs from fiscal policy may turn out to be unambiguously positive (Gros, Alcidi 2010).
But a critical element of the stimulus packages in all countries was the use of deficit
financing and tax reductions (Devereux 2010).
Both monetary and fiscal policy have to be oriented at securing financial stability.
Nevertheless separation between central banks, governments as well as cross-country
diverse responds to crisis result in a slower recovery. The compelling goal is to find a way
to synchronize actins without harming the independence of financial authorities.
Is there a point where markets should not or cannot grow anymore? What CB or any other financial authorities should do if there is a new era of finance?
Financial market should grow for all the time, but on the other side, it causes many
problems. It seems that financial markets are not able to be in on-going speed of growth.
Firstly, credit policy has many boundaries, like creditworthiness of banks’ clients. In the US
banks did not check how much money people could lend in the reality (NINJA clients).
Secondly, there are a huge impact of securitization nowadays. Derivatives have huge
connections with other instruments and when one of them is toxic, it will infect another.
After some time all financial area is sick and it provides to financial crisis. Expansive
monetary policy can stimulate the development, but only to some point. If the market has
too much money, we can predict, that real value of assets is much lower and every decline
on the market is very noticeable. Another evidence, that markets cannot grow all the time
are speculative bubbles. Investors do not pay attention to financial analysis, they only want
to know how much money they can earn. It begins inadequacy increase of value, which is
hypersensitive for every shock and can depress and infect other sectors of the market.
(European Commission, 2010)
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Marxism says, that non-crisis economy does not exist. Investors always has predispositions
to over-investment, because they want to maximise their profits and curtailment real wages
simultaneously. It causes a fall of the demand, because people reduce spending money.
Next, the supply is too high, so investors cut the amount of production. That step always
causes a growth of a crisis. There is a theory, that the economy and society need financial
crises, because they induce global changes in world economy. (Milewski, Kwiatkowski,
2008)
The new era of finance shows us, that the Central Banks, government institutions and
financial companies need new kinds of solutions in the financial area. Central banks can
improve their structure by transparency. (Sotomska - Krzysztofik and Szczepańska (2006))
say, they need access to:
• As many information, as they can,
• Information adequacy,
• Effective quality of published information.
If their policy meets those requirements, we can say, that the Central Bank has great
transparency and it is trustworthy. Clarity is one of the most important communication
instrument between investors, governments and commercial banks. If everybody knows
and understands the aims of central banks, they can create compatible fiscal policy
and make proper financial decisions. Benefits of central banks’ transparency are market
reliability and growth of the real independence and less uncertainty on the market,
which entrenches stability. The European Central Bank must meet those requirements
and it can provide to the one union budget.
One of the greatest weaknesses of monetary union is the lack of its budget. The experience
of dealing with the negative effects of the global economic and financial crisis of the recent
years, the destabilization and the loss of credibility of the Eurozone has fuelled discussions
and accelerated efforts to establish a fiscal union in the euro area. Is fiscal union in the euro
area is the only one preferred embodiment to save the lost competitiveness of the group
of European countries? Answering this question is extremely difficult regarding to the
effects that could arise, as a result of the proposed options for reaching the fiscal union
and it is necessary to analyse both the positive and the negative effects of this process.
Starting with the issue of the common currency of the monetary union and ending with
the creation of a joint treasury institution, the integrated budgetary framework can help
the Euro area countries adapt to mitigating and counteracting asymmetric shocks and thus
reducing fluctuations in national income. Avoiding long-term cash flow is to be ensured by
greater economic integration and convergence. European convergence includes points as
inflation, government budget deficit, government debt to GDP ratio, exchange rate stability
and long-term interest rate. Those aspects help in building economic union. If in every
country economic situation is similar, creating a central budget will be faster and less
BUSINESS ETHICS AND SUSTAINABLE DEVELOPMENT
20
complicated. Central budget provides opportunities for direct budgetary policy - generate
budget savings in terms of prosperity and opportunities for future manoeuvring support
measures during the economic downturn. Considerations on the effectiveness of the
use of automatic stabilizers also highlight many doubts as to their effectiveness in view
of the large diversity of Eurozone member states. On the other hand, the approach of
labour market institutions can bring benefits for public finances in the form of tax strategy.
Moreover, fervent discussion is to use EMS for fiscal protect the Euro zone, potentially
limiting its role relating to the provision of support and ensuring financial liquidity/flow ??
to states at risk of insolvency. (Dorożyński T., 2010)
On 24 November 2015, the Commission presented a legislative proposal to include in the
banking union an additional element, namely the European Deposit Insurance Scheme
(EDIS), which is based on existing national deposit guarantee schemes (which have hitherto
had no security in Common European system). EDIS will be introduced gradually and
is expected to be cost neutral for the banking sector (however, higher risk banks will
have to pay more than the cautious ones). The system will be accompanied by stringent
guarantees and measures to reduce bank risk. The European Parliament has launched
appropriate internal procedures. On 16 June 2016 the rapporteur published a working
document on EDIS. The document emphasized the need for the Commission to carry out
an EDIS impact assessment and take concrete action on risk reduction. I believe, that such
a solution in the banking union is necessary and fair for the Eurozone member states.
(TFEU, art. 114, art. 116 para 6)
Summary
Now, we can conclude, that a financial crisis will never be inevitable due to the creation
of cycles by the behaviour of consumers to spend more than they earn. We also found
out there are multiple ways of prevention that the Central Bank and financial authorities
can take. It is important to take in consideration that the possibilities should be equally
balanced in order to achieve the best possible outcome.
Furthermore, we concluded that one of the measurements that was taken to prevent
banking collapse during financial crisis 2008/09, could have fatal consequences (printing
huge amount of money). Even though this solution could save the banking sector, it should
be done very accurately, otherwise it could have a negative impact on the economy in long
term. In this paper we were trying to answer the question, when central banks should
stop increasing their balance sheets. Because US and Eurozone markets are different,
and FED and ECB has different problems, positions and tools for solving these problems,
there are two suggestions for each of them. FED needs to find a way to make its regulation
and supervision policy stricter. And ECB needs to find a way for more efficient and fast
negotiating process with other financial institutions.
INTERDISCIPLINARY THEORETICAL AND EMPIRICAL STUDIES. NO. 1/2017
21
Then we concentrate on changes, which the European Union should make in its policies.
The financial crisis has shown, that monetary policy needs to be compatible with fiscal
policy. Both procedures should be modified all the time, because the market changes all
the time. It should be noticed the impact of transparency in central banking on making
proper investment decisions, can improve the cooperation between governments and
markets or even be one of the anti-crisis instruments.
References:
1. Aizenman, J., & Jinjarak, Y. (2011, August). The Fiscal Stimulus of 2009-2010: Trade Openness, Fiscal Space, and Exchange Rate Adjustment. In NBER International Seminar on Macroeconomics 2011 (pp. 301-342). University of Chicago Press.
2. Brunnermeier, M. K. (2009). Deciphering the liquidity and credit crunch 2007–2008. The Journal of economic perspectives, 23(1), 77-100.
3. Cukierman, A. (2013), Monetary policy and institutions before, during, and after the global financial crisis.
4. Cynamon, B. Z., & Fazzari, S. M. (2008). Household debt in the consumer age: source of growth--risk of collapse. Capitalism and Society, 3(2).
5. Davidson, P. (2006). Can, or should, a central bank inflation target?. Journal of Post Keynesian Economics, 28(4), 689-703
6. Dalio, R. (2013, September 22). How The Economic Machine Works by Ray Dalio.
7. Retrieved from https://www.youtube.com/watch?v=PHe0bXAIuk0
8. Devereux, M. B. (2010). Fiscal deficits, debt, and monetary policy in a liquidity trap. Central Bank of Chile.
9. Dickerson, A. M. (2009). Over-indebtedness, the subprime mortgage crisis, and the effect on US cities. Fordham Urb. LJ, 36, 395.
10. Dolls, M., Fuest, C., & Peichl, A. (2012). Automatic stabilizers and economic crisis: US vs. Europe. Journal of Public Economics, 96(3), 279-294.
11. Dorożyński, T. (2010). Integracja walutowa a regionalne nierówności gospodarcze.
12. Emmons, W. R., & Noeth, B. J. (2012). Household financial stability: Who suffered the most from the crisis?. The Regional Economist, (Jul).
13. European Commission, (2010). The 2008 Financial Crisis and Taxation Policy.
14. Feldstein, M. S. (2009). Rethinking The Role Of Fiscal Policy, Working Paper 14684.
15. Greenstone, M., Mas, A., & Nguyen, H. L. (2014). Do credit market shocks affect the real economy? Quasi-experimental evidence from the Great Recession and ‘normal’economic times (No. w20704). National Bureau of Economic Research.
16. Gros, D., & Alcidi, C. (2010). Fiscal policy coordination and competitiveness surveillance: What solutions to what problems?.
17. Kwiatkowski, E., Milewski, R. (2008). Podstawy ekonomii.
18. Mertens, K., & Ravn, M. O. (2011). Credit channels in a liquidity trap.
BUSINESS ETHICS AND SUSTAINABLE DEVELOPMENT
22
19. Mink, M., & De Haan, J. (2013). Contagion during the Greek sovereign debt crisis. Journal of International Money and Finance, 34, 102-113.
20. Mishkin, F. S. (1999). Lessons from the Asian crisis.
21. auly, L. W. (2009). The old and the new politics of international financial stability. JCMS: Journal of Common Market Studies, 47(5), 955-975.
22. Sotomska - Krzysztofik, P., Szczepańska, O. (2006). Polityka informacyjna banków centralnych jako instrument wspierania stabilności systemu finansowego. Zeszyt nr 200.
23. Treaty on the Functioning of the European Union, 114, 116 § 6 ( of the European 2007).
23
Celia CAMPO1
Petr LAJSEK2
Veronika BORODAI3
Banking 2020 and beyond
Abstract
The aim of this project is to define the future of the banking 2020 and beyond through
research. In this project we are going to focus on the banks’ customer-centricity behavior
and how they must position their clients as the core element. Some differences will be
stated between this banking behavior in Czech Republic, Poland and Spain.
The millennials are the main generation we put in focus in this paper, as it is the generation
of the future. Their behavioral characters and their values will be exposed in order to know
how banks should address their clients and satisfy them.
Keywords: Client-centric, sustainable banking, banking 2020, Fintech, Millennials, Banking
ecosystems
123
Bankowość 2020 i dalej
Streszczenie
Celem artykułu jest zdefiniowanie przyszłości bankowości w 2020 roku i dalej poprzez
badania. Artykuł koncentruje się na orientacji na klienta w bankach. Zidentyfikowano w tym
zakresie wybrane różnice w zachowaniu banków w Czechach, Polsce i Hiszpanii.
Głównym przedmiotem zainteresowania jest generacja tzw. „millennialsów”, ponieważ
osoby te będą pełnić kluczową rolę jako klienci w przyszłości. Zidentyfikowano zatem ich
1 CEU University San Pablo Madrid. Faculty TNR 122 University of Finance and Administration, Prague. Faculty TNR 123 Uniwersity of Economics in Katowice, Poland. Faculty of Finance and Insurance
BUSINESS ETHICS AND SUSTAINABLE DEVELOPMENT
24
cechy zachowania oraz wartości tak, aby banki mogły dostosować się do swoich klientów
i zaspokoić ich potrzeby.
Słowa kluczowe: Orientacja na klienta, zrównoważona bankowość, bankowość 2020,
Fintech, millennialsi, ekosystemy bankowe
Introduction
Nowadays we are experiencing an important change in the banking system. The financial
market has changed considerably in the last nine years since the global financial crisis.
Factors such as the consolidation of new technologies are forcing banks to a new scenario.
The banking system must change their strategies in order to recover their clients’ trust.
At the same time, customers are changing their consumption habits. Therefore, banks must
focus on their customers in order to survive this constantly and fast changing environment.
At the same time, banks must understand their future clients’ behavior in order to evolve
and satisfy them. Millennials are a difficult type of client they must adjust to in order
to succeed.
What is client-centric banking?
In today’s world being customer-centric as a business is essential if it wants to succeed
for the long term. Nowadays, millennials are the next generation changing the world as
we know it. Like all new generations, they have different needs, identities and values than
previous generations. They are used to client-centric behavior from other companies and
are looking for the same behavior from their banks. Being client-centric might sound like
a modern expression, but according to NGDATA customer centricity is not a new concept.
It first appeared in the 90’s with the invention of customer management. Today, it’s coming
back because the interaction between customers and banks have changed. The focus
shifted away from the organization and the product to the customer; the customer wants
to be far more in control of the relationship. Internet and social media have changed and
keep on changing social behavior nowadays. Influence of social networks on millennials
is constantly increasing. Banks need to be aware, that bad customer experience can
spread through social networks really quickly and damage their reputation. [NGDATA 2017]
Banks need to adjust old-school attitudes towards its clients and adapt. Social networks
and internet, constant connectivity, provide a great platform for adverts and collection
of customer data. Banks are aware of it, but are less agile than fintech companies when it
comes to listening, analyzing and reacting in real time.
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Fintechs are defined by the investopedia as any technological innovation in the financial
sector, including innovations in financial literacy and education, retail banking, investment
and even crypto-currencies like bitcoin. Banks must be open for new ideas and new
opportunities from FinTech companies in order to evolve and satisfy their clients. Fintech
companies are more focused on the client, they are small companies that develop
innovations to satisfy consumers. Banks can take a major advantage of this. As an example,
a FinTech made an innovation where people can send money from one banking account
to another just by using the phone number with zero costs.
Another interesting point of view from NGDATA concentrates on the difference between
B2C and C2B models. Banking system as we know it is now in transition from B2C model
to C2B model. B2C companies mainly operate in a product-centric way, which means
customer is not as important as product revenue and cost. On the other hand C2B model
customers create the value by providing their data. If banks want to shift to the C2B model
they need to follow these steps according to NGDATA:
• They need to behave to their customers as one-offs, every customer is different
• Customers pick the channel of communication, banks need to adapt
• Everything needs to be data-based, then can banks quickly respond and adapt
to the customers needs
• Satisfaction of customers must be as important as revenue and cost [NGDATA 2017]
On the other side, banks need to understand that customer centricity is not only making
commitments to put the customer first. Primarily, they need to make relationships, build
conversations and personal service according to the customer’s needs on an everyday
basis. [NGDATA 2017] In real life, many banks say they are client-centric, but in reality it is
just advert to attract new clients. When it comes to customer satisfaction surveys, these
banks sometimes do not have a good rating from their customers.
When it comes to getting the customer data and achieving customer-centricity, NGDATA
says, that it will be only achieved if customer-related metrics are part of the company’s
strategic KPIs. “Without those strategic KPIs, financial or risk trade-offs will always
undermine the customer-impact, even with the best intentions. Once the organization
has settled on their strategic customer KPIs and targets, departments will naturally
start reflecting on what success means for them, and how they will contribute to the
organization’s customer success. Which customer KPI to settle on is not necessarily that
important. What is important is to agree on a single KPI across the organization, to start
measuring and to set a target.”[NGDATA 2017, p.10]
Another interesting point of view provides performancemagazine.org. According
to them modern banks will have to consider abandoning their old school KPI targets.
They will eventually have to learn how to measure on the outside, instead of the inside.
[Presecan M. 2016] Fintech will probably never takeover all the tasks that bank staff can
BUSINESS ETHICS AND SUSTAINABLE DEVELOPMENT
26
perform. Especially because of their weakness in compliance and the lack of capital.
Fintech can provide the platform, but in the end it needs to be analyzed and applied in real
time within the bank institution itself.
As the financial brand says, the millennials will not wait for banks to understand them.
Millennials will soon be the major part of bank staff and are the most mobile using and
tech friendly bank customers. They have unique needs and so far most banks are failing
to satisfy these needs. [Marous J. 2016] Connecting with the customers is important
in every business, so becoming more client-centric is crucial to survive in the future.
In order to survive as a banking institution, finding the added value for the millennial,
regaining trust from millennials (also because of the consequences of the financial crisis),
finding and adapting to the identity of the next generation, to become more client-
centric in all countries in banking will be essential. The technological progress in banking
may be different in each country, but eventually, banking will become very similar
everywhere. Once any kind of technology will be proven right in any country, it will spread
into the others.
When it comes to Czech Republic, Poland and Spain there are big differences in client-
centric banking. Czech markets are already in transition to being more client-centric
despite being very old- school now. Czechs as a nation are in favor of new technologies
and want to try innovations in this area. It’s true that mainly the millennials and this
relatively limited and stable group of people seek these technological innovations. A barrier
to widespread use of mobile banking may be still insufficient expansion of smartphones
and tablets among Czechs.
In comparison to Spain the Czech banks are not that client-centric right now.
That’s mainly due to the crisis effects on Spain and local corruption in the banking
sector. Spain has taken a big hit during the crisis and because of corruption, people
do not trust their banks as much as people in the Czech Republic. Banks need to earn
their trust again. In a survey carried out by PwC, banks are aware of that challenge.
In Czech Republic generally people have a lot of money in bank deposits and trust
their banks. Like in every country, they are not happy with certain bank practices but
only a small percentage of these people actually change their bank. According to ING,
more than 60% of Spanish people use mobile banking. In Czech republic only around
40% people use it. Fintech and mobile banking of course come hand in hand with
connectivity (Smith 2016). Connectivity means that anyone or anything will be able to
interact, trade or exchange information anywhere and anytime An illustration of diversity
in connectivity within the EU can be found in the chart below.
INTERDISCIPLINARY THEORETICAL AND EMPIRICAL STUDIES. NO. 1/2017
27
Graph 1: Connectivity of EU countries
Retrieved from http://digital-agenda-data.eu/charts
In Poland banks are becoming more client-centric, the willingness of individual clients
to use advanced high technology services is high. According to the Ernst and Young
research the main part of customers in Poland are considered to be self-sufficient.
Main characteristics of self-sufficient consumers are lower advocacy and trust, stability
in their account opening decisions, preferring self-sufficient research instead of advocacy.
They prefer online banking, online bill payment, current and saving accounts and credit
cards. Consequently, the most preferred channels are online bank application for routine
transactions and branches for unusual or firstly made operations. [Ernst and Young
2014] So, the majority of traditional bank clients is omni-channels or digital-only users.
According to the Customer Behavior and Loyalty in Retail Banking report [Bain & Company
2015] online interactions exceed mobile transactions in Poland, but the number of mobile
transactions goes up. In the end the differences between these countries do not matter
that much, because the banking revolution comes in waves, so eventually the banking will
be the same in every country.
BUSINESS ETHICS AND SUSTAINABLE DEVELOPMENT
28
Graph 2: Major channels of sales and service
Retrieved from http://www.bain.com
“Best practices” of customer-centricity
The idea that customers are always right and the idea of pleasing the customer as the most
important goal to achieve by businesses are commonly known. However, this idea has
been more utopia than reality until recently. Banks do a lot to introduce and increase
financial services based on modern financial technologies, but it should also be stated that
however trying to achieve the aims of client-centricity, they fail to actually situate the client
in the center. It is known as ‘silo thinking’ and functions as a roadblock in the execution
of customer centricity. PwC (2014) made a survey where it showed that there is a growing
awareness towards the transition to a client-driven sustainable banking. 61% of the
executives state that this transition is extremely important and are making the proper
investments to achieve it.
PWC (2014) also states that the winners of banking 2020 will be those organizations that
reach the highest grade of understanding of their customers. They need to grasp their
clients needs, the ecosystem they live in and enable to give them solutions in real time.
Something that should be achieved by using big data the proper way. At the same time,
banks will need to redesign their different product sets with the purpose of making it
easier to understand from their clients’ point of view. In order to do so, they are trying to
integrate sales and services across all channels. This way, they try to forge a sustainable
long-term relationship with their clients. A lot of banks are working on new financial
technologies introduction in order to be the most comfortable one for their clients.
INTERDISCIPLINARY THEORETICAL AND EMPIRICAL STUDIES. NO. 1/2017
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Banks have understood that Customer-centricity is a powerful tool. New fintech
companies are investing on social media in order to help people access their money or
even send money to other people through online apps. [Accenture 2016] Social media
can be used as a channel for retail customer interaction. This can be fully integrated
into Customer Retail Management (CRM) and send clients deals based on the pages
they follow or based on their likes. In 2014, a study was made by Econsultancy in United
Kingdom. This study showed the response rates of 16 different banks on the social media.
The quickest response was 3 minutes and the longest one an hour and twenty four
minutes [Eldridge, R. 2016].
In 2013 the Indian bank ICICI launched an application that allowed users to send money to
other users, to pay movie tickets, or to pay utilities. Users had to log in using the facebook
credentials, which shows the need for an open and integrated architecture, another
weakness of the banking institution. This e-wallet can be used to pay on all websites and
apps in the country, [ICICI Bank 2015]. The Spanish bank named Bankia has won the Digital
Adopter prize of 2017. This prize rewards the bank’s ability to adapt to the new financial
market and type of client. As an example, this bank has introduced 500 personal advisors
so that they can give a better service to their clients. [El Economista 2017].
Another Spanish bank named BBVA has developed what they called “Nimble Payments”.
A new digital product that facilitates the management of collections, immediate acceptance
of payments and financial solutions for e-commerce businesses. [El Mundo, 2016].
Santander Bank has invested great amount of money on innovation. Among other
initiatives, they have invested on card payments using mobile phones and tablets
or financing SMEs in just few minutes [Euroforum 2014].
To continue with, there is one Polish bank that is considered to be the most mobilized
bank in Poland. As it was stated in Bain & Company report “mBank in Poland has made
exceptional progress in mobile and point the way for others” [Bain & Company 2015].
mBank mobile application allows you to obtain a loan in one-click in 30 seconds, enables
money transfers using your smartphone contact list, manages your finances informing you
on how much you still owe after you payed your bills, informs you on the amount of your
savings etc.
They try to offer what clients need, at the right time, through the right channel,
synchronizing mobile use and internet, broaden the base of actively mobile banking
users and digitalize all paperless operation [mBank 2016]. According to the bank’s policy
the first aspect of work with client is to understand their clients’ needs, consequently
making banking as convenient as possible, the second is to be mobile and the third is to
be efficient.
BUSINESS ETHICS AND SUSTAINABLE DEVELOPMENT
30
Another innovation made by banks is the BLIK. Your mobile bank application gives you
an opportunity to pay from your account without a credit card. It generates a BLIK
code displayed in the app that you should enter to BLIK payment option and confirm
the transaction on your mobile app afterwards.
Operating in Poland Idea Bank SA launched a secure multi-functional mobile ATM and
depository service housed in an electric BMW i3 car driven by trained bank employees
that is offered free of charge for the banks’ small/medium enterprise (SME) customers.
This innovation gave Idea Bank the winner position as most innovative bank within
payments in 2015.
In Czech republic ČSOB Group wanted to execute a business transformation program
called the Self Service Platform (SSP). The program was driven by the desire to transform
into a customer-centric organization. Today the platform perates well supporting a strong
position of ČSOB Group in Czech market.
In conclusion, banks are starting to comprehend the new customer, the next generation
we define as ‘millenials’ and invest in innovations in order to satisfy their needs.
Millennials behavioral characteristics
Millennials are defined by New Jersey Institute of Technology (2006) as a huge generation
of impatient, experiential learners, digital natives, multitaskers, and gamers who love
the flat, networked world and expect nomadic connectivity. More importantly they are
demanding consumers who expect more selectivity, personalization and customization in
their products and services. They are the generation born in the 80s and 90s.
New technologies usage in industry and production, and increasing in efficiency caused
decrease of the work places from the one side, which leads to decrease in household
incomes. Important to state is the reality of the average income of 25-to-34 year-old
in 1989 was almost 25% higher than millennials now. [Allison, 2017] Millennials are faced
with the problem of limited financial resources.
Another comparison that can be made addresses the companies that were present during
previous eras and would be considered stay on the market for ages to come, failed.
Technological companies and companies that provide software and hardware lead the
market nowadays .
When comparing what is of interest to the millennials and previous generation of
youngsters a rather frantic ascertainment is that 71% of millennials would rather go to the
dentist than go visit their bank [The digital banking report 2016]. Millennials are willing to
consider alternative financial service providers such as Google, Amazon, Apple, PayPal
or Square. Bottom line, Millennials represent the greatest challenge – and growth potential
– for banking today.
INTERDISCIPLINARY THEORETICAL AND EMPIRICAL STUDIES. NO. 1/2017
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According to Paul Endacott (2017), millennials are always connected, therefore they are
experts on social media and expect companies to have an effective social media strategy
that they can engage with. By 2020 social media will be the most important tool in order
to contact, engage, inform and understand clients. According to PwC (2014), mastering
social media will be an extremely important competitive advantage for banks.
This author also defends that this generation seeks for transparency, open and honest
communication and instant feedback. Therefore, initiatives as the one made by the
banks in London, which consisted on answering really fast to clients through their social
media can be an important competitive advantage for banks in order to satisfy their
future clients. The millennials also believe in Corporate Social Responsibility and having
a purpose, they believe businesses must take care about society. High level of production
and irresponsible human activities lead to land disturbance, air and water pollution,
overpopulation and deforestation. Our irrational use of the natural resources caused rapid
increase in modern human illness, especially respiratory problems like pneumonia and
asthm. It lead to ozone layer depletion, which caused weather changes and loss of our
nature. Eco, health style of life and paying a lot of attention to our environment protection
became the solution for millennials. Therefore, banks should invest more in sustainable
activities.
It is commonly known that millennials are also tech savvy. Digitalization is drawing a new
path for the banking system. In a rather short period of time, physical branches could be
less necessary than they are nowadays. More and more traditional activities will shift to
online ones. Banks will close an important number of these locations. However, banks
will maintain some of them, adopting new features and creating new concepts for them
[PwC 2014]. The online banking is an example of adapting to what clients want.
Millennials look for experiences. All services, products and employees’ work will be
designed by banks around the customer trying to give them what they want and trying to
improve services, products and even internal working patterns designed around amplifying
the customer experience [Accenture 2016].
During the years where millennials rise and rose to adulthood, the world has faced
a lot of problems, such as unemployment, globalization, terrorism and environmental
pollution. Lower employment levels and smaller incomes have left younger millennials
with less money than previous generations to spend. Another ascertainment is the rise of
a lot of technological inventions, such as mobile internet, humanoid robots, 3D printing,
holograms, drones and etc. The increase in the quantity of microcontrollers and sensors
production and decrease of its production costs, as well as the development of internet,
which is considered to be the largest information base in the world history, result in the rise
of the information and technology creating opportunities for the millennials. Next to this,
the implementation of all this has come at a much faster pace than ever before.
BUSINESS ETHICS AND SUSTAINABLE DEVELOPMENT
32
Digitalization is changing the finance sector now. New non-bank players, which offer
original or traditional financial products via new channels understand what their clients
need the most. The banking technologies, payments, CyberCurrency, business finance,
consumer finance and alternative cores are considered to be the main parts of FinTech
industry. [Venture Scanner Report2016] But many financial services’ providers offer
different services that are not convenient for clients. From this point of view banks have
a new challenge – to become a new banking ecosystem providing “smart everything”
for their clients on digital base. The modern non-bank digital ecosystems, like Google,
Apple, Amazon, eBay, Facebook, provide some financial services for their clients.
Banks have to respond to “millennials” challenge in many ways, since millennials can be
seen as both: a chance and threats. Their financial constrains make them new type of
clients in need of new products. Their health problems, ethical concerns and sensitivity
to transparency issues call for corporate social responsible strategies from banks
(Paulik et al. 2015). Millennials connectivity and digital skills require special attention
– banks can respond by creating their services with the algorithm-based data analyze
instruments, that take into consideration all client data, synchronize its information on
a real time base. Furthermore, they should make it comfortable, simple in using and
intuitive. [Dapp A. 2015, p. 20]
Summary
Banks are definitely trying to change their behavior towards a client-centric one.
Top executives are bearing in mind the characteristic of their future clients: the millennials.
[Deloitte 2015] Banks will have to use big data to understand what this generation wants
and needs and they have to be able to put the client at the core in order to succeed.
The modern banks’ client-centric strategy means working on digitalization, improving their
mobile and internet apps. It’s important to do it in an integrating way, to offer financial
solutions towards the new generation that are relevant and compelling in real time,
offering the (new) customer a fulfilling experience. It will force banks to work with a much
more open and integrated architecture and away from the silo approach. As these are the
strenghts of fintechs, cooperation rather than compete them seems a healthier way for
bringing banking towards client centricity into the next era.
However, as it was mentioned before, millennials are a noticeable challenge, therefore,
major companies such as Google or Amazon can take over activities of the banks, and
millennials are enough open-minded to accept it. These companies have sufficient client
information and technology to start a financial activity just like a bank. Therefore, banks
must bear this threat in mind in order to be able to adapt and survive.
INTERDISCIPLINARY THEORETICAL AND EMPIRICAL STUDIES. NO. 1/2017
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35
Sylwia CHRAPEK1
Kwint KRAMER2
Fernando BRIOSO DE LA RICA3
Remuneration schemes and bonuses in banking sector. Comparative analysis – European perspective
Abstract
This paper focuses on the problem of remuneration schemes in the financial sector.
It describes currently used forms of bonuses and give an insight of some case studies
of remuneration schemes in different countries and institutions. It also describes
the regulations set by governments in that area in the recent years. In the final part, the
paper considers the possible future of the banking. This paper focuses on European
financial market, especially the situation in Netherlands, Poland and Spain.
Keywords: bonuses, remuneration schemes, Poland, Spain, Netherlands, 123
Systemy wynagrodzeń i premii w sektorze bankowym. Analiza porównawcza z pespektywy europejskiej
Streszczenie
Artykuł koncentruje się na problemie systemów wynagradzania w sektorze finansowym.
Opisano obecnie stosowane formy premii wraz z wybranymi przykładami systemów
wynagrodzeń w różnych krajach i instytucjach. Ponadto dokonano opisu regulacji
rządowych w omawianym zakresie wprowadzonych w ostatnich latach. Ostatnia część
poświęcona została możliwym ścieżkom rozwoju sektora bankowego w przyszłości.
Artykuł koncentruje się na europejskim rynku finansowym, w szczególności na sytuacji
w Holandii, Polsce i Hiszpanii.
Słowa kluczowe: premie, systemy wynagradzania, Polska, Hiszpania, Holandia 1 University of Economics in Katowice2 Inholland University of Applied Sciences3 CEU San Pablo University
BUSINESS ETHICS AND SUSTAINABLE DEVELOPMENT
36
Introduction
When a bank goes bankrupt it doesn’t just lose the money provided by the shareholders
(equity) but also the money of the depositors and other debt providers that put their savings
at this bank. While most banks won’t fall because of excessive risk-taking, it does increase
the chance of these banks to fall. The tread of the bank collapsing makes the consumer
lose trust. This loss of trust translates to a decrease in consumer-spending, which slows
down the economic growth and might result in a financial crisis. The effects of this will be
seen in the stock-market, housing-market, unemployment-rates, in the economic-growth,
interest-rates and an increase of government debt depending on the measures taken.
The role and importance of the banking sector is undeniable – not only on the
microeconomic level, as it was already mentioned, but also for the whole economy, on the
macro level. Just to mention the financialization and globalization processes. As it is said,
in 2010 the world GDP was at the level of 55 bn USD and the money supply classified as
M3 was at the level of 75 bn USD. The financial sector grew significantly over past years
(in 2009 its share in the US economy was around 21%, while in 1947 – 10%). Moreover,
the financial sector contributes more and more to the creation of GDP [Gostomski, 2014].
This measures of course also affect everyone life – as the financial sector is growing and
gaining importance in the modern world, even a slight unbalance or uncertainty could lead
to significant impact. An example of that is the latest world financial crisis.
As the effects of the crisis of 2008 were severe and the spill-over effect made it global,
we need to consider ways of preventing such situations in the future. The causes of
the latest financial global crisis were complex; however, we could observe, that the
remuneration schemes in the banking sector played a great role in the process
[Fahlenbrach, 2011]. We could relate here to the agency problem – the different aims of
the shareholders and the manages, different approaches to risk and different perception of
the success (short-term view and long-term view). It is especially vital in the banking sector
as the actual decision makers influence not only their life or their companies, but have
impact on the whole society and economy.
The problem is that the variable remuneration, i.e. bonuses encouraged the excessive risk
taking. But what actually are bonuses? We could define them as a way of incentivizing
employees by giving them additional benefits (usually financial), which rely on the
performance of the employee or company.
Therefore, it is vital to investigate if remuneration schemes could be improved in order
to provide the sustainable development to the banking, and hence - the stability to the
economy on the both - country and global level.
The aim of this paper is to briefly cover the current scheme of bank bonuses as well as
ongoing trends and regulations set by governments in this area. This paper also wants
to discuss how different types of compensation could motivate bank managers towards
INTERDISCIPLINARY THEORETICAL AND EMPIRICAL STUDIES. NO. 1/2017
37
achieving certain types of financial goals - more and less risky decisions, long-term and
short-term view. Moreover, it highlights the outcomes of opting for certain compensation
structure.
This paper will also show some case studies of how the remuneration policy is handled
in particular banks. This paper focuses on the situation on the European level, especially
in Poland, Holland and Spain.
The research methods used in preparation of this paper involved research in the internet
environment – analysis of the data gathered and presented by different organizations (desk
research), analysis of text – scientific research papers, reports, books, well-known media
and regulations set by governments and international organizations.
The problem of remuneration schemes
In the beginning of the investment banking the owners and the managers of the banking
institutions were the same. As the market grew, the situation slightly changed – the bankers
started managing the money of many people. The risk and responsibility shifted from
managers to owners of the capital. The theory of the agency states that there is a conflict
between these two parties – both sides have different priorities [Murphy, 2013]. It is also
said, that to prevent such situation it is good to align the performance of the managers
with the performance of the company, e.g. by setting a variable part of the remuneration.
In that remuneration scheme, the managers get basic salary and additional bonuses if their
decisions are translated to the success of the company.
However, the results of the investigations in that area are mixed - we cannot say for sure
if there is or is not a correlation between high return on bank stocks and high incentives
for the managers in the banking industry [Fahlenbrach, 2011], [Faisal Ahammad, 2015]
[Vallascas,2013].
As the need to change the remuneration schemes emerged, there has been significant
changes in the types of the compensation, in the past few years. Also the new regulations
set by the governments and international institutions took effect. The following paragraphs
will discuss these issues in detail.
Different types of bonuses
Salaries and bonuses of the executives of financial entities became a controversial topic
due the role that financial sector played in the last economic recession. According to
Matthias Efing et al., [2014] there is a lack of information when it comes to retributions
in the financial sector that makes impossible to correctly analyze its structure.
The relationship between bonuses and productivity, when it comes to the banking sector
BUSINESS ETHICS AND SUSTAINABLE DEVELOPMENT
38
this relationship is in doubt [Galeano, 2013]. These critics believe that it is not feasible to
establish the right incentives through the regulation in order to improve the performance
of the executives or have an influence on their behavior. Actually, most of them think this
kind of regulation in the banking sector that links bonuses with profitability of the company,
creates moral hazard, making the directorates more prone to risk assumption to obtain
higher remunerations [Espinosa de los Monteros, 2012]. This moral hazard is reflected in
the fact that two-thirds more executives prefer to link their reward to an internal measure
that they can influence in, such as profit, rather than depend from an external variable,
such as shareholders [PWC, 2012]. In words of Slater [1980] try to make people follow
money incentives will only produce people pursuing money.
The form of incentives could differ. The following table describes briefly the currently used
forms of rewarding employees in financial services industry.
Table 1. Different forms of compensation in financial institutions.
fixed salary it’s the base salary, that is not related to the employee or bank performance; usually it is followed with additional incentives
cash bonus it’s the immediate pay of the yearly bonus; it is considered to promote the short-term view for the managers, encouraging them to take high risk in order to get immediate rewards
* the cash bonus is usually connected to the employee performance, but there are cases of cash bonuses e.g. for working outside the home country
deferred cash
it’s cash compensation deferred for few years (e.g. 6 or 7 years); it is said to promote the long-term view for the managers and conservative approach to risk management as the deferred bonuses could be taken back if the act of misconduct would be revealed; the payment of deferred bonus could also rely on the bank profitability and the loyalty of the employee (whether the employee is still working in the same company) [Mehran, 2015]
shares of the bank
the bonus could have form of a shares of the bank; that kind of compensation is said to link the interests of the bank managers with the ones of the owners (shareholders); it promotes long-term view and more conservative approach to risk
grants of options
it’s a financial instrument (derivative contract) allowing the holder to buy certain instrument in the future at the strike price; the holder takes profits from exercising the option;it’s impact is similar to getting the shares of the bank - it promotes the long-term view of the bank [John,2003]
other, non-financial incentives
employees could also be motivated by non-financial benefits, that are also present in other companies, e.g. private medical care, social fund, retirement plan, social events, workshops, etc.
We could also consider the ex-ante and ex-post incentives. They are based on the future
and past performance respectively. The research shows that in the case of well qualified
workers both of these forms are effective, while the workers with weak abilities are unable
to profit from them both [Faisal Ahammad, 2015].
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We also need to highlight that the remuneration paid is usually a complex composition
of the presented forms of bonuses. Moreover, in past decade and probably in the following
years the situation will be changing rapidly as the remuneration schemes have to be revised
and changed.
Current trend is that the fixed salary is becoming more and more important - it becomes
a bigger part of the whole remuneration, sometimes even 100% for the junior staff.
As the new cap on bonus in EU took effect the fixed salary is said to increase in the following
years. The cash bonuses are decreasing over past years. Deferred compensation is getting
more and more attention - some of the international institutions even recommend to defer
around 40-60% (or more) of the bonuses. Also, other forms of incentives are getting more
attention - e.g. the stocks or options for stocks.
Bonuses in the selected countries
Sunthein [2010] analyzed the executives’ salaries of 74 banks from 18 different countries
in the financial sector and found out that the average wage in 2007 was 5.3$ million,
55% paid as bonuses [OECD, 2009; Murphy, 2009]. In this sense, the latest report from
European Banking Authority (EBA) showed that the number of people within the financial
sector who earn more than 1€ million per year is still increasing in almost every country
in Europe and the average of the variable to fixed remuneration ratio of high earners
(see fig.1) dropped from a 317% in 2013 to a 147% in 2015 (EBA, 2015).
Figure 1. Ratio of variable to fixed remuneration for high earners.
Source: [EBA, 2015]
BUSINESS ETHICS AND SUSTAINABLE DEVELOPMENT
40
When it comes to the countries analyzed in this paper, in the case of Spain, the National
Securities Market Commission (CNMV) of Spain release every year an annual paper
summarizing and analyzing the structure of salaries in the banking sector. According to
the last report published by the CNMV [2015] the average salary between the directorates
of the financial entities was 334,000€ which was an 8.2 % higher than the year before.
However, the salaries vary depending on the job responsibility. The average wage of the
chief executives in listed companies during the year 2015 was 3.45€ million, whereas
the average salary for a CEO was 3.05€ million. In terms of its structure, 54% out of
these amounts was due to bonuses, composed by 38% of variable remuneration,
6% by attendance fees and the rest composed by other type of remunerations, such
as pensions and compensations [CNMV, 2016]. The remaining 46% was perceived as the
fixed part of the salary. In terms of the ways chosen to pay those variable remunerations,
the CNMV report shows that just a 13% of these payments were made by company’s
shares, whereas a 37% of these remunerations were made half by shares and half by cash,
and 50 % out of the total of this variable remuneration was made by cash [CNMV, 2016].
The structure of the remunerations of the CEO of Pekao SA, Luigi Lovaglio, can be used as
an example to explain the structure of the salaries in the Polish banking sector. In the year
2015 he earned the total sum of 3.12€ million, being 992.331€ paid by cash, 921.469 € paid
as deferred bonuses from previous years (2011-2014) and 909.716€ in banks stocks. He also
got additional bonuses for working outside the home country. Another interesting example
of changes in the remuneration schemes is the case of Deutsche Bank. The institution
decided to skip the yearly bonus for about 25% of the employees. The limited number of
employees will receive special long-term incentives. It will be deferred for as long as six
years and part of it would have the form of a stock of the bank. Moreover, a lot of junior
staff will get only fixed salary [Morris, 2017].
The structure of salaries in the Dutch banking system has been analyzed by PWC [2012].
This report defined the Dutch banking sector as less risk-averse than the banking sector
of other European countries, what makes more attractive for Dutch executives to receive
their bonuses in cash than other ways of retribution as shares or attendance fees. However,
the Stanford University professor, John Roberts, said these bonuses and incentives paid
on cash have not seemed to be the right ones to avoid feckless behaviors in the future.
They are dangerous and dysfunctional at least for the banking sector [Roberts, 2009],
therefore it might be problematic in the future if the structure of bonuses in the Dutch
banking sector is not changed.
INTERDISCIPLINARY THEORETICAL AND EMPIRICAL STUDIES. NO. 1/2017
41
Regulations of bonuses in the financial sector
With high bonuses being recognized as an important cause of the financial crisis, measures
have been taken to prevent this from happening in the future.
One of the first actions were the recommendations set by EU Commission in march
2009. The EU advised e.g. deferring the compensation and controlling the situation
of remunerations in financial sector by a national authority. However, the issued
recommendations failed to give a guidance of how this should be implemented - both by
regulators and financial institutions. An important measure undertaken by EU was the
amendment of Capital Requirements Directive. It enhances the need of disclosure of the
company data related to remuneration schemes. Financial institutions need to send the
data to national regulator as well as reveal to public the data about remuneration policies,
especially regarding those employees who have the “material impact on the risk profile”
[Directive 2006/48/EC] of the institution [Johnson, 2014].
Also, the Basel Committee on Banking Supervision issued a Compensation Principles and
Standards Assessment Methodology in 2010. They e.g. stated that 40-60% of the variable
compensation should be deferred (in the case of senior managers even more than 60%).
Moreover, they recommend the minimum period of deferral as 3 years [Basel Committee
on Banking Supervision, 2010].
Other international institutions also took some measures by setting a recommendation
or pass a law - e.g. Financial Stability Board, CEBS, CEIOPS, EU institutions (European
Commission, European Council, European Parliament). Some of them were self-regulations
and some of the them were directive. [European Banking Federation, 2010]. It is important
to highlight, that self-regulations could be powerful if the sanctions for noncompliance
are harsh.
In Europe since 2015 a bonus may not be higher than 100% of the normal salary except
when there is a supermajority by the shareholders. Then the bonus may be up to two
times the normal salary. With the average bonus being around 100%, this measure will only
affect the top earners, who sometimes get bonuses of 300% of the normal salary. With the
shareholders being the actual owners of the company, they are believed to be legitimized
to increase a bonus over the cap. The consequences of excessive risk-taking actually
exceed the walls of company, which raises the question if it should be up to them to
decide.
In the Netherlands, an even tougher policy was introduced by the minister of finance
Dijselbloem. In February 2015, a bonus could not be over 20% of the annual salary
and could even be taken back when the decision to award the employee with a bonus
was based on false information. Employees who decide to leave the company or are fired
for legitimate reasons will also no longer benefit from a final bonus and finally it was
ruled that financial institutions which had gotten financial support from the government,
BUSINESS ETHICS AND SUSTAINABLE DEVELOPMENT
42
were not allowed to reward their employees with a bonus. Cause if they would receive
a bonus, this would indirectly be paid by the taxpayers, who are also the ones who suffered
most from the excessive risk-taking. Also, a plan is put into motion by minister De Jager,
which prohibits banks from speculating with the customers money.
In Spain the Say on Pay policy was the start of a movement to increase the power
of the shareholders in matters of bonuses and income. These policies aimed to penalize
the feckless and unethical behaviors of the financial institutions during the years before
the crisis by implementing some market discipline. Social pressure made its effect and since
the approval in 2011 of the “Sustainable Economy” regulation [Ley de Economia Sostenible
2/2011] all the listed companies in the country have to present to their shareholders
in their annual congresses a report showing and detailing the wages and bonuses of their
executives (Calleja and Marcos, 2015). Also some ‘hard’ measures were taken as a cap on
the salary of the CEO of 600.000 and a cap of 300.000 on the salary of board directors.
In Poland, Polish Bank Association implemented the European Commission’s
recommendations which came into force in 2010 [European Banking Feredation,
2010]. CRD IV EU Directive which was passed in 2013, was implemented by the Polish
government in 2015 by amendments to the polish Banking Law. In 2017 the regulation
of the minister was issued, to clarify the already implemented law. The Polish Financial
Supervision Authority in its resolution 258/2011 also set some additional rules e.g. that the
bonus should rely in the financial performance of the company [KNF, 2017], but in general
the polish regulations doesn’t show any significant difference to the EU law.
The table 2. Different regulations set by the governments and financial institutions.
European Union The Netherlands Spain Other
cap on pay for senior managers - bonuses set at max 100%, and 200% with the approval of shareholders
bonus could be at max 20% of the fixed remuneration
restrictions for institutions that received help from government or have public capital; CEOs could earn max 600 000 euro and board directors - 300 000 euro
the United States considers deferring bonuses for 7 years as well as possibility of taking back the compensation in a case of misconduct by the employee
Source: [PWC, 2015], [Murphy, 2013]
Also, the United States took measures to prevent another crisis from happening by
founding the Dodd-Frank act. Part of this act means to prevent excessive risk-taking by
providing shareholders with a say on pay, corporate affairs and a non-binding vote on
so-called golden parachutes. Instead of a cap on bonuses the US implemented bonus
deferrals, which raises the question what policy is more effective?
INTERDISCIPLINARY THEORETICAL AND EMPIRICAL STUDIES. NO. 1/2017
43
First DeYoung established that the bonuses in one year explains the risk-taking
in the following year. This effect, measured by daily stock returns, proves strongest
in the largest banks. ESA Jokivuolle, Jussi Keppo and Xuchuan Yuan researched the effect
of the European caps in comparison to the bonus deferrals used in the US. To answer
this question these researchers developed a theoretical model analyzing CEO pay of
the 78 largest banks in the US during 2004-2006. First the model shows that risk-taking
increases when bonuses are less deferred and a cap on the top of the bonus also decreases
risk-taking. A cap on bonuses turned out to be more effective since the effect of the bonus
deferral is immaterial unless bonuses were originally paid multiple times a year, which is
not the case in the banking sector.
Finally, the research shows how much the risk-taking would have decreased if measures
had been implemented before the crisis. For an average bank, the risk-reduction caused
by the taken measures would result in reducing a bank’s leverage from 25 to 20, assuming
the original leverage was 25.
There is however a lot of controversy around the subject and other researchers like Murphy
K.J. believe that limiting bonuses could lead to more excessive risk-taking. This believe
is caused by the fact that by limiting the bonuses the potential loss (not receiving a bonus)
is less. Also, the caps on bonuses is believed to weaken the European banking-sector, since
this will drive away a lot of talented bankers to other sectors or even non-EU countries.
Finally, the banking-sector loses a lot of flexibility since the need to increase the normal
salary [Murphy, 2013].
Moreover, the market perceives the changes in the negative way. As the EU bonus cap took
effect, there was a downfall on the stock market, as the investors expect the costs of that
actions in near future [Kleymenova, 2016].
Breaking the rules
We could easily find examples of institutions that doesn’t comply to the rules.
As the already mentioned EBA report stands, it still could be observed extremely high
ratio of variable to fixed remuneration among high earners. In 2015, it was the case of
Ireland (252%) and Greece (635%) and it was due to waivers. In the examined countries,
the numbers were below the 200% maximum, and goes as follows - Poland 164%,
Spain 93% and Netherlands 49%. What is worth noticing - the bonus cap in Netherlands
is way lower than the general EU rules - it’s 20% of the variable to fixed salary. If we take
that into the account, the high earners in Netherlands exceeded the limit more than twice.
Moreover, we need to analyze the particular banking sectors. E.g. as the EBA report stands
- in the retail banking in Poland the ratio of variable to fixed salary was at the level of 133%
and in comparison, - in asset management - it was 280%, hence exceeding significantly
the cap on bonuses set by the EU.
BUSINESS ETHICS AND SUSTAINABLE DEVELOPMENT
44
Future of bonuses structure
The crisis has made very clear the structure of bonuses in the European banking sector
was not working anymore. The current structure of the salaries has led to risk assumption
and banks failures. This scenario has stimulated the implementation of new regulation
within the European Union to avoid similar scenarios in the future, being the modification
of the compensation structure across the different levels of the organization the core
of these new regulations; for example, by using long-term incentives rather than cash
bonuses, or reducing the reliance on bonuses [DNB, 2009]. However, the restructuration
of the bonuses in the banking sector must consider the fact that just 50% of the executives
think that their long-term incentive plan is an effective or a positive incentive [PWC, 2012].
According to these examples of remunerations given before, such as pensions, will be
examples of ineffective incentives in terms of influencing executives’ decisions and
behaviors. The new European regulations that introduce cap on pay ratios will discourage
the added value creation given to the shareholders and the society, which is at the end
of the day the main goal of banking [Murphy, 2013]. As a survey made by PWC, people
from the financial and banking sector still thinking cash bonuses is the easiest way
to emonstrate how valued a worker is in a company, and this is reflected in the fact that
the executives surveyed would accept an average of a 28% wage cut for their ideal job
[PWC, 2012]. Thus, the new regulation introducing a lower reliance on bonuses might lead
to a situation where the banking sector cannot retain the talented people anymore. Paying
fewer bonuses than other sectors could make other sectors more attractive.
The future structure of bonuses in the banking sector might be affected as well by the
increasing role that women are playing in the financial and banking sector. A report
made by the World Economics’ Forum showed that in the year 2010 just 2% of the CEO’s
in the Financial Services & Insurance industry were women [Zahidi and Ibarra, 2010].
The inclusion of women that is taking place might change the whole banking sector
as a bigger presence of women at the directorates will mean more sustainable investing
and less risk assumption. Recent studies showed that in the last decade women have
taken fewer risks and have made less transaction costs while they were performing better
than their male colleagues [Chang, 2010; Ahmed Azmi, 2008]. Concretely, these studios
showed that on average under uncertain scenarios of high volatility, women take more
time to study all the risks and they are more likely to include a wider variety of points
of view through teamwork and collaboration [Staveren, 2009]. As women and men respond
differently to bonuses and incentives, companies might start adapting their bonuses
according to these psychological differences.
Changes in demography might affect the banking system too, as the Islamic population
is increasing within Europe and United States. According to some authors [Beck et al., 2013]
the increasing Islamic population could trigger a different way of business orientation.
INTERDISCIPLINARY THEORETICAL AND EMPIRICAL STUDIES. NO. 1/2017
45
Despite conventional banking has seemed to be more cost-effective, there is evidence that
shows Islamic banking has been more efficient when it comes to the quality of the assets
and the intermediation ratio, what in fact makes them perform better during the economic
recessions. If this sustainable way of banking is extended around Europe the change
of bonuses’ structure would need to be adapted as well.
To conclude, as Adam Smith proclaimed [1776], there is always a risk when people
manage others money which makes them less careful than if they were managing their
own money. However, the high-powered incentives based on high amounts of money
have sometimes seemed to be dysfunctional. Thankfully, there is a solid research which
supports the idea that less powered incentives based in fewer amounts of money combine
with other intrinsic rewards will work better and will create the right incentives, meeting
executive’s and company’s goals. Although this new regulation of banking will need to take
into account different sociological aspects that the older regulations used to forget.
Conclusion
The problem of the bonuses and remuneration schemes in financial sector is still
a challenge we need to face. Even though some measures were undertaken by both
authorities and financial institutions themselves, the discussion of how the motivation
in financial industry should look like is still open. Current trends are the shift from variable
to fixed remuneration. The cash bonuses are in decrease, while other forms of bonuses
are getting more and more attention, e.g. deferred cash bonuses, stocks or options
for stocks. There is a focus on promoting the long-term profitability of the institution,
rather than short-term view. However, the impact of these policies is questionable.
The results of the research are mixed. The new limitations are said to affect the stability
of the financial system in the positive way. On the other hand, it can lead to the increase
in the fixed remuneration as well as worse performance of European banks, followed by
outflow of talented bankers.
The future structure of bonuses in the banking sector will be influenced by changes
in demography or by the real inclusion of women in the financial world. Research shows
that women on average are more prone to sustainable investing and risk averse. Men and
women have different responses to same incentives, this means they have different
motivations and attitudes towards bonuses and their types. A regulation which takes this
into account would be successful and efficient.
As we consider the remuneration schemes, we also need to take into account the problem
of good supervision of the management actions. The further problems to discuss are
the shareholders passive approach and the lack of disclosure of remuneration schemes,
i.e. lack of the proper transparency. Creating more and more complex way of rewarding
employees also makes it harder to manage it and then - assess it. As the new regulations
BUSINESS ETHICS AND SUSTAINABLE DEVELOPMENT
46
are said to bring the more stable development, decreasing the risk on the market has also
brought us additional costs and new challenges [Kleymenova, 2016].
Looking into the question if the government should intervene with bonus policy,
we discovered the complicity of the question. We believe that when the government
intervenes, the focus shouldn’t be on the amount of the bonus, but the way of payment.
Moreover, it is a good development that bonuses given under wrong information can be
taken back. We also think that it is better to reward employees in other ways than money,
e.g. in stocks of the bank, since this will improve the long-term view of the employee.
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30. PWC, (2012), Making executive pay work, the psychology of incentives. PWC Report in association with London School of Economics and Political Science. May, 2012. Retrieved from: https://www.pwc.com/gx/en/hr-management-services/publications/assets/making-executive-pay-work.pdf
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49
Tomáš TURNA1
Aleksandra TRZASKA2
Mike ALTENA3
Brando STILLACCI4
After Crisis Financial Regulation on Ethics and Anti Money Laundering. Comparative Analysis
Abstract
This paper focuses on the importance of financial regulations regarding ethics and anti-
money laundering in Czech Republic, Netherlands, Poland and Spain. Provided regulations
are seen from the perspective of each country and their similarities and differences
are compared. Also, each of those countries have coped with the crisis differently,
so there is provided comparison of introduced financial regulation which helped dealing
with crisis effects. Furthermore, the paper concerns the influence of ethical behaviour on
financial market.
Keywords: anti money laundering, information asymmetry, ethical code
1234
Pokryzysowe finansowe regulacje w zakresie etyki oraz przeciwdziałaniu „praniu” pieniędzy – analiza porównawcza
Streszczenie
Artykuł koncentruje się na istotności regulacji finansowych w zakresie etyki oraz
przeciwdziałania “praniu” brudnych pieniędzy w Czechach, Holandii, Polsce i Hiszpanii.
Regulacje analizowane są z perspektywy każdego z krajów w celu identyfikacji i porównania
podobieństw i różnic. Z uwagi na fakt, że każdy z krajów borykał się z kryzysem finansowym
w inny sposób, wprowadzone regulacje porównano również pod kątem efektywności
1 University of Finance and Administration Faculty of Economics2 University of Economics in Katowice Faculty of Finance and Accounting for Business3 Inholland University of Applied Sciences Faculty of Business, Finance and Law4 Universidad CEU San Pablo Economics and business school
BUSINESS ETHICS AND SUSTAINABLE DEVELOPMENT
50
zwalczania efektów kryzysu. Ponadto dokonano analizy wpływu zachowań etycznych
na rynek finansowy.
Słowa kluczowe: przeciwdziałanie “praniu” pieniędzy, asymetria informacyjna, kodeks
etyczny
Introduction
The existence and the need of regulation on financial markets and their participants
is non-negotiable condition for functioning markets, such as the securities market,
insurance and banking market. However, a key issue for regulation and supervision remains
a question of the level of regulation. Regulation and the origin of its formation can be
viewed from several sides. The surprising cause of formation of the new regulation may be
an existing company on the market that already has divided the market shares and seeks
to prevent dynamic companies from entering the industry [Musilek, 2011]. In an attempt
to influence the possible redistribution of market shares.
By pressure on regulating institutions are forcing notably more extensive micro-prudential
regulation, which is aimed mainly at the conditions for entry into licensed sectors such
as banking or insurance market. This limitation of the increased competition on one
hand prevents unstable companies to enter the industry, but on the other hand leads
to market monopolization. This could result in a worse treatment of the clients of financial
institutions, deterioration of product quality and, for example, the possible emergence
of information asymmetry, which must be responded by the regulator. This leads
to re-strengthen the regulation of the sector.
The secondary and subsequent regulations will not be reflected on the candidates
for entry into the sector of the financial market, but will be reflected negatively on
existing companies that bear the cost of this new regulation. Generally speaking, that
stricter regulation of entry into the industry is not effective because it has a negative
impact on clients (investors) and its negative impacts should be corrected by subsequent
regulations.
The more common cause of the new regulation is itself a regulator, who is trying to
either prevent the emergence of a risk to financial markets, or directly responds to the
already existing problem. Risk prevention is rather done by setting certain limits, whether
it’s a minimum amount of capital banks seeking a banking license, and capital adequacy
of banks already existing. These measures are mainly focused on the minimization of
systemic risk primarily in the banking sector, which is the crises connecting and most
vulnerable sector of the financial market.
INTERDISCIPLINARY THEORETICAL AND EMPIRICAL STUDIES. NO. 1/2017
51
For institutions of regulation it is enormously important to be able to identify potential risks
and to prevent them consistently. Because of the crisis (subprime mortgage crisis 2008)
that had negatively influenced not only the institutions of the financial markets, but also
companies which, for reasons of insecurity and by investors required higher risk premium
could be very difficult and expensive to finance its activities. Neither households are not
spared the effects of the crisis, since it usually leads to bail out financial institutions that are
systemically important using public money. Measures taken to respond existing problems
usually have to adapt procedures and behavior of financial market participants.
At first, the money laundering definition was very specific and covered only the process
of transforming illegally obtained profits into legal assets. However, during recent
years its meaning have widened and now it also covers all other forms of financial and
business crimes. Anti-money laundering (AML) laws cover only a relatively limited number
of transactions and criminal behaviors, but their implications are extremely far-reaching.
For example, AML regulations require institutions issuing credit or allowing customers
that open accounts to complete detailed procedures to ensure that these institutions are
not aiding in money-laundering activities. The responsibility to perform these procedures
is on the institutions, not on the criminals or the government. In this paper we will
focus on financial regulation, ethics and anti-money laundering in the Czech Republic,
The Netherlands, Poland and Spain. How it applies on each country and what its differences
and similarities are. We will also mention common European applications.
To lay the foundation for this research topic it is necessary to compare existing legislation
that had and still has a big effect on the banking sector of each examined country.
These legislations will be used as a basis to explore the problematics of unethical
behaviour, anti-money laundering and their impact on sustainability of banking sector.
This part will look at which laws regulating banking sector are common in examined
countries, which legislation differs from other participating countries and the legislative
influence of Europe.
Methodology
Many authors deal with the problematics of regulation. For practical use and for
an explanation of the AML regulation issue author Dennis Cox says that according
to the IMF approximately 2 to 5 percent of global gross domestic product each year
are laundered [Cox, 2014]. Because of that is necessary to place increasing emphasis
on regulatory measures in banking sector. The authors of this paper decided to cover this
issue from the perspective of the banking sectors of four European countries.
BUSINESS ETHICS AND SUSTAINABLE DEVELOPMENT
52
Regulatory measurements across the countries
The way the economic crisis from 2008 hit each participating country is different.
This difference was caused by the different macroeconomic situation in the examined
countries and the way banks operated in that countries. The banking sector of each
country was also affected by the interrelations between domestic banks and the US banks.
a. Spain
After a detailed analysis of macroeconomic variables and the new political and social
situation, one can conclude that Spain has changed drastically, not only economically
but also socially and politically. Structural reforms have been applied since 2012, and more
are about to come in the following years to ensure a sustainable economic growth.
According to the Banco de España (2012), the economic recession started in Spain as in
many European economies, at the end of 2008 when the Spanish GDP began to be negative.
According to the Confederación Española de Cajas de Ahorro [CECA, 2013] the number
of savings banks in Spain was of 45 and in 2013 was just of 11. Since the start of the crisis,
33% of the offices have been closed and 29% of employees have been fired as a result
of the major reorganization of the banking sector in Spain. Many of these entities were
supported by the construction industry in Spain, leaving these entities with high volumes
of debt and under severe imbalances.
Between the years 2001 and 2007 Spanish economy developed three economic bubbles:
the public sector, the financial sector and the construction sector. When the crisis started
to make its effects in Spain, what Spanish economy needed was a private and public
debt reduction, liberalizations and build up a productive system which produces added
value and was not based on construction and cheap credit. None of these measures were
taken. Conversely, the Spanish Government focused all its 9energies on raise taxes to try
to maintain the public sector bubble and politicians’ benefits.
In June 2012, the Spanish Government agreed with the European Financial Stability
Fund a credit line of 100€ billion due the lack of liquidity of Spanish financial system.
By the end of 2015, the amount of money injected in the Spanish banking system reached
103,365€ billion, what is about 3,300-3,800 € per family (Rallo, 2016). It was a typical
bail-out of broke banks with the money of the Spanish tax-payers. This means that the
creditors of the failed banks, instead of suffering their losses by implementing a bail-in,
they were rescued with money from tax collection [Bagus et al., 2014].
This credit line agreed was the last step of the bail-out implemented by the Spanish
Government though. In 2009 the Government of Spain passed a law which created
a banking restructuration fund (FROB) in order to manage the restructuration processes
of the banks with solvency problems. This new regulation made that the banks which
needed financing must create a restructuration plan and presented it to the Bank of Spain
INTERDISCIPLINARY THEORETICAL AND EMPIRICAL STUDIES. NO. 1/2017
53
that studied the feasibility of the plan. If it was not feasible enough, the FROB would be
responsible of the restructuration of the bank making all the necessary decisions in terms
of mergers, acquisitions or concentrations.
The initial amount injected in the FROB was 9,000€ millions, 75% of which were directly
transferred from the tax-collection. The other 25% were from a fund created with
contributions of the financial corporations. By the end of 2015, the amount transferred
from the taxpayers reached 53,553€ millions, which supposed the 87% of the money
transferred to the saving banks [Bank of Spain, 2015].
Spanish banks have had serious reputational problems due to the practices carried out in
the last years and in particular due to the old saving banks because of the political-financial
corruption scandals they have had. It is for this reason that the European Central Bank
demands a test of suitability to all new board members in order to avoid new reputational
issues like in the past.
The crisis meant that Spain had to reform the way their banks operated by adapting reforms
that were produced in Europe. These reforms gave motive to change how much banks can
invest with several coefficient policies. The cash coefficient policy: banks in Spain need
to have between a 5% and a 9% of deposits in their accounts. The investment coefficient
policy: this is to guarantee that a determined percentage of funds are being used for public
funds or credits to the preferential interest sector acquisition, such as exports or social
property constructions. This needs to be 20% of the external funds. Bank directors in Spain
started to have limitations on being simultaneously directing many banks at the same
time. Accrual and transparency information was increased: the Bank of Spain forced the
entities to improve the quantity and the quality of the information shared, mostly for
the mortgages property assets. Solvency is now the principal indicator with the liquidity
position and decreasing the risk ratio.
b. Netherlands
For the Netherlands, the crisis unveiled that banks operated unethically. Greed forced
personnel working in the financial market to act on personal behalf and not the customer’s
behalf. The Netherlands implemented 40 measurements that reshaped the financial sector.
The Netherlands forced every financial institution (including banks) by law to have employees
that were authorized to work on the financial market via diploma’s (WFT). The financial
advisors must uphold an oath to serve the customer needs. The AFM and the DNB recently
concluded that the implementation of the oath is taken up very seriously by the banks.
85000 people have taken that oath. Banks uphold their duty by informing personnel with
information and have meetings that inform personnel [DNB, 2016]
Every financial product that was offered to the consumer must be clear, not have any
loopholes and serve the customers need. A product that is not clear, has a loophole
BUSINESS ETHICS AND SUSTAINABLE DEVELOPMENT
54
or does not serve the consumers need is by law illegal. The government reinforced
the position of the Kifid. Kifid is a institution that independently checks if a financial
product is good. A consumer that does not trust a financial product can contact the Kifid.
One of the financial products that was changed was the mortgages. Banks are not allowed
to give a mortgage that exceeds 104% of the house value.
A company that receives support by the Dutch government is not allowed to give
bonuses to their employees. The government can claw back high bonuses if a financial
institution shows unethical reasons for giving the bonus. Dirk Duijzer, managing
director of the Rabobank in the Netherlands finds a bonus culture in a bank nonsense.
The argument that you cannot attract good personal if you will not offer them is good
bonus is ridicule, says Duijzer. His believe is that the banking sector in the Netherlands
has become a bit detached from the reality. [De Telegraaf, 2015]
Financial institutions are not allowed to give provisions to financial advisors that sell
financial products to consumer. The financial advisor also must be clear at how much
he or she will charge the customer and the charge must be equal to the service that is
provided and not more.
The financial crisis made it clear that banks can cause risks to the Dutch society. A bank has
an important role in a society and the Dutch government will try to save it if it is possible.
Because of this banks are forced to pay taxes to the Dutch government that will be used
if banks need financial support by the Dutch government. Financial institutions that
received government support were also forced to pay back the support they received
by the Dutch government. Because of the crisis the government had to support Dutch
banks that operate on the international markets. The complexity of banks that operate
international did not allow the Dutch government to only support important branches
of a bank. New legislation forced banks to separate the savings of the consumer with
the activities of the banks. This way a bank can guarantee that the consumers savings is
secured. Bigger banks in the Netherlands where are also forced to increase the buffers they
had. This will insure that banks can take a hit when a crisis hits the Dutch market. The CPB
in the Netherlands concluded that the banking industry holds the biggest potential to
again throw the Netherlands back in a financial crisis. The implementation of regulatory
measurements did lower the risks of a throwback, but it also means that the big banks that
need to uphold these measurements enjoy extra protection when a financial crisis hits
the Netherlands. The risk that a bank takes could potentially be higher if it knows that it
will be helped when it is needed. And this could potentially increase the risk of a financial
crisis. [Muns, 2016]
The two supervising institutions AFM and DNB are institutions that act independent and
are not subordinate to the minister of finance. The list of the things these institutions
checked grew because of the crisis and the internal structure of the DNB was reinforced.
The trust in these supervisors was also very low because they were not transparent enough
INTERDISCIPLINARY THEORETICAL AND EMPIRICAL STUDIES. NO. 1/2017
55
in the way they operated. This was mainly caused because of strict European legislation
on secrecy on how supervisors work. The Netherlands is working in Europe to change this
so supervisor can act more transparent.
Commission-Ottow concluded is a study about the external reviewing process is not
transparent enough and the supervisors DNB and AFM can win ground on that area.
The relation between the AFM, DNB and ECB is good. The relation between AFM and DNB
is not clear for the outside world. [Annetje Ottow, 30]
Also, the minister of finance can, because of the crisis, act more quickly when banks start
to disrupt the Dutch society. This power can go as far a firing the board of directors and
inquire the bank.
The Netherlands also recognized that the supervising power that Europe has should be
reinforced. The DNB concluded in their annual report of 2016 that big steps in European
integration is hard to imagine. This is mainly to do because of status quo in the Netherlands
about Europe. Instead of big leaps, the Netherlands should make small steps to increase
wealth and stability in the EMU. This can be done by deepening the internal market of each
country in the EMU. [De Nederlandse Bank, 2017]
c. Czech Republic
The Czech Republic was not hit by the crisis like Spain or the Netherlands were.
The stability of Czech banking sector was caused by the fact that almost no risk assets
in the portfolios of domestic banks appeared which lead to avoidance of a systemic
threat to the banking market. [Singer, 2009] While the EU created in 2011 the new
institutional structure of regulation and supervision known as the European System
of Financial, the Czech National Bank had not taken any regulatory measures to respond
the crisis. And so conditions in the Czech banking sector remained same. Instead of that,
CNB focused on improving the conditions of consumer protection. Stricter conditions
for the banking sector regulation also did not occur because of concerns from too
much regulation and the transfer of powers of supervision and regulation from local
regulators to the European regulators without simultaneous transfer of responsibility
for the consequences of the measures adopted [Tomšik, 2011].
Long-term pursuit of domestic regulators to strengthen the position of consumers on
credit markets resulted in 2016 when in December entered into force a new law on
consumer credit. This regulation is due to the existence of several problems in the domestic
financial market. The first of them was strongly increasing trend in the total number
of personal bankruptcies, which in 2014 reached record levels, and strongly showed
so on the rampant problem on the consumer credit market. The problem of information
asymmetry, where clients were often poorly informed and made to take out loans that
they were clearly not able to repay. We can not whether this situation was caused by
BUSINESS ETHICS AND SUSTAINABLE DEVELOPMENT
56
a deliberate concealment of material contractual requirements or parameters of the loan
transaction or it was caused by a lack of professional knowledge of the person arranging
the loans [Červenka et al, 2017]. However, under the amendment to the Consumer Credit
Act in 2016 significant changes occurred.
This law directly regulates the activities of persons authorized to provide and mediate
consumer loans, including their rights and obligations towards clients and the institution
of supervision. Providers and intermediaries are required to reflect moral view to lending
and also rigorous assessment of the creditworthiness of loan applicants. The law also
places greater emphasis on skilled personnel of providers of consumer loans. Among
the fundamental aspects to strengthen the position of consumers is involving loan limits
of consumer loans, as well as extensive information obligation of providers of consumer
credit to the consumer. While the provision of information in paper form or on a carrier
capable of continuous recording is needed. Expected manifestation of this new regulation
is to correct the difference among providers of consumer credit and the consumer
together with improving the qualifications of the persons involved in the lending process.
[Act No. 257/2017 Coll.] The issue of the law on consumer credit and its impact on the
market environment is explored in the book Consumer loans 2017 written by Červenka,
Ircingová, Škvára.
d. Poland
Poland did not react in a specific way to reform their banking sector. In comparison to
other European countries, Poland was not hit by the crisis as noticeable as others. The only
area when crises had some negative effects was export. That is why the government was
busy by making sure the country economy is prospering well. Nonetheless, the other
entity, Polish Financial Supervision Authority, did introduce the plan how the banking sector
should behave after the crisis, however the changes were not very significant [KNF, 2011].
Poland also had to adopt some European directives, for example the Capital Requirements
Directive, but as well as in the previous case, changes were not very noticeable and were
mostly focused on different classification of assets and liabilities, rather than changes in the
banking sector. According to the same directive, many European countries had to change
its capital requirements, but in Poland that requirements had already been very comparable,
so in practise, this country did not experienced big significant modifications [KNF, 2011].
In the year 2012, Poland had to introduce the Payment Service Directive (PSD) which
influenced all providers of payment services, which in practise, covers not only banks,
but all providers of electronic wallets. The regulation demands that all services must
be objective, non-discriminatory and proportional. On the basis of PSD, it is said that
all clauses prohibiting the usage of PIS/AIS services will be recognised as discriminatory.
PSD also requires from payment institution the initial capital equal to 125000 EUR when
it comes to PIS and AIS services, and 50000 when it comes only to PIS services. The next
INTERDISCIPLINARY THEORETICAL AND EMPIRICAL STUDIES. NO. 1/2017
57
requirement is to fulfill all organisational issues, such as assurance of risk management
control, control of internal procedures and monitoring the incidents which may be
connected to money laundering. Also, under the PSD, payment providers must have
qualified management board. Overall, Poland did not introduce new legislation that differ
from other countries.
In recent times, the Polish society has observed few situations when banks behaved
unethically, breaking completely the Principles of Good Banking Practise. One of the
examples of the unethical bank’s action is the Swiss Franc affair, which led to financial
troubles of many Polish citizens.
In the year 2005, we could have observed the strengthening of the Polish currency -
PLN against the Swiss one – CHF. Installments of the credit which was taken before
the year 2005 decreased and the opinion about the profitable mortgage was spread across
the country. People, encouraged by banks, started to take mortgages and there would
be nothing unethical, however banks did not explain to customers how the currency risk
works.
As they should have predicted and informed customers, the Swiss currency has started
becoming more and more strong which have led to the increase of installments of the
credit by even more than 100%. Another problem which have occurred, was concerned
with the exchange rate at which banks converted currencies. It was obligatory to take
the mortgage in CHF, next the installments were converted to PLN, by the exchange
rate which was established by banks. That allows banks to earn the difference between
buy price of CHF and sell price of PLN. However, in 2011, to prevent this kind of behavior,
Polish government introduced the ‘anti-spread law’. It allows polish citizens to exchange
currencies by themselves in order to pay installments. Introduction of this law has resulted
in lower costs for debtors.
EU Measurements
Legislation is made by each participating country, but also by the EU. In response to the
crisis some major reforms were forced onto the European countries. Three new European
Supervisory Authorities were set up within the European System of Financial Supervisors:
• EBA (European Banking Authority) founded in 2011: a regulatory agency of
the European Union that conducts stress tests on European banks to increase
transparency in the European financial system and to identify weaknesses in banks’
capital structures. The EBA has the power to overrule national regulators if they fail
to properly regulate their banks and is able to prevent regulatory arbitrage and should
allow banks to compete fairly throughout the EU. It’s headquartered in London.
BUSINESS ETHICS AND SUSTAINABLE DEVELOPMENT
58
• EIOPA (European Insurance and Occupational Pensions Authority) founded in 2011:
a regulatory agency of the European Union whose core responsibilities are to
support the stability of the financial system, transparency of markets and financial
products as well as the protection of insurance policyholders, pension scheme
members and beneficiaries. It’s headquartered in Frankfurt.
• ESMA (European Securities and Markets Authority) founded in 2011: a regulatory
agency of the European Union that works in the field of securities legislation
and regulation to improve the functioning of financial markets in Europe,
strengthening investor protection and cooperation between national competent
authorit ies. The idea behind ESMA is to establish an “EU-wide f inancial
markets watchdog”. One of its main tasks is to regulate credit rating agencies.
Its headquartered in Paris.
As a consequence of the financial crisis in the banking sector, solvency is now the principal
indicator for all the bank entities that all the Authorities are making a constant monitoring
in order to improve the entities liquidity position and decrease the NPL (Non-performing
Loan) ratio. For these reasons “Basel III” was created. It was agreed between 2010 and
2011, and it’s a comprehensive set of reform measures, developed by the Basel Committee
on Banking Supervision, to strengthen the regulation, supervision and risk management
of the banking sector. These measures aim to:
• improve the banking sector’s ability to absorb shocks arising from financial and
economic stress, whatever the source
• improve risk management and governance
• Strengthen banks’ transparency and disclosures.
The reforms targets:
• Bank-level, or micro prudential, regulation, which will help raise the resilience
of individual banking institutions to periods of stress.
• Macro prudential, system wide risks that can build up across the banking sector
as well as the procyclical amplification of these risks over time. [Bis, 2016].
These two approaches to supervision are complementary as greater resilience at the
individual bank level reduces the risk of system wide shocks. These reforms were necessary
to make the European banking environment more strong and transparent
INTERDISCIPLINARY THEORETICAL AND EMPIRICAL STUDIES. NO. 1/2017
59
Anti-money laundering regulation
Money laundering is a complicated and long process, which have 4 main stages.
- Preparation – transferring the money from the origin place to the place where
the whole money laundering will take place.
- Placement – the allocation of illegally obtained assets into legal financial system.
It can be done by blending, smurfing, structuring and gambling.
- Layering – Transferring the money into the variety of bank accounts.
- Integration – Allocating the resources into economic market.
The Czech, Spain, Poland and the Netherlands all have these same forms of regulation
dealing with the problematics of anti-money laundering and financing terrorism by law
which transposes the relevant EU legislation and follows directly applicable regulations of
the European Union. The main purpose is not only to prevent the financing of terrorism,
terrorist groups or financing of weapons of mass destruction, but also to prevent the
money laundering. This aspect makes it a law, you work in banks and other financial
institutions on a daily basis and every employee engaged in financial flows in these
institutions must be trained to recognize typical symptoms of money laundering such as
[Act No. 257/2017 Coll.]
a) the client makes withdrawals or transfers to other accounts immediately after cash
deposits,
b) in one day or in the days immediately following client would have made noticeably
more cash, transactions than for its usual activities,
c) the number of accounts opened by the customer which are in obvious discrepancy
with his business activities or wealth;
d) client performs asset transfers, which clearly have no economic reason, or performs
complex or unusually large transactions,
e) money, which the client has, obviously do not correspond to the nature or scope
of its business activities or wealth;
f) customer or the beneficial owner is the person against whom the Czech Republic had
imposed international sanctions under the Act on the implementation of international
sanctions,
g) the subject of trade or be goods or services against which the Czech Republic applies
sanctions under the Act on the implementation of international sanctions,
h) the client refuses to undergo inspection or refuses to provide identification data
of a represented person. [Act No. 257/2017 Coll.]
BUSINESS ETHICS AND SUSTAINABLE DEVELOPMENT
60
Regulatory measures have been applied in the examined countries in different years.
In postcommunist countries, Poland and Czech Republic was necessary to stabilize
economic environment and prevent crimes related to money laundering. Poland created
AML regulation in 2001 and in subsequent years enriched it by the EU anti-money
laundering legislation and also the Czech Republic took first step to the AML regulation
policy in 1996 and next step was the transposition of EU AML legislation in 2008. European
Union anti-money laundering regulation was also transposed into the Netherlands legal
system in 2008. Spain acceded to this AML regulation in 2010, the difference between
dates when the countries transposed EU AML regulation into their legal system is rather
due to flexibility of their political systems.
Ethics and obeying the law
The problem with regulation is that among companies which are seeking for profit they
are not very popular. Some of that firms are willing to admit that regulation could have
a positive contribution, especially in the field of competition and consumer protection.
Businesses very often bear the relatively high costs associated with the new regulation.
We can not therefore expect that these companies, and especially banking institutions
should comply with the regulations of over a specified level. In most cases, law obeying
should be enough, but in connection with a mortgage crisis and then the global financial
crisis, the question of ethics arises. [Musilek, 2011]
Each participating county has implemented a guideline or law that informs of forces banks
to uphold an ethical code. This code mainly describes the way a bank stands in a country
and what are the responsibilities of a bank in that society. Responsibilities like CSR,
transparency, sustainability and ethical behaviour.
Since the global crisis was also caused by an unethical conduct of banking institutions, it is
appropriate to focus on ethics in the financial markets more than ever. Ethical behaviour
is neglected pillar of stability of markets that regulators should encourage and build it
into place as important as the regulation itself. A person who is motivated to act ethically
will commit less risky operations on the market and thus represents a significantly lower
risk to the entire financial system. The pursuit of ethical behaviour of financial market
institutions is creating ethical codes. These codes are also in the form of self-regulation,
where the signatories promise to adhere to certain rules of ethical behaviour without being
forced to do so by the regulator. These codes bring its signatories theoretically competitive
advantage, as they committed to act ethically opposed to entities which have not signed
the Code of Ethics.
In the Czech Republic, a banking code of ethics was introduced in 2005 under the auspices
of the Czech Banking Association. Existence of codes of ethics, no matter if it is the code of
banks or insurance companies, poses the question whether code-not-signed institutions
INTERDISCIPLINARY THEORETICAL AND EMPIRICAL STUDIES. NO. 1/2017
61
can stay on the market. If there is a financial institution that has the opportunity to sign
up to the Code of Ethics without doing that leads to the assumption that this institution
does not intend to comply with general principles of ethical behaviour. In this case,
the existence of such an entity on the market should be considered by regulator to restrict
or prevent the conduct of its business. A key factor in signing codes of conduct is legally
enforceable obligations arising from the Code. Promoting ethical conduct in Poland
is also done by an existence of self-regulation. The Polish Bank Association and Spanish
Bank Association also create ethical codes which are complied voluntarily, but unlike
the situation in the Czech Republic not complying the ethical code is not enforceable
by law.
Another way to promote ethical conduct of banking entities are guidelines created
by the government. These guidelines are focused on behaviour of banks and procedures
for assessing their behaviour. This approach is typical for the Netherlands where the
government forces the ethical behaviour through the Act on Financial Supervision (WFT)
which is described below.
The complexity and globality of the banking sector is so large that the banks and their
employees are able to affect lives of people around the world, either directly or indirectly.
This factor requires a strong degree of regulation. Sometimes legislation is imperfect
and only covers situations that have already occurred. Therefore, as a precaution and
a higher level of regulation serves the principles of ethical behaviour. Obeying the law
and ethical behaviour are two totally different things. Ethical behaviour in the banking
sector is a prerequisite for the stability of the global financial market. Therefore personnel
of the banks should consider the huge level of the responsibility that is associated with
their profession. It would be foolish to believe that it is possible to achieve a fully ethical
environment in the short term, however, it is possible to increase the level of ethics in
the banking environment through quality education of the young population. It is necessary
for young people who are the future employees of banks, to have as much information
about the importance of ethical behaviour as possible.
Dr. Cecile Rozuel published an article in the journal of business ethics proclaiming that
the ethical behaviour of people who work in business is based on economic growth.
She connects business ethics with psychology and how training of the imagination
provides a more ethical foundation for future employees of a business. [Rozuel, 2016]
Conclusion
Resulting from this paper the problematics of AML regulation issue occurs in all surveyed
countries. Some countries have approached the solution to this problem in late 90s,
but gradually under the influence of a unified European legislation occurred AML
regulatory harmonization, especially by transposing AML principles in the legal systems
BUSINESS ETHICS AND SUSTAINABLE DEVELOPMENT
62
of the countries in 2008 and 2010. The importance of ethical behaviour and its impact
on global financial markets is closely connected with the issue of regulation and should
be emphasized more especially in youth education. Implementation of the principles of
self-regulation in the banking sectors of the countries is an element of interconnection
of legal principles and ethics. In all four countries measures responding to the global
financial crisis have been created to enhance the client’s position in the market and thus
prevent unethical behaviour which is one of the causes of the financial crisis. Strengthening
regulation at national and European level is a key element of harmonization of the financial
regulation in EU countries. Harmonized legal system with elements of ethical behaviour
is a prerequisite for a stable banking sectors. It is obvious that the process of harmonization
of financial regulation is challenging due to differences between the current situation in
the banking sector of each country and especially due to the different economic situation.
Social responsible investment should not be an option for banks and investors. Investors
should be very well educated and regulations should be creapted beforehand and not
afterwards as patch to fix problems. From an ethical point of view this is fundamental.
All banks should have a percentage of investments dedicated to ESG, to favour those
markets and sustainability. Corporate governance and legislation are closely connected to
each other. Legislation prohibits or gives guidelines on how a financial institution should
operate. Corporate governance is the part that executes the legislation. An ethical code is
executed ethically if corporate governance see to it that it is executed ethically.
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67
Kinga KOWALCZYK1
Sustainability of Polish pension system in the light of selected social and demographical aspects
Abstract
The presented work is focusing on the factors which influence the pensions. The main
aim of this work is to give the answer to the question: “What factors mostly influence
the Polish pensions in the future”. The work is divided into two sections. The first
part focuses on a short description of a pension system in Poland. The second part
of the work is devoted to the factors determining pensions within Polish pension
system. This section shows the years of work service (seniority), capital accumulation
and demographic factors which strongly influence the general pension system in Poland.
Keywords: pension system, demographic factors1
Zrównoważony rozwój polskiego systemu emerytalnego w świetle wybranych aspektów społecznych i demograficznych
Streszczenie
Artykuł koncentruje się na czynnikach, które wpływają na stabilność polskiego systemu
emerytalnego. Jego istotą jest odpowiedź na pytanie: „Jakie czynniki mają największy
wpływ na przyszłe emerytury Polaków”. Praca jest podzielona na dwie sekcje. Pierwsza
skupia się na krótkim opisie systemu emerytalnego w Polsce. Druga część jest poświęcona
czynnikom wpływającym na polski system emerytalny. Zwraca ona uwagę na staż pracy,
akumulację kapitału oraz czynniki demograficzne, które mają istotny wpływ na polski
system emerytalny.
Słowa kluczowe: System emerytalny, czynniki demograficzne1 University of Economics in Katowice Faculty of Finance and Accounting for Business
BUSINESS ETHICS AND SUSTAINABLE DEVELOPMENT
68
Introduction
One of the pillars of sustainable development is the development of the society.
Social development requires promoting equality and fighting poverty. One of important
elements stabilizing individual income through the lifetime is pension system. In Poland the
system has evolved and now it is comprised of three pillars. However, still there are many
factors, which are seen as threats to pension system. Especially 90s generation is vulnerable
to several significant factors, which may lower their future benefits appropriated by pension
system and harm equality among retired.
The aim of the paper is to identity and evaluate factors, which may cause inequality and/
or poverty among 90s generation, when they retire. The method applied in the study
is analysis of literature and analysis of descriptive data. The results may be used to design
policies aimed at improving pension system sustainability.
Pension system in Poland
The system itself started to work in a current form in 1999, when the Polish government
decided to change the system in order to allow it to correspond to various changes which
happened in the Polish society.
The system of pensions in Poland is based on three pillars. These pillars are:
• first pillar - pay as you go scheme,
• second pillar - mandatory pension funds,
• third pillar - voluntary pension funds.
The first pillar is a mandatory pay-as-you-go scheme which is based on notional defined
contribution (NDC) accounts. It is managed by the state-owned Social Insurance Institution
(ZUS). Benefits depend precisely on contributions. In an NDC system every participant has
a virtual account which contains all contributions made over a working life. Benefits are
calculated considering average life expectancy at the time of retirement. Contributions
for the insured are paid by government in several circumstances, such as: periods
of unemployment, military service or maternity leave. The total contribution rate is 19.5%
of the employee’s taxable income. It is split equally between employees and employers
(Składki ZUS 2017).
The second pillar of the pension system is also mandatory. It takes form of mandatory
individual accounts - open pension funds (OPF). OPFs are DC type. OPFs are created and
guided by a joint-stock company (general pension fund society). They are independent
legal entities. The contribution which are paid to sub-account in ZUS and OPF comes fully
from the part paid by the insured.
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Table 2. Division of pension contributions in the case of a decision to transfer contributions only to a sub-account in ZUS vs Division of pension contributions in case of decision on further transfer of contributions to OPF account
ZUS 19.52%
Account in ZUS12,22 %
Sub-account in ZUS7,3 %
OFE 19.52%
Account in ZUS12,22 %
Sub-account in ZUS4,38 %
Account in OPF2,92 %
Source: Self-study based on: Ministerstwo Rodziny, Pracy I Polityki Społecznej.
While the second pillar is mandatory, employees may also resign from OPFs, leaving
all social insurance in ZUS. For those members who, from the first and second pillar,
contributed for the minimum amount of time and obtain the minimum pension, the state
pays the guaranteed minimum pension from public funds. (Wilmington Insight 2017).
The third pillar of pension system as the name suggests, is the only one voluntary
pension fund in the Polish pension system. It can be characterized by the fact that
it is supplementary, offers higher level of benefits in comparison to the two other pillars,
it is private. Moreover, the organization which provides payment might vary. It is the only
pillar which does not have to be connected with ZUS in any way. The most important traits
of the third pillar, which should be mentioned are as following:
• it is complementary and based fully on the capital,
• tax profits emerge only in the long run.
The system has two forms:
• group – Occupational Pension Programs (PPE) – freely by employer based on
agreement of at least one employer with pension fund. The basic contribution
in this case is at 7% of the salary,
• individual – Individual Pension Accounts (IKE/IKZE) – contributions not larger than
3x(for IKE) and 1,2x(for IKZE) of average economy wide pay (Kowalewski 2008, p.5).
It is worth to notice that while OPF is the part of the pension system in Poland, it is rather
an addition than independent organ. In general the whole scheme itself is controlled
by ZUS (Kaczmarczyk 2014, p. 24).
BUSINESS ETHICS AND SUSTAINABLE DEVELOPMENT
70
Factors determining pensions of 90s generation
The first aspect which should be described in the context of the pension within Polish
pension system are years of work service, also known as seniority. It is crucial problem
which appears within the Polish pension scheme. It is the fact that before the 2012
the Polish years of work service were 65 for male and 60 for female. As it can be seen,
the rule was changed after 2012, when the new government came with the conclusion
that it would be a good idea to increase the age of retirement from 65 to 67 for males
and from 60 to 65 for females. Furthermore, the new government is reversing the change
in 2017.
In case of the Polish pension system, the money for pension for already retired
people are earned by young workers. The basic problem connected with the system
is the fact that the worker is not earning money for own retirement fund but instead
for pensions, which are given to seniors who already retired. Especially if, the amount of
the workers is going to be significantly lower, in comparison with seniors. For example,
“In 2003 the unemployment rate reached 19% and it is higher for the young, older
workers and women. The low level of employment threatens the future adequacy
and sustainability of pensions. While some of those who pay no contributions may be
employed informally, they still do not accumulate an employment-related pension and
consequently will be more likely to be entitled to minimum guarantee pensions only”
(Eurostat Data Collection 2005, p. 2).
The attention should be also given to the fact that the highest levels of unemployment is
found among the youth - people on whom this system mostly relies on. In general, in 1995
the unemployment rate was much lower than in 2005. While the tendency changed, still
it is too far away from a “decent” number. Especially in the context of the Polish pension
scheme, which is entirely based on the amount of money given for government by youth.
Recently registered in 2017 unemployment rate in Poland was 7,1% while, at the same time,
unemployment among youth was recorded at 14,1 % (trading economics 2017). In other
words, people who are able to provide the most contribution for the pension system
are unemployed.
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Figure 1. Youth unemployment rate in EU member states as of February 2017 (seasonally
adjusted) in %
Source: Self-study based on: Statista 2017.
As it can be seen in the Figure 1, the youth unemployment in Poland in February 2017
was 14,5 %. Furthermore, it should be noted that it is still lower than in many other
countries. However, for a pension system which is heavily relaying on the work of the
youth, the level of unemployment is still too high (Trading Economics 2017).
Another factor which should be mentioned is the capital accumulation. In the context
of the pension scheme it might be simply defined as pension plan in which employees
make tax-deferred contributions from their salary to retirement accounts. This deduction
reduces their taxable income and qualifies them for a lower tax bracket. It is also called
salary reduction plan.
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Figure 2. Demographic Burden Rate - 65+ population per 100 persons at productive rate
Source: Self-study based on: Ministerstwo Rozwoju 2015, p.7.
It is important to focus on the capital accumulation in the context of the demographic
burden rate. As it can be seen in Figure 2, Poland is currently suffering from ageing. If the
tendency is going to remain the same, then in 2050 the number of pensioners is going to
exceed the number of regular workers.
Table 1. Population Indicators and Projections for Poland
Population (in millions)
Growth rate (%)
Fertility rateLife
expectancy (in years)
Median age (in years)
Proportion of elderly
population (%)
1950 24,8 1,7 3,7 58,8 25,8 5,3
1960 29,6 1,1 2,9 67,7 26,7 5,9
1970 32,7 0,8 2,2 69,9 28,3 8,4
1980 35,6 0,9 2,4 70,1 29,7 10,0
1990 38,1 0,2 2,0 70,7 32,3 10,2
2000 28,4 0,0 1,4 73,8 35,4 12,4
2010 38,0 0,1 1,4 76,4 28,1 13,5
2020 37,4 1,3 78,1 22
2030 36,7 1,3 79,2 27
Source: Self-study based on: Leszko 2015 p.707.
INTERDISCIPLINARY THEORETICAL AND EMPIRICAL STUDIES. NO. 1/2017
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As it can be seen, since the 1950 fertility rate is steadily falling down, which is not only
the problem of Poland but also many other European countries. According to experts,
in 2020 it might lead to the fertility at the level of 1.3 which is too low for the pension
system to work properly. With the increasing life expectancy, the amount of older people
(potential pensioners) in population rises. In 2020 they are expected to be more than
20% of all citizens.
Furthermore ZUS is supposed to pay bigger amounts of pensions, due to the fact,
that people live for much longer.
There are few other important demographic factors, which have an impact on Polish
pension system. First of all, the problem is high emigration level connected with relatively
low birth rate (aging of society, already mentioned). It was especially problematic in 2007
and 2013. “According to data released by the Central Statistical Office (GUS) 2,2 million
Poles lived for more than three months abroad last year, higher than the previous year
and only marginally below the record 2,3 million noted in 2007” (GUS 2017). It is a very
high number in particular if it will be taken into consideration that Poland has only
38 million of citizens. According to GUS, nowadays 2,4 million of people from Poland
live abroad (GUS 2017).
Another aspect, which influence the pension system in Poland, is increasing gender gap.
The gender gap is a difference between women and men, especially as reflected in social,
political, intellectual, cultural, or economic attainments or attitudes. In case of Poland
it is problem of glass ceiling, and wage gap between male and female, which leads
to the situation where women in Poland get less money from pension, than males (Wirth
2001). The gender gap is presented in the following figure.
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Figure 3. Population Pyramid of Poland
Source: Self-study based on: Leszko 2015, p. 708.
As a result of lower female mortality rates, almost 60% of older adults aged 70 - 74 years
are female and this proportion gradually increases to 76% for those aged 90 – 94 years.
Furthermore, women being a bigger part of the society, are suffering from the fact that
their pensions are lower because their pension contributions are divided into longer period
of time (earlier retirement) than men.
However, it must be stated, that the gender pay gap at median earnings in Poland is one
of the lowest in the OECD (Organization for Economic Co-operation and Development).
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Figure 4. Estimated difference between average gross hourly earnings of male and female
employees as % of male gross earnings
Source: Self-study based on: Eurostat 2015.
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Figure 4 in general shows that the information about the gender gap in Poland is positive.
It is significantly lower than in other European countries. It is proved that: “Globally, women
continue to earn less than men, with the World Economic Forum’s Global Gender Gap
Report 2015 showing that despite an increase in women’s earnings, their current worldwide
average only equals what men were earning 10 years ago” (Luxton 2017).
In addition to gender pay gap there is one more issue which should be mentioned –
maternity leave. Childcare is perceived as mothers’ duty in Poland. It is often result of
women not being available to attend the labor market for several years because of family
duties. The official length of leave for women is 20 weeks. “Up to two weeks can be
used before the expected date of birth. The first 20 weeks are referred to as ‘maternity
leave’, the next six weeks as ‘additional Maternity leave’. It is obligatory for the mother
to take 14 weeks” (Michoń et al. 2015). In comparison paternity leave lasts only for
two weeks. Furthermore, mother has a right to decide what will be the payment and
funding. “Twenty six weeks at 80% or 100% of average earnings for 12 months before the
birth, with no ceiling on payments. If the mother chooses to take the 100% option, any
Parental leave taken will be paid at 60%; if she chooses the 80% option, it also will be paid
at 80%. Funded from the Social Insurance Fund, financed by contributions by employees
(2,45% of earnings) and self-employed workers (55 PLN per month), with some additional
finance from the State to cover pension contributions. There is no contribution from
employers” (Michoń et al. 2015). For father it is 100% of average earnings for the period of
12 months before birth, with no ceiling on payments.
A number of studies have shown the negative correlation between having young children
and employment of female in Poland. Women tend to remove from the labor market
during the first three years after child was born and face difficulties re-entering afterwards
(European Commission 2012).
Conclusion
Polish pension system has been a talking point due to the fact that it influences wealth of
current and future generations. It is probable, according to various sources, that it will turn
out to be inefficient to cover future pensions of 90’s generation. It is forecasted that by
2060 the ratio of Polish people in the production to the postproduction age will change
in favor of the second group (postproduction) making it impossible to cover pensions
of the ones that turned 67 - current retirement age. In addition to that another threat
for the Polish pension system is the fact it is shaped and constantly modified to fulfill
the short-term political objectives but not to provide long-term safety and suitability.
Therefore, there are still many changes that have to be done in order to make Polish
pension system work properly.
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References:
1. Eurostat Data Collection for Poland. (2017). Retrieved from: ec.europa.eu/social/BlobServlet?docId=5404&langId=en. (access: 25th June 2017).
2. GUS. (2016). Informacja o rozmiarach i kierunkach emigracji z Polski w latach 2004–2015. Retrieved from: http://stat.gov.pl/obszary-tematyczne/ludnosc/migracje--zagraniczne-ludnosci/informacja-o-rozmiarach-i-kierunkach-emigracji-z-polski-w-latach-20042015,2,9.html (access: 24th June 2017).
3. Kaczmarczyk, M. (2014). Three Pillar Pension System in Poland.
4. Kowalewski O. (2008). Poland‘s Pension System: An Overview.
5. Leszko M., Zając-Lamparska L., Trempala J. (2015). Aging in Poland. The Gerontologist.
6. Luxton E. (2015). World Economic Forum. Retrieved from: https://www.weforum.org/agenda/2015/12/which-european-countries-have-the-biggest-gender-pay-gaps/ (access: 27th June 2017).
7. Michoń. P., Kurowska A., Kotowska I. (2015). Poland.
8. Ministerstwo Rodziny, Pracy i Polityki Społecznej. (2017). Składki na ubezpieczenie emery-talne, Retrieved from: https://www.mpips.gov.pl/ubezpieczenia-spoleczne/ubezpie-czenie-emerytalne/skladka-na-ubezpieczenie-emerytalne/ (access: 25th July 2017).
9. Ministerstwo Rozwoju. (2015). Responsible Development Strategy - Capital Accumulation Programme. Retrieved from: https://www.mr.gov.pl/media/22166/ResponsibleDevelopment_Strategy_CapitalAccumulationProgramme.pdf.
10. Pension funds online. (2017). Country Profiles – Poland. Retrieved from: http://www.pensionfundsonline.co.uk/content/country-profiles/poland/81 (access: 25th July 2017).
11. POX. (2017). Składki ZUS. Retrieved from: http://zus.pox.pl/skladki-zus-2017.htm (access: 25th July 2017).
12. Schulze E., Gergoric M. (2015). Maternity, paternity and parental leave: Data related to duration and compensation rates in the European Union. Retrieved from: http://www.europarl.europa.eu/RegData/etudes/STUD/2015/509999/IPOL_STU(2015)509999_EN.pdf (access: 22nd July 2017).
13. Trading economics. (2017). Poland Youth Unemployment Rate, Retrieved from: http://www.tradingeconomics.com/poland/youth-unemployment-rate. (access: 25th July 2017).
14. Ustawa z 1998 o emeryturach i rentach z FUS. Retrieved from: http://isap.sejm.gov.pl/DetailsServlet?id=WDU19981621118.
Część II
Zrównoważone organizacje
Part II
Sustainable organisations
81
Zuzana ČMELÍKOVÁ1
Toward Ethical Organizations – Ethics Officers and Ethical Leaders as Moral Agents
Abstract
The fast pace and rapidly changing environment in which modern organizations function
require transformational leadership that is substantially different from Max Weber´s solitary
executive at the top of a bureaucratic hierarchy. Organizations require leadership that
is fluid, not simply positional, dispersed rather than centralized, and agile not inflexible.
Based on our practical experience we can say that organizational leaders also in Slovakia
know this mantra well, but are often reluctant in practice to distribute genuine, moral
leadership below managerial levels. Despite this reluctance, the external environment
and continuous advancements in technology are major driving forces underlying change
in organizational leadership – toward moral leadership. Such leadership, moral leadership
is more than a personal style of a leader. It becomes the essence of the organization´s
integrity – a clear demonstration of organizational values and a very basic precondition
for creation of ethical organization.
Keywords: Ethical organization, ethics officer, ethical leader, ethical organizational culture,
organizational change, innovation
1
W kierunku organizacji etycznych - doradcy etyczni i etyczni przywódcy jako wzorce moralne
Streszczenie
Szybkie tempo i szybko zmieniające się środowisko, w którym funkcjonują współczesne
organizacje, wymagają przewagi transformacyjnej, która różni się znacznie od samotnego
1 Better Future, s.r.o
BUSINESS ETHICS AND SUSTAINABLE DEVELOPMENT
82
wykonawcy na szczycie biurokratycznej hierarchii Maxa Webera. Organizacje
wymagają przywództwa, które jest płynne, a nie tylko pozycjonowane, rozproszone,
a nie scentralizowane i zwinna, a nie sztywna. Opierając się na naszym praktycznym
doświadczeniu, możemy powiedzieć, że liderzy organizacyjni również na Słowacji znają
tę mantrę, ale często niechętnie praktykują dystrybucję autentycznego, moralnego
przywództwa niższego szczebla kierowniczego. Pomimo tej niechęci, środowisko
zewnętrzne i ciągłe postępy w technologii stanowią główne siły napędowe leżące
u podstaw zmiany w kierownictwie organizacyjnym - w kierunku moralnego przywództwa.
Takie przywództwo, moralne przywództwo jest czymś więcej niż osobistym stylem lidera.
Staje się istotą integralności organizacji - wyraźną demonstracją wartości organizacyjnych
i bardzo podstawowym warunkiem wstępnym tworzenia organizacji etycznej.
Słowa kluczowe: Organizacja etyczna, urzędnik etyki, lider etyczny, etyczna kultura
organizacyjna, zmiana organizacyjna, innowacje
Introduction
According to J. Ciulla most workplaces are like zoos. “They are filled with a variety
of people, some like you and some quite exotic. When you go to work, you navigate your
way through a complex web of relationships with people who often seem to be of different
species.
Some of them are dominant, some are docile, some are cooperative, others are
contentious, some are kind, and some will bite you. When you think of it, life in
organizations of various kind is basically about the interaction of people toward
some common goals, and ethics is about how they treat each other.” [Ciulla 2013, p.
3] The purpose of this article is to emphasise the importance to institutionalize ethics
in to organization and the role of ethics officers and ethical leaders in organizational
transformation toward ethical organizations. We focus creation of organizational ethical
culture as crucial for moral development of organizations and its members.
Ethics in Organizations
Organizations has undergone many major changes in the last few years. No longer do
ethicsists and business people always talk at cross purposes. “The discourse of business
and the discourse of ethics are being connected in important ways.” [Freeman 1997, p. xi]
In this article we will understand organizations as communities. Therefore, the main
purpose of ethics in organization must be demonstrated in creation of good communities.
Ethics in organizations is not only about how individual employees think and respond.
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“Anyone who has ever worked knows that employees are not “just” individuals.
They become part of something larger; they’re members of an organizational culture
that affects how they think and behave.” [Trevino 2017, p. 158] However, we agree with
E. Hartman who argues that any good community, any good organization, requires not
only good rules but also people of civic virtue. “I have to say that moral persons are at
the very least necessary for good organizations but also that a good organization helps
make people moral. In so doing it benefits them, for it causes the virtuous life and the
good life to coincide.” [Hartman 2006, p. 9] In this article we will apply the organizational
ethical culture concept to organizational ethics. We will argue in favour of structural-
functionalism and the systems approach to understanding organizations. “I shall argue for
rational individualism, and for interpretation as a way of explaining individual behaviour that
organization theorists cannot ignore. I shall argue too for a collective approach, irreducibly
different from one based on psychology and focused on individuals, to explain what
organizations do. In fact, a collective approach, including reference to corporate culture,
is required for explaining not only organizational but individual behaviour.” [Hartman 1998,
p. xiii]
We understand ethical culture of an organization as a part of the larger organizational
culture that represents the aspects of organizational culture that affect the way employees
think and act in ethic-related situations. Ethical culture has become important to work
organizations. “When asked by the Society of Corporate Compliance and Ethics to list
the major “hot topics” of concern to them in January 2016, ethics and compliance officers
listed “creating and maintaining an ethical culture” as one of the top five hot topics.
This was true for small companies, privately held firms, multinationals, not-for-profit
organizations, and government organizations, among others.” [Trevino 2017, p. 158]
In terms of how we understand ethics in organizations we consider ethical culture
as a significant concept, which has powerful influence on individuals’ ethical awareness,
judgment, and action. According to the recent survey of the Society of Corporate
Compliance and Ethics most employees are at the conventional level of cognitive moral
development, meaning that they are looking outside themselves for guidance about
how to think and act. “Ethical culture is a source of a good bit of that guidance and can
influence employees to be aware of ethical issues (or not), to make good or bad judgments,
and to do either the right thing or the wrong thing.” [Trevino 2017, p. 158] Figure 1 depicts
ethical decision making in context of ethical culture, ethical awareness, ethical judgment,
and ethical action.
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Figure 1 - Ethical organizational culture
Source: L. Trevino
Why and How to implement ethics into organizations of various kind
Trust and transparency in conduct is ever more important in our organizations and ethics
need to be clearly stated. In this part of the article we will focus our attention on the
importance of creating ethics infrastructure in organisation. We will not only introduce
ethics program and ethics training but also emphasize the role of ethics officers and ethical
leaders in this process. An ethical infrastructure is needed in order to avoid the unethical
behaviours as well as establishing ethical climate within the organisation. It should have
both formal and informal influence to control the unethical behaviour and educate the
employees about ethical behaviours.
There are several advantages of the formal ethics infrastructure. First of all, ethics
program (ethical leader(ship), vision statement, mission statement, mission statement,
clarified organizational moral values, organizational code of ethics based on moral
values, ethics training – especially values, ethics committee, ethics communication
strategy, ethics officers, ethics hot line, system of measurement and rewards, system
of periodic evaluation-monitoring and tracking, ethics training on important ethical
issues) provides clear guidance for managers and employees and training will help
they know what is expected of them in terms of ethical behaviour. This process should
be monitored by ethics officers, who are competent and skilled in managing ethics
in organization. Second, it will enhance the organisation’s reputation and good-will
as well as to remind suppliers and customers of the organisation’s expectation of proper
behaviour. Third, ethics program, ethics training and supervision by ethics officer and
support from ethical leader(ship) will promote an ethical climate and culture within the
organisation. But there are also some things managers and leaders must be aware of.
Firstly, introducing and implementing ethics program effectively requires full support
and engagement of organizational leaders and decision makers. Secondly, it demands
time of both decision makers (shareholders, leaders, managers) and employees.
Shaping long-term ethical behaviour in the organisation will need investment to a new
INTERDISCIPLINARY THEORETICAL AND EMPIRICAL STUDIES. NO. 1/2017
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position in organization – an Ethics Officer, who will manage monitor and update all this
process of creation ethical infrastructure. In the following part of this article we focus
our attention on the role of ethics officer in organization.
Ethics Officer
Today, more people are aware and are concerned about corporate misbehaviour and
the growth of corruption. The community is cynical about the intentions of organizations,
so the need for ethics officers is expected to grow vigorously in any sphere of our lives.
The corporate executives in the US now are willing to look after their organization
by empowering ethics and compliance. Situation in Slovakia is different. There is a great
need for creating this position in organizations of various kind in Slovakia, but corporate
executives are not aware of this possibility and they do not realize how much their
organization could benefit from it. The role of ethics officers was fully acknowledged
in the US in 1991. It was thanks to legal support when the Federal Sentencing Guidelines
for corporations went into effect. “The guidelines stated that companies with effective
compliance and ethics programs could receive preferential treatment during prosecutions
for white-collar crimes.” [https://www.forbes.com/2006/10/23/leadership-ethics-hp-
lead-govern-cx_hc_1023ethics.html] According to Roy Snell, a CEO of the Society
of Corporate Compliance and Ethics, companies in the last five years have become even
more interested in ethics and compliance. After the corporate scandals of 2001 and 2002,
and the Sarbanes-Oxley Act that followed, companies began tripping over themselves
to identify potential ethics problems. We consider such legislative support as crucial also
in Slovakia. Therefore, we would like to initiate broader discussion with our political leaders
and legislators to create such an Act which will motivate organizations and their decision
makers to initiate creation of this profession that will enable professional and competent
implementation and managing of ethics in their organizations. The reality is that in Slovak
organizations most of these ethics initiatives are delegated by manages to HR departments
e. g. to create code of ethics. These people at HR are not competent in ethics and they just
copy some codes of ethics from abroad and translate them to Slovak. Such code of ethics
cannot work effectively and this is the reason why are members of some organizations
quite sceptical about ethics and they start to gain resistance against formal implementation
of ethics into organization. According to our opinion competence of ethics officers
and their daily cooperation with organizational leaders, managers and decision makers
is crucial to successful implementation of ethics in to any organization.
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Ethical leader(ship) as a key factor of effective organizational change
According to J. Ciulla the greatest strength and the greatest weakness of leaders is that
they are human beings. As such they are unpredictable creatures, capable of extraordinary
kindness and cruelty. “Leaders do not have to live by higher moral standards than the rest
of us, but it is imperative that they have a higher compliance rate, because the impact of
their behavior impacts on many lives.” [Ciulla 2005, p. 1] J. Ciulla emphasizes two distinctive
factors that make the ethics of leadership different from the ethics of other individuals.
“The first is power - the way that leaders exercise it and the temptations that come with it.
The second is the special moral relationship that they have with followers and the range
of people with whom they have moral relationships and obligations.” [Ciulla 2005, p. 1]
In this section of the article we will focus on ten facets of ethical leaders which offer
a way to understand ethical leadership in more complex way. We argue that ethics is
at the heart of leadership and ethical leadership plays a central role in any organizational
transformation. In our effort to support this statement we will use E. Freeman and
L. Stewart’s argumentation about what constitutes ethical leaders; those who play a crucial
role in changing organizational culture. Ethical leaders do:
1. Articulate and embody the purpose and values of the organization.
2. Focus on organizational success rather than on personal ego.
3. Find the best people and develop them.
4. Create a living conversation about ethics, values and the creation of value for
stakeholders.
5. Create mechanisms of dissent.
6. Take a charitable understanding of others’ values.
7. Make tough calls while being imaginative.
8. Know the limits of the values and ethical principles they live.
9. Frame actions in ethical terms.
10. Connect the basic value proposition to stakeholder support and societal legitimacy.
How to develop ethical leaders?
E. Freeman suggests organizational leaders answer the following simple question that will
help them establish whether they really follow what they formally declare:
What are my most important values and principles?
Does my calendar—how I spend my time and attention—reflect these values?
What would my subordinates and peers say my values are?
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What mechanisms and processes have I designed to be sure that the people who work
for me can push back against my authority?
What could this organization do or ask me to do that would cause me to resign for ethical
reasons?
What do I want to accomplish with my leadership?
What do I want people to say about my leadership when I am gone?
Can I go home at the end of the day and tell my children (or a loved one) about my
leadership, and use my day’s work to teach them to be ethical leaders?
“The best way for organizations to develop ethical leaders is to engage in some of these
questions. Viewing business simultaneously in economic and ethical terms helps to send
the message that ethics isn’t just an important set of rules not to violate, but that it is an
integral part of what it means to work at your organization.” [Freeman – Stewart 2006,
p. 9]
The most renowned scholars from the field of Applied Ethics, like James MacGregor
Burns, Joanne B. Ciulla, Edward R. Freeman, Patricia Werhane, Craig E. Johnson, Heidi von
Weltzien Hoivik and many others all agree that one of the most important steps is to bring
life to a conversation about how to effectively create sustainably ethical organizational
culture.
The Center for Ethical Business Cultures at the University of St.Thomas Opus College
of Business published a document named “Assessing the ethical company” in which
authors proposed “The Ethical Organization Model”. It describes five characteristics
of an ethical organization: Values, Leadership Effectiveness, Stakeholder Balance, Process
Integrity, Long Term Perspective.
Values
At the heart of ethical organization are its values. The Center for Ethical Business Cultures
uses an organic analogy – an organization’s values are its lifeblood. “For the organization
to be healthy, they must flow vigorously through every cell.” [Jondle-Shoemake-Kowske
2009, p. 57]
Leadership Effectiveness
Leaders must embody the organization’s values in their own behavior and must articulate
those values in a way that is compelling not only for employees but for key (primary)
stakeholders. “Leaders set the tone that permeates the organization’s culture. If employees
perceive top leaders to care more about results than about how those results are
achieved, this perception can encourage the bending or even the breaking of rules. ”
BUSINESS ETHICS AND SUSTAINABLE DEVELOPMENT
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[Jondle-Shoemake-Kowske 2009, p. 57] We have emphasized the meaning of ethical
leadership at several places in this article and we argue that leaders set a moral tone
in any organization.
Stakeholder Balance
Proposed Ethical Organizational Model, with which we agree, recognizes that stakeholder
needs and demands frequently exist in tension with one another. “Customers want
higher quality at a lower price; employees want higher wages and increased benefits;
owners/investors want a greater return; suppliers want to be paid more; communities
want companies to invest more in them; and competitors want fair competition.”
[Jondle-Shoemake-Kowske 2009, p. 57] The authors of this model do not suggest that
these tensions will disappear for the ethical organization. They argue that the ethical
organization recognizes these tensions and works to maintain a balance between them.
“Focusing too much on any one stakeholder, whether owners/investors, customers
or employees, will create a distortion that can lead to ethical lapses.” [Jondle-Shoemake-
Kowske 2009, p. 57]
Process Integrity
Process Integrity in proposed model represents a focus on the systems dimension
of organizational life. “The ethical organization’s values must be built into every operational
process. All of its operational systems, e.g., recruiting, hiring, evaluating, compensating,
promoting, demoting, firing, marketing, sales, production, etc. need to be aligned with its
values. At best, misaligned processes create confusion and poor decision making within
the organization; at worst, they create ethical breaches and chaos.” [Jondle-Shoemake-
Kowske 2009, p. 57]
Long Term Perspective
The fundamental characteristic of an ethical organization is the devotion of its leadership
to strategically plan for the long-term. This characteristic, according to authors of this
model, evokes the question, “what is the purpose of this business?” For some, the answer
is to maximize shareholder value, but for others, the goal of business is found in balancing
the interests of numerous stakeholders – owner/investors and employees, customers
and suppliers, communities and as the authors present, also competitors. “Within the
model, the linkage between Leadership Effectiveness and Stakeholder Balance represents
a company’s commitment to serving, and its ability to return value to all stakeholders.”
[Jondle-Shoemake-Kowske 2009, p. 57]
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Conclusion
The aim of this article is to propose a model for creation ethical organizations in Slovakia.
Our focus is on the complex ethical relationships that are the core of organizational
transformation toward ethical organization. We consider professional implementation
of tailored ethics programs that are based on clarified organizational values as an effective
way of any organizational transformation. We emphasize that this effort – to implement
ethics into organization must be managed professionally by ethics officers who closely
cooperates with leaders and managers on transformation of their organization toward
ethical organization.
References:
1. ARISTOTELES.: Etika Nikomachova. Bratislava: Pravda, 1979. ISBN 75-067-79
2. BLANCHARD, K. - O’CONNOR, M.: Managing by Values. San Francisco: Berrett-Koehler Publishers, Inc., 1997. ISBN 1-587675-007-8
3. BURNS, J. : Leadership. New York: Happer & Row, Publ ishers Inc. , 1979. ISBN 0-06-131975-9
4. CAMERON, K. - QUINN, R.: Diagnosing and Changing Organizational Culture. San Francisco: Jossey-Bass, 2006. ISBN 978-0-7879-8283-6
5. CIULLA, J. B. et al.: Ethics, The Heart of Leadership. Toronto: Nelson Thomson Learning, 1998. ISBN 0-275-96120-6
6. CIULLA, J. B. et al.: The Ethics of Leadership. Toronto: Nelson Thomson Learning, 2003. ISBN 0-15-506317-0
7. CIULLA, J. B. – MARTIN, C. – SOLOMON, R. C.: Honest Work – A Business Ethics Reader. New York: Oxford University Press Inc., 2013. ISBN 9780199944200
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Contact information:
PhDr. Zuzana Čmeliková, PhD.
Better Future, s.r.o.
SNP 325/38
962 31 Sliač
Slovakia
Phone: 00421/907684817
Email: [email protected]
91
Andrea KLIMKOVÁ1
Ethics of care and sustainable development in context of applied ethics
Summary
Mankind has entered a new geological period (Anthropocene) and society must learn
to deal with the challenges of sustainability and sustainable development. The university
sector is the one that can critically address sustainable development as it carries out
pioneering research, crosses interdisciplinary boundaries, and challenges dominant
paradigms. Universities prepare future leaders and experts, therefore one of the priorities
of practical professional preparation is the development of competencies for future experts
and auditors towards sustainability and sustainable development. On the field of Applied
Ethics, we can identify several research questions and areas of exploration as high priority
in higher education to sustainability. Inspiration and a tool for socio-critical research may
be ethics of care as a weak normative ethics, as a search for a balance between theoretical
ethics and moral practice. Can ethics of care be methodological and methodological
in the context of a post-fundamentalist paradigm?
Keywords: Ethics of Care, Applied ethics, Sustainable Development, paradigm of
Post-foundacionalism 1
Etyka troski i zrównoważony rozwój w kontekście etyki stosowanej
Streszczenie
Ludzkość weszła w nową epokę geologiczną (antropocen), a społeczeństwo musi się
nauczyć radzić sobie z wyzwaniami zrównoważonego i trwałego rozwoju. Sektor
akademicki może zaproponować krytyczne podejście do problematyki zrównoważonego 1 Matej Bel University in Banská Bystrica, Slovakia
BUSINESS ETHICS AND SUSTAINABLE DEVELOPMENT
92
rozwoju, jako że realizuje pionierskie badania, przekracza granice dziedzin i podważa
dominujące paradygmaty. Uczelnie wyższe kształtują przyszłych liderów i nauczycieli,
dlatego jednym z priorytetów praktycznego przygotowania zawodowego wydaje się
rozwój kompetencji przyszłych nauczycieli w kierunku zrównoważonego i trwałego
rozwoju. W dziedzinie etyki stosowanej można wskazać kilka zagadnień i obszarów
badawczych o wysokim priorytecie w szkolnictwie wyższym, istotnych z punktu widzenia
zrównoważonego rozwoju. Inspiracją i narzędziem analizy społeczno-krytycznej może
być etyka troski jako słaba etyka normatywna, poszukiwanie równowagi między etyką
teoretyczną a praktyką moralną. Czy etyka troski może mieć metodologiczne i metodyczne
uzasadnienie w kontekście paradygmatu postfundacjonalizmu?
Słowa kluczowe: etyka troski, etyka stosowana, zrównoważony rozwoj, paradygmat
postfundacjonalizmu
Preliminary notes
The role of “humanities disciplines” for sustainability needs elucidation. One view conceives
of sustainability as requiring communities at various levels to envision their future
well-being and to draw from sustainability science to make such visions viable. In this
regard, sustainability science should include the brokering or negotiation of knowledge
and pathways to achieve change and enable development of capable social institutions
[Schindler, D. - Hilborn, R. 2015] and enable development of organisations in all spheres.
Of the three components of sustainability, social sustainability is the least studied.
Established to make progress in this domain, research groups in community of Applied
ethics in Slovakia can explores current knowledge as well as critical questions that merit
research priority. Historical lessons from less-than-optimal, or even satisfactory, outcomes
demonstrate well the need to consider social sustainability in major public infrastructure
projects, organizational practice and complex technological systems. Achieving
sustainability will require interdisciplinary studies. Long-term research in context of
Applied Ethics is critically important on issues like ensuring fairness during the redesign of
organisations, institutions, cities and striving for inclusion in access to information on critical
social equity and justice issues, particularly those related to the natural environment. Also
needed is research on effective and responsible ways to achieve individual, organizational,
and institutional change in coming periods of climate, ecosystem, and societal transition.
Universities prepare future leaders, managers and experts, therefore one of the priorities
of practical professional preparation is the development of competencies for future
experts and auditors towards sustainability and sustainable development. On the field of
Applied Ethics, we can identify several research questions and areas of exploration as high
priority towards sustainability, sustainable development and sustainable life. Inspiration
INTERDISCIPLINARY THEORETICAL AND EMPIRICAL STUDIES. NO. 1/2017
93
and a tool for socio-critical research may be ethics of care as a weak normative ethics,
as a search for a balance between theoretical ethics and moral practice. Can ethics of care
be methodological and methodological in the context of a post-fundamentalist paradigm?
The counselling in ethics gradually achieves significant social acknowledgement and
acceptation. It relates to acquiring new experience, looking for the new accelerators
of economic growth, retaining competitive advantage. Its specific mission focused
on ethical support accomplishes the important task for ensuring economic and social
dynamics. This type of counselling service represents, similarly as legal or social
counselling, qualified professional orientation. It offers a special social order and
requires specific expert competences [Fobel 2015, p. 90]. We would like to show to
important scientific efforts: the current theoretical discourse and trend in Applied Ethics.
Our research is based on the paradigm of post-foundationalism. This intention has not
only a theoretical but also a practical impact. In general, this is an increasing trend in
applying methodological paradigms within the framework of weak ethics. With respect
to his, not only ethical coherentism, contextualism or communitarianism is in question,
but also the approach known as post-foundationalism. We will widen these theoretical-
methodological inspirations in current concept of sustainable development in Applied
ethics in more concrete applied considerations. P. Fobel - M. Fobelová [2016] state that
post-foundationalism paradigm creates prerequisites for the more effective application of
ethics in business in Slovakia. I build on the assumption [Fobel – Fobelová 2016], that it
also is inspiration for Concept of sustainable development, not only in higher education.
There is another important fact that inspires us to more critical considerations. It relates
to the situation in one sphere in Slovakia. “We have in take care “certain social anomalies,
the underestimation of the importance of ethical credibility and ethical rationality” in all
spheres. It is alarming that despite sufficient potential (staff and experts) in applied ethics
(business ethics) in Slovakia, implemented ethical initiatives are not well represented and
not reflected clearly in real practice” [Fobelová 2016, p. 66].
In this article the relevance of the ethic of care is elaborated for current Concept of
Sustainable development. It starts from the observation that Slovak society is witnessing
two intertwined processes: the relocation of politics of sustainability and the relocation of
care (caring about nature). Together these processes result in the need for new normative
frameworks for organisational practice (in context of social ethics, politics ethics and
organizational ethics). Our interest is only concentrated on the organizational spheres.
Care has to become part of the practices of organizational culture and organizational
ethics, which should be based on notions of relationality and interdependence.
Basic moral concepts of the ethic of care, like attentiveness, responsibility, competence,
responsiveness, trust and asymmetrical reciprocity are introduced. They are important for
sustainability and sustainable development. In the final part, the ethic of care is applied
in recommendation for practice. Finally, some recommendations are proposed to guide
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sustainable policymaking of organisation. If an ethic of care is to be (re)instituted, it will
demand wide-reaching changes in the ways in which organizations and institutions operate
at a range of spatial scales as well as new sets of responsibilities towards co-workers,
members of organisation and the wider public. I conclude by considering some of the
implications of such an ethic for everyday practices within the higher education.
Organisational practice is a dynamic social system consisting of different organisations.
It constantly manifests itself as an environmental practice in which various implemented
cultural strategies; it has a complex structure and follows political, legal, environmental,
and ethical standards. What is good environmental practice? How do we achieve it and
what steps needs to be taken? What is the role of care / caring for the environment and
nature in this context? Can ethics of care be inspiring for applied ethics and Education
for Sustainable Development?
Sustainable Development and the Possibility an Ethical Expertise
Understanding ethical leadership, ethical environment, and culture in the context
of sustainability and sustainable development in organizations is a crucial task
in the 21st century. The implementation of ethics, sustainability and ecological responsibility
into organizational practice is a current issue. It is also a complicated one as it exists
on global, systemic, and even organizational levels. Organizations require a specific
type of ethics that can provide a methodology for the rehabilitation of organizational
culture and creation of ethical policies, as well as programmes, which would incorporate
sustainability and sustainable development. Contemporary experts in ethics are expected
to design tools and strategies for the moral development of organizations leading towards
sustainability in these times characterized by ecological issues [Klimková – Bednár 2016].
Based on different case studies carried out in Slovakia, it seems that there is a problem
with ethical leadership in many organizations. It is evident in politics, business, sports,
and educational institutions. The symptoms include the erosion of integrity, injustice,
corruption, excessive ambitiousness, inconsiderate cultural strategies, and decisions
regarding the environment2. The crucial reason for this situation is related to the lack of
ethical power and insufficient ethical institutionalisation, i.e. the problem is present on
two levels: (1) the systemic level (environmental policy including normative tools on the
national level facing the pressure of globalization); (2) the organizational level (insufficient
normative tools of the organizational and ethical infrastructure); (3) the individual level
(participants with internal access lacking competences needed for the implementation 2 In the times we live in, it is important to present ourselves as green – at least on the outside. Declaring
the use of green technologies, often only formally, as a sort of advertisement, which however, does not actually eliminate the impact on the environment, is a requirement (greenwashing index). The emergence of the phenomenon of greenwashing is a direct result of the development of the concept of sustainable development and corporate social responsibility. See: greenwashing index scoring criteria: Available at: http://greenwashingindex.com/about-greenwashing/
INTERDISCIPLINARY THEORETICAL AND EMPIRICAL STUDIES. NO. 1/2017
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of sustainability principles). The leader of an organization – as the moral participant
responsible for the behaviour and actions of their employees – employs approaches
and strategies which exceed the mere obligation of acting in accordance with the law.
They are deliberately creating an ethical infrastructure in the organization through ethical
programmes which consist of the following components (ethical tools) and their selection:
vision, values, ethical code, ethical expertise, ethical training, ethical committees, hot lines,
system of control and reward, monitoring system, and ethical leadership3.
Therefore, it is necessary to integrate new competences for sustainable development in
the pregradual training of future experts in Applied ethics. They consist of the following
components:
1. Principles of Education for Sustainable Development [Klimková – Bednár 2016;
UE4SD, 2015] in actual existing sustainability;
2. Epistemic expertise – knowledge as an episteme (conceptual knowledge) that
determines what the teacher has to know about sustainability and sustainable
development [Fobel 2013];
3. Performative expertise – knowledge as phronesis (perceptual knowledge, practical
wisdom) [Fobel 2013], related to practical abilities, creativity, flexibility, sensitivity to
particular situations, resourcefulness, improvisation and filled with moral imagination.
On the field of Applied Ethics, we can identify several research questions and areas of
exploration as high priority in higher education towards sustainability:
• What kinds of interdisciplinary research—for instance, research on sustainable
organization or which competences—address issues of sustainability in organisation
(in all of triple bottom line: economic sustainability, social sustainability,
environmental sustainability)? How can this effort be strengthened?
• What factors influence how professional organizations view or promote sustainability
and sustainable development?
• What incentives can encourage professional organizations to engage with their
members in the pursuit of social sustainability?
• Which kinds of education for sustainable development improvements are likely
to occur “from the ground up,” on a case-by-case basis, and which can occur from
the top down?
• What educational courses, workshops, and materials provide high-quality
introductions to social sustainability?
• What examples of successful courses in science and engineering address social
sustainability? What can be done to enhance the adoption of social sustainability
material in appropriate courses?3 The Ethics & Compliance Officer Association (ECOA) and the Ethics Resource Center (ERC) announced
a major strategic alliance for conducting research and providing resources to the growing community of ethics and compliance officers. Available at: http://ecoaconnects.theecoa.org/home
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Ethics of Care (as the Concept and the Possibility) for Sustainable Development
I agree with the author P. Fobel, applied ethics and specific ethical sub-disciplines, politics
ethics, social ethics, environmental ethics and organizational ethics: „are still the subject of
internal changes and new experience which lead them to correct their theoretical bases...
The current discourse of professional community emphasizes the topic of the new mission
for applied ethics, which creates its new position in the system of knowledge and new
forms of action“ [Fobel, 2016, p. 50].
Care / caring (commonly) is a part of both the private and public spheres. We care about
ourselves, others, environment, region, and the world of which we are a part. It appears
to be such a self-evident element of social interactions, that the justification of care as an
exact scientific concept becomes challenged. Care is performed on different social levels
and various ethical levels: individual ethics, organizational ethics, systemic ethics, global
ethics. According to A. Jesenková, care is a part of life and the lack of it negatively affects
the quality of life of human beings and society as a whole – it deteriorates and ultimately
becomes unsatisfactory. Care-takers and their relationships are often perceived as
something so natural, it becomes invisible [Jesenková 2016a]. In the area of environmental
care, the caretakers are, for instance, policy makers, experts in applied ethics, managers
and leaders, and also university teachers who train future managers. Care requires
a specific set of abilities, skills and competences.
A. Jesenková speaks of three levels on which relevant trends requiring proper reaction
from political and moral actors can be found: 1) global relationships, (2) practical care
in all areas, and the 3) temporal and spatial context of regional and local relationships
-- public or political relationships, and also global, social, cultural, economic and political
interactions [ibid].
According to experts in theoretical ethics such as Joan Tronto [2013], Virginia Held [2015],
Selma Sevenhuijsen [2003], Lorraine Code [2006] or the Slovak researchers Zuzana
Kiczková and Marianna Szapuová [2005], Adriana Jesenková [2016a; 2016b] and Andrea
Klimková [2015], it is necessary to initiate an expert discourse in order to comprehend and
conceptualise care as a moral practice for specific professional fields. We believe that the
ethics of care also play a role in the area of sustainability and sustainable development.
Proper care is often commented on using the phrase “it is in good hands”. What does it
mean? It means that certain actions have been taken in order to fulfil the needs of the
object of our care. Good care depends upon the ability to identify the needs to be satisfied
as well as the way to do so. The inability to identify or understand the needs of the object
of our care can result in the complete failure to provide it.
The postmodern era along with its philosophies, postfoundationalism and also ethics
of care challenge the traditional perception of rationality, universalism, the atomised
INTERDISCIPLINARY THEORETICAL AND EMPIRICAL STUDIES. NO. 1/2017
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subject and other issues. V. Held [2015] claims feminist theoreticians presented a number
of alternatives within the framework of traditional universalist moral approaches supported
by numerous inspirational critical arguments. Care can be considered a gender-bound
term since in all kinds of sociocultural contexts throughout history it was usually
connected to females; however, Kiczková and Szapuová claim that the time has come
to break this bond. According to these theoreticians, it is necessary to liberate ourselves
from the essentialist foundation which assigns care to women only, and finally accept that
both women and men can provide it. The ethics of care therefore represent a normative
concept of a good life not only for an individual, but also for everyone living in a good
society.
Between normative and empirical. The ethics of care as a moral theory is always explicitly
normative. Its normative nature has empirical roots based on which it belongs among
the disciplines of so-called weak normative ethics. Weak normative ethics represent a new
line in the traditional categorisation of ethics (divided into teleological and deontological)
[Jesenková 2016a].
The normative core of care stems from experience; it is not transcendental and its content
cannot be identified using deduction or speculation. From this point of view, the ethics
of care belong to empirical ethics, whose aim is to research relationships and practice
of care in their empirical state. T. Pettersen claims that experience and knowledge of care
are practically universal. Everyone knows how it feels to receive or provide care. Values and
principles of care are not limited to subjective private emotions and feelings, nor are they
based on religion, culture, academic qualifications, or class. They are a shared human
experience, [Petersen 2011]. The normative nature of ethics of care originates from the
shared experience.
The normativity represented by a system of values, principles and standards regulating
specific practices and relationships in the context of care always forms in specific historical
and sociocultural conditions, interacting with other sociocultural or natural (biological
and physical) surroundings. Therefore it has certain specifications resulting from the given
context. However, it can be usually identified whether specific care contributes to well-
being, health and success, which constitute a good life, or not.
In such a case, normativity or the normative dimension of ethics of care serve
as a framework of criteria for the evaluation of a specific practice of care and its criticism.
V. Held justifies the necessity to form the ethics of care as a moral theory, where he
claims we need not only care itself, but also its ethics. Different aspects and manifestations
of care and related relationships should be scrutinized and evaluated; it is not enough
to only observe and describe [Held 2015]. An approach based on the ethics of care must be
normative, but also comprise a descriptive or empirical dimension. The solution of moral
questions is impossible without knowing, understanding and taking into consideration
the empirical reality of a specific context in which the specific participants are placed.
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Philosophers developing the theoretical ethics of care focus on the connection between
the normative and empirical dimensions, philosophy and practice. This approach is based
on the research of actual life experience and subsequent application of the gained
knowledge in order to develop analytical concepts and theories with the aim of deepening
our understanding and management of what we face in practice. In terms of this approach,
the ethics of care aims to become a practical philosophy. After all, the ethics of care
developed as an effort to overcome a limited view of philosophy and extract a normative
concept of care from the practical experience of real people [Ruddick 1986; Gilligan,
2001]. Therefore, it is useful to perceive ethics of care as a social and critical theory aimed
at helping change care in practice through knowledge, critical reflection and evaluation.
The adoption of the ethics of care as a theoretical basis for policy and social strategies
is the task that builds upon us (the experts in Applied Ethics) these challenges:
• Ethics of Care allow assessment of concrete practice and can be a tool for improving
the quality of different care practices [Jesenková 2016b]; for example in caring
company, in caring organisation; Joan Tronto, Selma Sevenhuijsen and Virginia Held
understand care as a practice (caring about / caking care of / care - receiving / caring
with) [Jesenková 2016a].
• Good life is possible only through participation in the polis [Aristoteles 1988],
ie. participation and participatory decision making;
• The critical reflection of the current liberal democracies [Tronto 2013], care should
become ethical and political value; for example caring about nature, caring about
sustainable communities, caring about sustainable practices; caring about ethical
environment in organisations (in public sphere, in business; in cieties, in regions).
Methodological notes: “how to think about sustainability”
This methodological part of article begins with background on the theoretical initiative
by Lorraine Code and the proposed theoretical concept of ecological thinking.
This can be a way of thinking, or how to think about sustainability (for example: thinking
systemically is essential to sustainable development as piecemeal approaches have been
proved not to work, resolving one issue while creating other problems).
Ecological thinking by Loraine Code is a multidimensional concept. She describes it
as “a revisioned mode of engagement with knowledge, subjectivity, politics, ethics,
science, citizenship, and agency that pervades and reconfigures theory and practice”
[Code 2006, p. 5]. Ecological thinking isn’t just about each of these things; it is centrally
about the interconnections among them and how they mutually shape one another.
In its focus on these interconnections, it serves as a tool. Ecological thinking is committed
to a methodological pluralism. Thus advocacy becomes neither a new paradigm
INTERDISCIPLINARY THEORETICAL AND EMPIRICAL STUDIES. NO. 1/2017
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nor a universally valid method simply to be applied across the places where ecological
thinking makes a difference. Ecological thinking is an instituting epistemic-moral-political
imaginary concept. Ecological thinking by Canadian philosopher Lorraine Code takes
arguments for situated knowledge, that view all knowledge comes from a particular
embodied, located perspective, and combines them with the methodologies employed
in analyses of ecology to develop an ecological thinking. Code argues for „ecological
thinking” as a more dynamic view of situated knowledge that is a means for achieving better
knowledge acquisition in medicine and the science. Ecological thinking views situation as
a place from which to know and a place to know or to interrogate to understand how that
location an able or disables the ability to know. Thus not only does knowledge come from
a more critical perspective but it also that interrogates that perspective. Ecological thinking
seeks to understand the differences between particular epistemic locations and seeks to
negotiate differences within these locations.
In other words, ecological thinking is not only thinking about ecology or the environment;
rather, it is thinking like ecosystems where there are multiply and complex relations
between living creatures and inanimate things [Code 2006, p. 24]. This sort of thinking
is much the way I have describe contingency; it is recognizing all the ways in which we
are contact with our environment. Code´s theory includes synonyms for place: critical
contextual empiricism, feminist standpoints theory, and the politics of epistemic location.
Lorraine Code begins by constructing the concept of ecological thinking as science
born of anecdotal evidence, testimonials, and case studies in situ rather than limited by
controls or a laboratory setting. The work of ecologist Rachel Carson and biologist Karen
Messing are used as concrete examples of ecological thinking in action. Both scientists
overturned existing frameworks for understanding the world and thereby revolutionized
their respective fields; both formulated their inquiries based on empirical evidence that was
considered anomalous in dominant scientific explanations. Philosophically, the language
of ecology offers a way of both naturalizing and socializing epistemology, which appeals
to a range of knowledge practices in ecological science, where knowledge is produced
both “down on the ground” and in the laboratory. Thus it offers a model of knowing that is
at once situated in and in relation to multiple aspects of the human and other-than-human
world, interwoven with moral-social-political epistemological issues [Code 2006].
Recommendations for practice
We are convinced that the idea of post-foundationalism and case studies will become
an important inspiration for the further development of Sustainable development
in context organizational ethics in Slovakia as a recognised method of education in
this sphere, and organizational ethics can acquire prestige in all spheres in this ecological
era as expected. We are convinced that we able to apply Ethics of care and Ecological
BUSINESS ETHICS AND SUSTAINABLE DEVELOPMENT
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thinking into education for sustainable development as didactic tool. Both are opportunities
for critically reflection of sustainable development. Good-quality professional development
opportunities in Education of Sustainable development staff are needed across disciplines
and studying programmes. Exchange of knowledge and experience concerning current
best practice is needed within and between countries. A specific example is the
cooperation between Matej Bel University and the Silesian Center for Business Ethics and
Sustainable Development. According UE4SD, placing focus on educators competences
is a valuable way of integrating “sustainable development” curriculum policy [UE4SD 2015].
Care is a practice that gradually penetrates the public sphere (a shift from the private sphere
towards the public one). A number of theoreticians in the field of ethics of care speak of
a penetration of the values of care ethics into decision-making processes and politics
[Sevenhuijsen 2003; Tronto, 2013]. In practice, it means that care becomes a deliberate
activity and democracy becomes a caring democracy [UE4SD 2015]. Community-bound
deliberate practice undertaken by a local community is a simpler, sincere and targeted
type of care. It is more direct and tends to address the actual needs of people or nature.
As for smaller structures, decentralized leadership can be spread freely, is more flexible
and allows for the generation of different types of relationships.
Recommendation for policy-makers: acknowledge the importance of professional
development in sustainable development and consider education for sustainable
development in quality criteria for higher education.
Recommendation for university leadership: acknowledge the general importance
of professional development and the role of Education for sustainable development for
university educators; reflect upon the role of education for sustainable development
in quality criteria for higher education [UE4SD 2015].
Recommendation for educators / researchers in Applied ethics: critically reflect upon the
qood practice and the quality of higher education teaching
For community of Applied ethics and experts in Ethics: building innovate opportunities
in Education for sustainable development, develop a dialogue with policy-makers,
university leadership, university educators/researchers and all stakeholders and formulate
values of sustainable development, create ethical tools and joint strategies concerning the
competencies for leaders and managers, competences of graduates of higher education.
Applied ethicists can achieve this goal, the following method are applied: networking
in organisational ethics; communication and outreach in organiasational practice;
advocacy and representation of sustainable development; professional development
in community of Applied ethicists in Slovakia.
This paper has been written within the framework of GU VEGA 1/0187/16
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6. Fobel, P. - Fobelová, M.: Business ethics - theoretical trends and practical implica-tions. [W:] Kuzior, P. (red.): Business Ethics and Sustainable Development, 2016, No 2, pp. 45 - 52.
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8. Gilligan, C.: Jiným hlasem. O rozdilné psychologii žen a mužů. Praha: Portál, 2001.
9. Held, V.: Etika péče. Osobni, politická, globálni. Praha: Filozofia, 2015.
10. Jesenková, A. (a): Etika starostlivosti. Košice: Filozofická fakulta UPJŠ, 2016.
11. Jesenková, A. (b): Prečo potrebujeme starostlivú spoločnosť? Sociálne ľudské práva z perspektivy etiky starostlivosti. [W:] Posilňovanie |ľudských práv v oblasti zamest-nanosti na Slovensku. Košice, 2016, pp. 5 – 18.
12. Kiczková, Z. – Szapuová, M.: Rovnosť priležitosti cez prizmu caz prizmu etiky starostli-vosti, “Sociálna práca”, 2005, no 3, pp. 56 – 70.
13. Klimková, A. – Bednár, M: Ethical tools for implementation of sustainability in higher education. [W:] Kuzior, P. (red.): Business Ethics and Sustainable Development, 2016, No 2, pp. 69 - 82.
14. Klimková, A.: Pripadovosť – komunikácia – ekologická etika. UPJŠ, Košice, 2015.
15. Kuzior, A.: Aksjologia zrównoważonego rozwoju. Belianum, Banská Bystrica, 2014.
16. Pettersen, T.: The Ethics of Care: Normative Structures and Empirical Implications, “Health Care Anal”, 2011, pp.51 – 64.
17. Ruddick, S.: Care as Labor and Relationship. [W:] Mark S. Halfon, Joram C. Haber (eds.) Norms and Values. Essays on the Work of Virginia Held. Lanham: Rowman and Littlefield, 1998.
18. Sevenhujsen, S.: The Place of Care. The Relevance of The Feminist Ethics of Care for Social Policy, “Feminist Theory”, 2003, vol. 4, no. 2, pp. 179 – 197.
19. Schindler, D. - Hilborn, R.:. Prediction, precaution, and policy under global change: emphasize robustness, monitoring, and flexibility, “Science”, 2015, 347 (6225), pp.953-954.
20. Tronto, J.: Caring Democracy. Markets, Equality, and Justice. New York: New York University Press, 2013.
21. UE4SD.: Leading Practice publication. Professional development of university educa-tors on education for Sustainable Development in European countries. Prague: Charles university, 2015.
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Bibiána MARKOVÁ1
Using case studies in the network approach to solve ethical problems in nanotechnologies
Abstract
The paper focuses on theoretical definition of a responsible approach to nanoresearch
using the network approach, which represents a new method of solving ethical issues
related to the modern technology. It is based on a progressive and constant comparison
of the practice and theoretical recommendations of experts in the field of applied
ethics. This method should be used in the practical solving of nanotechnology issues.
It is consisting of three main actions: discovering the main ethical issues, actively
influencing nanotechnology development using specific regulations; and defining practical
issues. In this context, we recommend the use of case studies as an effective tool for
solving practical issues of nanoetics.
Keywords: Applied Ethics. Nanotechnology. Case studies. Nanoethics. Network approach.
1
Korzystanie z badania przypadkowego w przypadku sieciowym dla rozwiązywania problemów etycznych w nanotechnologiach
Streszczenie
Praca koncentruje się na teoretycznej definicji odpowiedzialnego podejścia do
nanotechnologii przy użyciu metody modelu siatki, która reprezentuje nową metodę
rozwiązywania etycznych problemów związanych z nowoczesną technologią. Opiera
się na stopniowym i stałym porównaniu praktyki i teoretycznych zaleceń ekspertów
w dziedzinie etyki stosowanej. Ta metoda powinna być wykorzystana w praktycznym
rozwiązywaniu zagadnień nanotechnologii. Składa się ono z trzech głównych działań:
1 Matej Bel University in Banská Bystrica. Faculty of Arts. Department of Ethics and Applied Ethics
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odkrywania głównych kwestii etycznych, aktywnego oddziaływania na rozwój
nanotechnologii przy użyciu konkretnych przepisów; i określenia praktycznych zagadnień.
W tym kontekście zaleca się wykorzystanie studiów przypadków jako skutecznego
narzędzia do rozwiązywania praktycznych problemów nanoetyków.
Słowa kluczowe: etyka stosowana, nanotechnologia, studium przypadku, nanoetyka,
podejście sieciowe
Ethical aspects of nanotechnology use
Arsenic and radium are chemical substances which made people realize that not all
of the things that the science presents as the state-of-the-art advance in technology
– with exceptional characteristics – is safe to use in an unrestricted manner. Over time,
people have discovered negative effects of such substances, however, consequences
of their irresponsible use are being paid up until today. Does nanotechnology belong
to the same category? Are we supposed to fear its harmful effects considering its expansion
into the industry and ultimately into our households and the environment? Is it right
to use technology if we lack detailed information about its characteristics? Are there more
benefits or disadvantages of nanotechnology use? Currently, there is one field exploring
ethical aspects of nanotechnology - nanoethics.
Applied ethics focuses on solving moral dilemmas within the particular fields of current
practice. In the context of nanoethics, it focuses on moral dilemmas caused by scientific
initiatives and current practice of using nanotechnology. Tools of applied ethics might
answer questions concerning nanotechnology and subsequently ensure successful
implementation of ethics in this field. Nowadays, debate on safe and responsible
nanotechnology use is very relevant. In this respect, applied ethics provides us with
appropriate tools permitting nanotechnology to show its scientific and social value
potential. Experts on ethics, their consultancy work and elaboration of ethical programmes
may efficiently contribute to solving issues within individual fields of practice.
Network approach selected for solving ethical questions regarding nanoresearch
There is an important question concerning implementation of ethical rules
in the nanoresearch. How to implement them in the most efficient manner? Evolving field
of nanotechnology disposes of certain characteristics requiring more flexible and quicker
reactions of ethical experts. Because of that, Ibo van de Poel, Sjoerd Zwart, Michie Brumsen
INTERDISCIPLINARY THEORETICAL AND EMPIRICAL STUDIES. NO. 1/2017
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and Harald van Mil2 have developed so-called “network approach” to solving of difficult
ethical issues related to technology research and development. According to Poel, network
approach should be used for implementation of ethics in the field of nanotechnology.
According to this model, ethical questions should be solved as follows:
1. uncover ethical questions in an early stage of nanotechnology development
2. influence technology development and provide clear responses regarding required
behaviour
3. identify an specify particular issues in the practical context.
The whole concept is based on an idea of parallel ethical research constantly revising
actions in the field of nanotechnology starting from an early stage of its development.
Under network approach, experts would connect actors from various fields and identify
basic differences between definitions, beliefs and values of the particular stakeholders.
That would solve the problem concerning high number of actors in the nanotechnology
industry. The specific solutions and recommendations would be suggested at the same
time. The emphasis is given on practical solutions of ethical issues, not on the theoretical
and abstract description3. However, it is important to say that the network analysis also
takes into account the negative effects of nanotechnology on people and aims at their
elimination, even though it is not possible to get rid of them altogether. Even though
the network approach will not erase all ethical issues, it might reduce some of their
negative effects. Anyway, this project does not aim to quickly terminate research intentions;
it should constantly inspect and modify ethical rules on the basis of the current knowledge.
Thanks to unpredictability of certain risks related to nanotechnology, the above-mentioned
alternative ethical concept seems to be an appropriate counterweight to insufficient
regulation, since it uses deonotological or consequential ethical theories and precautionary
principle and provides a basis for a new level of ethical expertise dynamics4.
Network approach in practice
Network approach is based on direct interaction with nanoresearchers and identifies key
ethical values by means of applied ethics. This method should be carried out by experts
on ethics, because they “have general philosophical education providing them with more
than common competence in argumentation and unveiling erroneous conclusions.
Moreover, from their own specific experience from the field of moral philosophy,
they understand moral concepts and reasoning of moral matters. … if a moral philosopher
2 POEL, I. et al. 2008. How Should We Do Nanoethics? A Network Approach for Discerning Ethical Issues in Nanotechnology. In NanoEthics. ISSN 11569-008-0026, 2008, vol. 2, no. 1, p. 25-38.
3 POEL, I. et al. 2008. How Should We Do Nanoethics? A Network Approach for Discerning Ethical Issues in Nanotechnology. In NanoEthics. ISSN 11569-008-0026, 2008, vol. 2, no. 1, p. 25-38.
4 BELYALETDINOV, R. R. 2012. Ценностный конфликт в развитии нанотехнологий. [online]. 2012. 16 p. [cit. 2016-07-14]. Dostupné na internete: <http://iph.ras.ru/uplfile/root/biblio/bioeth/bioeth_6/3.pdf>.
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wants, he may think about moral matters throughout all of his working hours”5. In the context
of the first step – identification of ethical issues in an early stage – theoretical knowledge of
nanotechnology has to be confronted by practice. Literature lists only certain ethical issues
related to the development of nanotechnology. When communicating with researchers
and visiting their workplaces, we are able to identify even more links causing negative
effects. For instance, we often encounter high demands from the part of grant agencies and
pressure for creation of publications by researchers, which may cause insufficient or reckless
behaviour during manipulation with nanoparticles. In such case, we may proceed not only
on the personal level; we may apply suggestions and changes on the organizational and
system level as well. Solutions on all three levels should be an integral part of nanoethics.
Applied ethics aims to identify values on the individual level and communicate them
to the persons of interest. On the organizational level, it is necessary to define particular
procedures, which should be carried out at research institutes. Both domains require
different approaches. In an organization, an individual does not act alone but cooperates
with the rest of his team, for example with his superior and “the first and easy principle
of institutional ethics requires the person to be able to strictly separate his or her own
interests from his role”6. This situation is even more difficult because there is a room for
non-transparent collective responsibility and at the same time “an employee of a chemical
factory, who ‘reveals’ unfair practices, of course, has to count with retaliation from the part
of his superiors or colleagues for making their life more difficult”7. Such relationship created
at institutions requires a person to have practical wisdom to evaluate his situation in the
right way and to proceed accordingly. Not every infringement calls for restrictive measures.
“Scientific methods and various research practices often have deeper cultural, value and
institutional roots, therefore it is not easy to create a clear moral value judgement”8.In this
context, we may efficiently use case studies, which enable us to consider specificities of
particular moral dilemmas and apply ethical principles in specific situations.
Case studies as an efficient tool of nanoethics in the context of network approach
Applied ethics is characterized by an approach, which focuses on specific practical moral
issues; an important part of the process therefore lies in an elaboration of case studies.
“Purpose and final aim of case studies is to increase ethical awareness, as well as the ability
of students and employees to solve moral dilemmas using alternatives based on moral
reasoning. The basis of such assessment might be steady (coherent) thinking emerging
5 SINGER, P. 2008. Spisy o etickom žití. Bratislava : Vydavateľstvo spolku slovenských spisovateľov, 2008. 352 s. ISBN 978-80-8061-332-7.
6 SOKOL, J. 2014. Etika, život, instituce. Praha : Vyšehrad, 2014. 256 s. ISBN 978-80-7429-223-1.7 SOKOL, J. 2014. Etika, život, instituce. Praha : Vyšehrad, 2014. 256 s. ISBN 978-80-7429-223-1.8 FOBEL, P. 2017. Etika – garancia dobrej vedeckej praxe. Banská Bystrica : Belianum, 2017. 132 s. ISBN
978-80-557-1217-8.
INTERDISCIPLINARY THEORETICAL AND EMPIRICAL STUDIES. NO. 1/2017
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from generally recognized ethical approaches”9. Case studies on nanoethics enable us
to clarify the main ethical dilemmas nanoresearchers might encounter during their work,
and suggest possible solutions. In accordance with the principles of network approach,
it is possible to identify and specify particular ethical questions from practice via illustrative
case studies. Such approach cannot do without active cooperation of ethical experts and
research workers from the field of natural sciences, who participate on the nanotechnology
exploration and development. At the same time, the solutions of specific cases are intended
for them as a part of education on responsible approach to nanotechnology research.
Specific examples of ethical dilemmas related to nanotechnology research might show us
solutions acceptable from the ethical point of view. Researchers might often encounter
situations, which might seem opaque. Analysis of such circumstances is especially
desirable because it allows the researchers to consider moral implications before they
find themselves in a situation at issue. This approach is a basis for the teaching of ethics
and, finally, it helps individuals to decide in the right way and choose the most appropriate
solution in a particular situation. “We cannot strive for termination of exploration –
neither of physics, nor of ethics … by analogy, we cannot strive for moral perfection,
however, we may strive for taking into account the needs of more people than before”10.
Case studies may deal with various situations with no clear solution. For instance,
the issue of human enhancement is currently being widely discussed. Using practical
example, we are able to illustrate moral dilemma and particular alternative solutions,
while stating different ethically defensible opinions. Case study should contain suggested
solution; ethical expert should justify selected alternative and define possible negative
effects, as well as benefits. Considering the human enhancement, we might, for example,
suggest an alternative solution, which would not allow nanotechnology to be used
for non-therapeutic enhancement of the human body. Obviously, such an approach
might develop and change in time in line with the new knowledge. Currently, regarding
the existing uncertainty about consequences of nanotechnology use, it is not responsible
to use it for other than therapeutic uses in the field of medicine or in the fields, where
its use has proved to be safe. Simultaneously, we have to state that according to legal
regulations on chemical substances, researchers are obliged to communicate harmful
effects they discover. We therefore emphasize that the main risk of nanotechnology lies
in its potentially harmful effects on human beings and environment. Related research
should be carried out during innovation development and implementation of nanoproducts
in practice. From the point of view of the discourse ethics, it would be beneficial if the
researchers themselves initiated creation of legislature based on their own observations
and provoked debate on the safe nanotechnology implementation.
9 FOBELOVÁ, D. 2011. Pripadová štúdia ako vzdelávacia metóda v aplikovaných etikách. In Prípadovosť - aplikácia – etika. Banská Bystrica : Univerzita Mateja Bela, 2011. ISBN 978-80-557-0213-1, s. 83-101.
10 RORTY, R. 2006. Filozofické orchidey. Bratislava : Kalligram, 2006. 264 s. ISBN 80-7149-830-0.
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Conclusion
In cooperation with nanoresearchers, we have not only been able to uncover moral
issues, but also the positive trends. Some researchers are approaching their research
responsibly; even outside the scope of legislative requirements. As an example, we may
list Institute for Nanomaterials, Advanced Technologies and Innovation of the Technical
University of Liberec which only uses water-soluble nanofibres that can be destroyed after
the end of research and, therefore, do not have a negative impact on the environment.
The Department of Chemical Physics and Optics of the Faculty of Mathematics and Physics
of the Charles University has decided to abandon a research method that uses cadmium
and might have a negative impact on the living organisms.
Such examples prove researchers’ decisions have a major impact on the direction in which
the nanotechnology revolution will proceed. It might be regulated in a way that will ensure
positive impact of nanoinovation on the human beings and, simultaneously, eliminate its
harmful effects. This includes increasing portion of the studies concerning the safety of
nanomaterial, active participation of the researchers in the negotiations with representatives
of the government and the industry. First of all, it is necessary to purposefully raise
nanoresearchers’ awareness of ethical aspects of nanotechnology. The tools of applied
ethics, such as teaching at faculties of natural sciences or preparation of workshops and
conferences, are appropriate especially for establishing cooperation between ethics
and researchers based on exchange of knowledge and information. Using those tools,
it is possible to draft appropriate ethical and regulatory standards for safe and responsible
use of nanotechnology. Implementation of such vision is in the interest of nanoethics,
and requires an intense cooperation of the stakeholders including not only researchers
and ethics, but also politicians, nanoproduct manufacturers, sellers and general public.
Nanodisciplines are only able to demonstrate their research and social value in conjunction
with ethics. Conceptual framework of nanoethics requires elaboration of a convincing
regulatory intent related to the field of nanoscience and nanotechnology, which may
perform a regulatory function in terms of nanotechnology development, production and
use and prevent risks with serious moral implications. Nanoethics, as an applied ethics,
can be developed theoretically, and may enrich and perform an important precautionary
and human function against possible failures. To implement nanoethics, it is also important
to have a special performative competence and knowledge base, which is called ethical
expertise, related to the field of nanoethics. In this context, it is necessary to educate
applied ethics, who will then be able to respond to the current challenges of the modern
world regarding nanotechnology.
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References:
1. BELYALETDINOV, R. R. 2012. Ценностный конфликт в развитии нанотехнологий. [online]. 2012. 16 p. [cit. 2016-07-14]. Dostupné na internete: <http://iph.ras.ru/uplfile/root/biblio/bioeth/bioeth_6/3.pdf>.
2. FOBEL, P. 2017. Etika – garancia dobrej vedeckej praxe. Banská Bystrica : Belianum, 2017. 132 s. ISBN 978-80-557-1217-8.
3. FOBELOVÁ, D. 2011. Pripadová štúdia ako vzdelávacia metóda v aplikovaných etikách. In Prípadovosť - aplikácia – etika. Banská Bystrica : Univerzita Mateja Bela, 2011. ISBN 978-80-557-0213-1, s. 83-101.
4. POEL, I. et al. 2008. How Should We Do Nanoethics? A Network Approach for Discerning Ethical Issues in Nanotechnology. In NanoEthics. ISSN 11569-008-0026, 2008, vol. 2, no. 1, p. 25-38.
5. RORTY, R. 2006. Filozofické orchidey. Bratislava : Kalligram, 2006. 264 s. ISBN 80-7149-830-0.
6. SINGER, P. 2008. Spisy o etickom žití. Bratislava : Vydavateľstvo spolku slovenských spiso-vateľov, 2008. 352 s. ISBN 978-80-8061-332-7.
7. SOKOL, J. 2014. Etika, život, instituce. Praha : Vyšehrad, 2014. 256 s. ISBN 978-80-7429-223-1.
111
Radosław WOLNIAK1
Verbal and nonverbal communication in the recruitment process
Summary
The publication discusses issues related to the role of verbal and nonverbal communication
in recruitment processes. We concentrated in the text on the often neglected processes of
nonverbal communication. The purpose of the publication is to investigate the presence
of non-verbal communication forms used in the recruitment process. The article presents
theoretical introduction to the issue as well as the results of research carried out on
organizations operating in the Silesian Voivodship.
Keywords: recruitment, communicat ion, verbal communicat ion, nonverbal
communication, human resources management
1
Komunikacja werbalna i niewerbalna w procesie rekrutacji
Streszczenie
W publikacji poruszono kwestie dotyczące roli komunikacji werbalnej i niewerbalnej
w procesach rekrutacji. Skoncentrowano się w szczególności na często zaniedbywanych
procesach komunikacji niewerbalnej. Celem publikacji jest zbadanie świadomości
występowania I form komunikacji niewerbalnej stosowanych w procesie rekrutacji.
W artykule przedstawiono teoretyczne wprowadzenie do zagadnienie jak również wyniki
badań przeprowadzonych na organizacjach działających na terenie województwa śląskiego.
Słowa kluczowe: procesy rekrutacji, komunikacji, komunikacja werbalna, komunikacja
niewerbalna, zarządzanie zasobami ludzkim1 Politechnika Śląska, Wydział Organizacji i Zarządzania, Instytut Inżynierii Produkcji
BUSINESS ETHICS AND SUSTAINABLE DEVELOPMENT
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Introduction
Recruitment, is a process by which hundreds of people pass and it is very important
for the functionality and image of the company. What kind of employees employ
the Human Resource department is about how the organization works. That is why it is
extremely important to prepare the structure of the recruitment process and the proper
course of each small element. Asked questions and answers, every word used body
language or first impression of the candidate make up the whole assessment and decision.
The purpose of this publication is to investigate the awareness of the occurrence and
forms of nonverbal communication used in the recruitment process.
The non-verbal and verbal communication in the process of recruitment – theoretical basis
Being able to speak nowadays is a very desirable feature among many employers and
it is also a facilitating activity and helping to achieve various goals. The way the message
affects the recipient’s response to the sender, for example, can have a huge impact
on the outcome of an interview. Those who can express themselves in an eloquent,
understandable and interesting way are much more desirable in the labor market. The basic
principles of public appearances and official statements are: appropriate appearance,
well prepared material, topic of expression or nonverbal communication speaks. These are
fundamental principles, which in most cases are widely known and often used.2
Thanks to this, the messages will reach the recipient and will be remembered longer
than words spoken to one type or to any one. One of the methods of exerting influence
is the power of authority, which shows the correct, proper conduct of a person to take
an example from it. A quotation of a given person can often be quoted as a confirmation
of a thesis or marking the validity of a given word. Stanley Milgram confirmed obedience
to authority with his experiments conducted in the early 1960s. The way to generate
positive feelings during recruitment is to surprise some unexpected element. When
a person interviewing for the 100th time asks the same questions and hears similar
answers, he is tired and does not register candidates who do not stand out. However,
when there are feelings other than the standard, and there is something going on in the
conversation, the chance of employment is definitely higher.3
2 Krzemień E., Wolniak R.: Zintegrowane systemy zarządzania – wytyczne dotyczące doskonalenia w zakre-sie zarządzania zasobami ludzkimi, „Przegląd Organizacji”, s. 10-14, nr 12, 2008; Wolniak R.: Kulturowe aspekty zarządzania jakością, „Etyka biznesu i zrównoważony rozwój, Interdyscyplinarne studia teore-tyczno-empiryczne:, nr 1, 2016, s. 109-122.
3 Sonneborn L.: Nonverbal communications, Rosen Publishing Group, New York, 2011.
INTERDISCIPLINARY THEORETICAL AND EMPIRICAL STUDIES. NO. 1/2017
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There are many vocabulary structures in the language to influence the caller. The language
used creates the reality and allows it to be changed at the discretion of the sender.
Persuasion treatments are, however, a difficult element to master, but many people choose
to train this art.
The recipient must remember the sender’s words and interest them enough to return
to them. The interview may in some cases be perceived by the participant as a speech.
Although it is a dialogue with a recruiter, the interviewee must prepare answers that will
interest them and prove that they are competent. To make such an impression you can use
the techniques that the speakers use during their great appearances.4 During recruitment,
most often, he is in favor of his experiences. It is important to talk about these situations
with faith and conviction about their veracity. Another element that can help in speech
is words. Words are, for example use to anchor in the listener’s mind by repeating them
relatively frequently, and also triggering visual, auditory, and kinesthetic stimuli to associate
with a given situation. By giving a longer speech the speaker should direct the words to
these three types of people, namely the listener, the kinesthetic and the visual.5
A number of studies have shown that 65% to 70% of decisions about accepting someone
to work are based on non-verbal communication. One of the basic skills for non-verbal
communication, and to a large extent active communication is the ability to actively listen.
This efficiency is important during any interview, including during a recruitment interview.6
People tend to be good listeners without knowing the characteristics of active listening.
It is very easy to recognize a person who during conversation only pretends interest,
or sometimes does not even force it.7 An entity that does not ask questions is distracted,
absent, unrelated, and storytellers will always have trouble getting in touch with a contact
or helping someone who needs support or interest. Listening seems to be the competence
all people have - this is a false assumption that results from a lack of knowledge about
active listening. The problem, however, is not to listen, but to listen to the other person.
During this process, many barriers may be encountered by the participants of the interview,
4 Pocztowski A., Zarządzanie zasobami ludzkimi, Polskie Wydawnictwo Ekonomiczne, Warszawa 2007;
Stewart J.: Mosty zamiast murów. Podręcznik komunikacji interpersonalnej, Warszawa 2007; Knapp M. L., Hall A., Horgan T. G.: Nonverbal communication in human interaction, Wadsworth, New York, 2013.
5 Adler B. Ronald, Rosenfeld B. Lawrence, Proctor F. Russell II, Relacje interpersonalne. Proces porozumie-wania się, Dom Wydawniczy Rebis, Poznań 2011; Krzemień E., Wolniak R.: Procesy szkolenia i doskonale-nia pracowników w ochronie zdrowia, Zeszyty Naukowe Wydziału Zamiejscowego w Chorzowie Wyższej Szkoły Bankowej w Poznaniu, nr 17, 2015 s. 163-176; Krzemień E., Wolniak R.: Problems of incentives for employees in the quality management of the service sector, „Quality and Quantity”, nr 5, 2007, s. 749-756; Wolniak R. The perception of municipal offices service of disable people Quality by office Staff, “Zeszyty Naukowe Wyższej Szkoły Humanitas. Zarządzanie”, nr 3, 2016, s. 423-435; Osika G.: Innowacje spo-łeczne jako wsparcie dla inteligentnych specjalizacji - uwarunkowania komunikacyjne, „Zeszyty Naukowe Politechniki Śląskiej. Seria Organizacja i Zarządzanie”, z. 95, 2016, s. 369-381.
6 Kering A., Głogowski T.: 150 pytań z rozmowy kwalifikacyjnej, Capital, Olkusz 2000.7 Leathers Dale G.: Komunikacja niewerbalna, Wydawnictwo naukowe PWN, Warszawa 2007; Orzechowski
S., Komunikacja niejęzykowa a wiarygodność, Wydawnictwo Uniwersytetu Marii Curie-Skłodowskiej, Lublin 2007; Osika G.: Komunikacja niewerbalna, „Zeszyty Naukowe Politechniki Śląskiej. Seria Organizacja i Zarządzanie”, z. 43, 2008, s. 111-128.
BUSINESS ETHICS AND SUSTAINABLE DEVELOPMENT
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and most often by the listener himself. One of them may be comparing the sender’s
situation to their experiences and experiences and telling them about them in response
to the message.8
Non-verbal communication is an important element of a person’s presentation. It affects
how people perceive others and what they think of them, and how well they communicate
with them. The recruitment process is one of the situations where the candidate and
the lead person should be aware and control non-verbal communication. Although the
candidate will provide the best answers that recruiters expect, and his or her body language
and all nonverbal communication will not match the verbal communication, he or she will
be disqualified throughout the employment process.9
The entire process begins when the threshold of the building in which the person applying
for the position is exceeded. All items of clothing, movement, or behavior while waiting
for a conversation can be important in the final phase. The so-called first impression
is possible to call once, so at the very outset it is important to have the appearance
of the candidate as well as the person with whom he or she will talk, as well as the way of
greeting. The method of giving a hand, a verbal greeting or a bow can show the relationship
between people beginning to interact with each other. It is possible to read the relationship
between people, whether the person is confident, open and friendly, and by the way,
whether he is in power in a given group of people. “Appearance is often treated as an
indicator of the character, personality, education and talents of a person.”10
It has a positive or negative feeling when talking to a person. It has been proven that
physically attractive people have more success in their private and professional lives and
are more popular or more fortunate in their daily lives. It can be argued that the person
presenting the conversation in a neat, elegant and appropriate outfit is at the start a better
scored than a person who did not take care of his appearance at the time. The employer,
because he is responsible for first contact with potential employees, and for the image
of the company he creates in the external environment, is also forced to make the right
dress and appearance. A survey conducted among 415 employment officials shows
that attire attests to the employee’s relationship to the company, and as many as 95%
of respondents claim that appearance is one of the conditions for promotion.11
When you present yourself to get a job, you should concentrate on different things that
make up one result. Apart from the outer appearance, attention is also paid to the behavior,
the way of moving, sitting, or keeping eye contact. For verbal communication to be reliable,
8 Navarro J.: Mowa ciała, przeł. Barbara Grabska-Siwek, G+J Książki, Warszawa 2008.9 Pawlak Z.: Zarządzanie zasobami ludzkimi w przedsiębiorstwie, wydawnictwo Poltext, Warszawa, 2011.10 Knapp M., Hall J.: Komunikacja niewerbalna w interakcjach międzyludzkich, Wydawnictwo Astrum,
Wrocław 1997.11 Esposito A.: Fundamentals of verbal and nonverbal communications, IOS Press, Vietri sul Mare, 2007; Kuzior
A.: Komunikacja interpersonalna w biznesie, w: Kadry i płace w przedsiębiorstwie. Pod red. Małgorzaty Król, Aliny Warzechy, Mariusza Zielińskiego. Gliwice : Gliwicka Wyższa Szkoła Przedsiębiorczości, 2011, s. 169-181.
INTERDISCIPLINARY THEORETICAL AND EMPIRICAL STUDIES. NO. 1/2017
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nonverbal communication must be compatible with it. Eye contact, eye movements
and eye movements show a lot of emotional expression and are an easy way to read the
mood of the accompanying interlocutor. The downward gaze is about shame, modesty,
wide eyes suggesting surprise, honesty or fear.12
Through the visual contact that is maintained during the interview, the candidate
has the ability to read additional details of the message the sender can monitor the
truthfulness, respond to the question or level of interest in the conversation. With
non-verbal elements, the next way to convince someone is the so-called reflection. It
consists of an imperceptible, insignificant, conscious, or unconscious imitation of another’s
movements. People who make similar movements to a companion’s conversations
are seen as being friendlier, more understanding or more integrative, and understanding
the other side. Experiments have been made to confirm this thesis. One of them was during
the interview where the hired actor imitated the behavior and movements of the person
conducting the interview. After its completion it was received more favorably than
its competitors.13
The evaluators found that the actor even had a similar opinion to them, he agreed
with most of them and integrated with the interlocutor. None of the respondents
had guessed or felt that the person was being substituted and intentionally imitating their
movements. In addition to imitating the interlocutor, touch can play an important role
in interpersonal relationships. Many researchers have examined relationships, feelings
toward people with physical contact, and feelings that have occurred without contact.
One of the experiments at Purdue University was that the library staff had gently touched
the client in hand while donating the library card. This touch was negligible and sometimes
even imperceptible, and significant. Persons affected by the employee asked for feedback
about the library expressed a much more positive and favorable view of the place than
people with no physical contact. Touch also had significance when giving tips to a waitress
or in situations where someone was asking a second person while putting a hand on his
arm at the same time. From the above mentioned experiments it may be concluded that
handshake during recruitment would be the most appropriate part of the whole process,
gently approaching the interlocutors.
Paying special attention to behavior, body movements or speech intonation can be
very much achieved when talking to others. In particularly important life situations such
as interviewing, there are many factors that affect how a person receives a response.
Many behaviors are analyzed at the subconscious level, and often can change a whole lot
in the assessment which gives you a lot of room to maneuver during important meetings.
Persons who can control their nonverbal communication will be far better perceived and
12 Król H., Ludwiczyński A.: Zarządzanie zasobami ludzkimi. Podręcznik, Wydawnictwo Naukowe PWN, 2008.13 Matsumoto D., Frank M. G., Hwang H. S.: Nonverbal communication: science and application, SAGE,
Los Angeles, 2012; Dolińska D.: Mowa ciała jako aspekt komunikacji międzyludzkiej, „Zeszyty Naukowe Politechniki Śląskiej. Seria Organizacja i Zarządzanie”, z. 65, 2013, s. 101-110.
BUSINESS ETHICS AND SUSTAINABLE DEVELOPMENT
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evaluated than those who are less aware of their behavior. Nonverbal presentation is very
important in interviewing, but it is even bigger during work, especially when dealing with
people.
The result of the research on the role of communication in the recruitmrnt process
A survey questionnaire was used to conduct this study on the perception of interpersonal
communication during recruitment. The survey was conducted in 2016 on a sample of
100 people.
The study provided information that helped to understand the look of the recruitment
process and the recruiter. The first few questions allowed to diagnose how many recruits
were involved, how much they were paid, and how many recruiting stages were involved.
With this information, you could determine what the job search process should look like
and what recruitment should be done. According to the respondents, the most common
way to find a person to work is a simple interview with the candidates, as many as 64%
gave the answer. Another 24% indicated a response in which psychological, linguistic or
analytical tests were listed. Only 2% of the respondents had the opportunity to participate
in the assessment center method, which examines the listed competencies based
on observation.
Table 1. Evaluation of the recruiter by the recruited
Feature / rating 1 2 3 4 5 Amount
1. neat 0 0 4 12 84 100
2. well groomed 0 0 5 6 89 100
3. prepared 1 0 13 65 21 100
4. cultural 0 2 15 19 64 100
5. vulgar 89 11 0 0 0 100
6. modest 9 29 33 11 18 100
7. shy 74 13 10 3 0 100
8. smiling 2 8 69 15 6 100
9. well dressed 0 1 38 29 32 100
10. peevish 76 19 5 0 0 100
Source: own elaboration based on: Jóźwiak E.: Znaczenie komunikacji werbalnej i niewerbalnej w procesie
rekrutacji, praca magisterska napisana pod kierunkiem R. Wolniaka, Katowice 2016.
INTERDISCIPLINARY THEORETICAL AND EMPIRICAL STUDIES. NO. 1/2017
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The respondents answered that the person recruiting most often was cultured, neat,
well-groomed (Table 1 - scale 1-5). As for the modesty of the recruiter’s opinions were
divided, and the smile on their faces was not always noticeable. As many as 69 people
responded that the recruiter was smiling at level 3, on a scale of 1-5, where 5 was the best
rating. 71% of the respondents described the recruiting person as not necessarily modest,
the scores given were in the 1-3 scale.
Research results suggest that recruiters most often (79%) greet potential candidates with
the words “good morning” and handshake. Only 14% additionally offers something to
drink and 7% only greets you with good words. Non-verbal communication has not been
applied in these cases 7 times. The results, however, show that the handshake is in most
cases a natural and commonly used gesture. Handing a greeting creates a professional
atmosphere and shows respect to the candidate so this gesture should be used every time.
Studies have also shown that the majority of respondents believe that recruiters were
competent in their job. Only, or as many as 9% answered no. People responded based on
their feelings, and in the next question were given the reasons for which they were given,
and no other answers.
The survey shows that verbal communication is more important for 87% of respondents,
6% responded non-verbal communication and 7% did not comment on it. The recruitment
process, the interview cannot take place without verbal communication, perhaps because
it is therefore more important for candidates. Nonverbal communication, however,
is of great importance to the 6 respondents. Nonverbal communication can be a novelty
for older people as it has not been paid much attention to specific trainee behavior yet.
Most of the respondents (69%) believe that non-verbal communication is important in the
recruitment process, 29% think the importance is low, and 2% argue that non-verbal
communication is irrelevant. The overwhelming number of respondents is aware that
they are also judged on the basis of their appearance, body movements or attitudes.
Yet still many people do not have this awareness, and as many as two believe that
nonverbal communication plays no role.
At a later stage, the non-verbal factors that are of greatest importance in the recruitment
process (Table 2). Each factor was rated by 1 to 5, where 5 are the highest score.
The data shows that the interest of the interlocutor and the intonation of the speech
are the most important factors that the surveyed persons taking part in the recruitment
are paying attention. It is less important, however, to gesticulate when asking questions
and expressing mimic expression. Many answers are in column 3, which may indicate
that respondents were not entirely sure which answers to answer or indeed number 3
was the most appropriate for them.
BUSINESS ETHICS AND SUSTAINABLE DEVELOPMENT
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Table 2. Non-verbal factors of greatest importance in the recruitment process.
Factor / evaluation 1 2 3 4 5 Amount
1. the way of greeting 1 0 11 67 21 100
2. open attitude 0 0 18 39 43 100
3. smile on your face 2 2 34 42 20 100
4. eye contact 1 0 9 49 41 100
5. gesture when asking questions 1 3 58 24 14 100
6. appearance 2 4 11 42 41 100
7. mimic expressions 2 2 59 24 13 100
8. physical distance 1 1 42 31 25 100
9. intonation of expression 0 0 6 45 49 100
10. interest of the interlocutor 0 0 3 38 59 100
Source: own elaboration based on: Jóźwiak E.: Znaczenie komunikacji werbalnej i niewerbalnej w procesie
rekrutacji, praca magisterska napisana pod kierunkiem R. Wolniaka, Katowice 2016.
Next, the non-verbal factors that is of greatest importance in the recruitment process
(Table 2). Each factor was rated by 1 to 5, where 5 are the highest score. The data shows
that the interest of the interlocutor and the intonation of the speech are the most important
factors that the surveyed persons taking part in the recruitment are paying attention.
It is less important, however, to gesticulate when asking questions and expressing mimic
expression. Many answers are in column 3, which may indicate that respondents were
not entirely sure which answers to answer or indeed number 3 was the most appropriate
for them.
At a later stage, the non-verbal factors that are of greatest importance in the recruitment
process (Table 2). Each factor was rated by 1 to 5, where 5 are the highest score.
The data shows that the interest of the interlocutor and the intonation of the speech
are the most important factors that the surveyed persons taking part in the recruitment
are paying attention. It is less important, however, to gesticulate when asking questions
and expressing mimic expression. Many answers are in column 3, which may indicate
that respondents were not entirely sure which answers to answer or indeed number 3
was the most appropriate for them.
Conclusion
The main purpose of the publication was to investigate the presence of non-verbal
communication forms used in the recruitment process. Research shows that for 69%
of respondents’ non-verbal communication is important in the recruitment process.
It is not always up to those who are seeking a particular position to be aware of this.
INTERDISCIPLINARY THEORETICAL AND EMPIRICAL STUDIES. NO. 1/2017
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The most common errors in non-verbal or verbal communication are made by people
who are applying for lower-level positions. These situations are due to the fact that these
people do not have too much knowledge about self-presentation, verbal or non-verbal
communication and speaking. Often, it also happens that they are not prepared in any way
for an interview.
Researchers sporadically came up with incompetent people for a job related to the
recruitment process, but most do their job properly. It happened that the person was not
well dressed, either rudely or unprepared to talk. These types of problems are most often
encountered during recruitment, which are not of great importance and are carried out
in low positions. Employee selection workers are the most educated professionals who can
accurately read the body language and select the right people to work.
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2. Dolińska D.: Mowa ciała jako aspekt komunikacji międzyludzkiej, „Zeszyty Naukowe Politechniki Śląskiej. Seria Organizacja i Zarządzanie”, z. 65, 2013, s. 101-110.
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13. Leathers Dale G.: Komunikacja niewerbalna, Wydawnictwo naukowe PWN, Warszawa 2007.
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In the International Congress Center in Katowice, a modern facility whose construction was
co-financed by the European Union from the European Regional Development Fund under
the Regional Operational Program of the Silesian Voivodship for the years 2007-2013 (73.30%
of the subsidy for the amount of PLN 182 135 641.37), during the fairs and conference
InfoENERGIA 20171, there was held a panel discussion entitled “Sustainable Development of
Silesia - Axiological Foundations and Practice”, which was organized by the Silesian Center
for Business Ethics and Sustainable Development (23 February 2017)2. To participate the
discussion, prof. Aleksandra Kuzior, President of the Silesian Center for Business Ethics
and Sustainable Development, invited Małgorzata Mańka-Szulik (Mayor of Zabrze and
Chairman of Upper Silesian Metropolitan Union), prof. Jerzy Buzek (Member of the European
Parliament, Chairman of the Committee on Industry, Research and Energy), prof. Janusz
Kotowicz (Vice-Rector for Cooperation with the Socio-Economic Environment of the
Silesian University of Technology), Tadeusz Donocik (President of the Regional Chamber of
Commerce) and prof. Andrzej Kiepas (head of the Department of Philosophical Anthropology
and Cognitive Science at the University of Silesia). The discussion focused on sustainable
development of Silesia in the aspect of the European Energy Community, the sustainable
development of Silesia from the perspective of a metropolitan union, the contribution of
higher education institutions to the programming and implementation of Silesian Sustainable
Development, CSR as one of the conditions for sustainable development of the region and
problems RRI (Responsible Research and Innovations).
The idea of sustainable development dates back to the eighteenth century when the Saxon
starost Hans Carl von Carlowitz embodied the concept of sustainable forest development,
thus forming a model of sustainable forestry. In fact, however, the concept of sustainable
1 http://www.infoenergia.com.pl/2 http://www.infoenergia.com.pl/?page_id=3897
SPECIAL SUPPLEMENT
Paulina KUZIOR
Sustainable development of Silesia - panel discussion at the fairs and conference InfoENERGIA 2017
Zrównoważony rozwój Śląska - panel dyskusyjny na targach i konferencji InfoENERGIA 2017
BUSINESS ETHICS AND SUSTAINABLE DEVELOPMENT
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development has only emerged since the late 1960s, when this deepening ecological
crisis drew attention to the various environmental forces. The first manifestations of this
interest became various types of studies and reports, among others the U Thant Report
(1969), first Report for the Roman Club “Boundaries of Growth” (1972), second Report
for the Roman Club “Humanity at the turning point, (1974), Report G.H. Brundtland
“Our Common Future” (1987), Declarations and programs, including the Global Agenda
21 Action Program (1992) and Johannesburg Implementing Action Plan (2002), “The Future
We Want” (2012), “Transforming Our World: Agenda For Sustainability - 2030” and many EU
documents and country documents. Conceptually, sustainable development is relatively
complex, but there is still a lack of proper translation of concepts into local, regional and
global practices.
The InfoENERGIA 2017 discussion focused on the dimension of local and regional
sustainable development. Its aim was to identify important aspects of sustainable
development of Silesia. Professor Aleksandra Kuzior, initiating the discussion, pointed out
that ethical values, primarily justice and generational and intergenerational responsibility,
are the basis of sustainable development, and the basic category of conceptual insights
is “quality of life”, among others from the perspective of personal security, which consists
of security: energy, economics, ICT, ecological, social, health, social, public, security of
human rights and security of democratic order.
The discussion began with a key to the quality of life energy security. Professor Jerzy Buzek
co-author of the concept of the European Energy Community, which he co-developed
with J. Delors in 2010, approximated the assumptions of this concept. He also pointed out
that Silesia and the Zagłębie area were the most polluted regions of Europe. Therefore,
rapid action should be taken to counter low emissions. Air pollution is the cause of many
illnesses and thus lowering the quality of life. The reason for low emission is, among other
things, a large number of cars driving through the Silesia, but also the burning of low quality
coal in households. Over 10 years ago, on the initiative of J. Buzek, the Innovative Silesian
Cluster of Clean Coal Technologies was created. Research on clean coal technologies
leads among others Central Mining Institute (GIG) in Katowice together with the Institute of
Chemical Processing of Coal (IChPW) from Zabrze as part of a joint initiative of innovative
laboratories at the Center for Clean Coal Technologies. There are solutions that can
reduce the negative impact of conventional energy on the environment. Such solutions
are also needed in households. Professor Jerzy Buzek emphasized the importance of
using environmentally-friendly technologies, such as heat pumps or solar panels and
cogeneration of integrated heating systems. However, in order to achieve sustainable
development of Silesia, complex actions need to be taken, ie in addition to cogeneration
and green energy, changes must be made in the transport area (trolleybuses, electric cars)
or in construction (passive buildings). The most important thing is energy conservation
and responsible use of resources.
INTERDISCIPLINARY THEORETICAL AND EMPIRICAL STUDIES. NO. 1/2017
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President of the Zabrze City and the President of Upper Silesian Metropolitan Association
Małgorzata Mańka-Szulik pointed out the need for cooperation in creating sustainable
development of Silesia. Creating a Metropolis can help. The analyzes and interviews
carried out confirmed that the majority of inhabitants of Silesian agglomeration positively
perceive the possibility of creating a metropolis, seeing in this benefits. Future Metropolis
should coordinate activities in different areas, and each city and municipality must
cooperate. Without cooperation, the sustainable development of the future Metropolis
will not be possible. It is difficult to fight with a smog in one city if the other will not
do it. Sustainable development of Silesia requires actions in various areas, starting with
the preparation of the road network, communication, spatial development, environmental
activities. Social issues must also be remembered, with smog being a social problem
not only because it adversely affects the health and quality of people’s lives, but also
shows the problem of the pauperisation of Polish society, which warms the household,
as it can not afford to use pro-ecological solutions and clean fuels. M. Mańka-Szulik also
mentioned the important aspect of cooperation with Polish science, pointing to innovative
proposals of Silesian University of Technology researchers who developed the technology
of small electrostatic precipitators for vents in single and multi-family houses. Electrofilters
should significantly reduce the problem of low emissions.
Professor Janusz Kotowicz, Vice-Rector for Cooperation with the Socio-Economic
Environment of the Silesian University of Technology, pointed out the important role
of the university, which should respond to the needs and expectations of the environment.
The Silesian University of Technology, thanks to the cooperation with the Social Council
and the Stakeholders’ Council, creates new fields of study, filling in the expectations and
demands of the labor market. The Silesian University of Technology also carries out various
types of expertise and carries out research and development works for industry, responding
to the needs of the socio-economic environment, realizes the assumptions of sustainable
development.
The quality of human life depends to a great extent on material status. That is why,
in sustainable development, economic aspects play no less role than others. Economic
development, however, is intended to serve man and society and lead to social well-
being. Tadeusz Donocik, President of the Regional Chamber of Commerce in Katowice,
commented on this commitment and responsible entrepreneurship during the discussion,
which noted that responsible business is becoming more and more popular but difficult
to implement, particularly by small and medium-sized enterprises that can not afford
adequate social involvement. . At the same time, he pointed out that small and medium-
sized enterprises account for 99.8% of all businesses in Poland, and that is they give jobs
and counteract unemployment, making a significant contribution to the sustainable
development of the region.
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The axiological aspects of sustainable development have been highl ighted
by prof. Andrzej Kiepas. He referred, among others. RRI problems, that is, responsible
research and innovation. He pointed out that not only the processes of innovation,
but also the processes of their dissemination and use, are part of the RRI. This is also
an area of challenges related to the possibilities of possible public participation in these
processes. He emphasized that one of the important tools for the dissemination of the
RRI idea could be the implementation of technology assessment, in particular the
participatory TA model. However, the realization of the RRI concept requires the effort
of the co-responsibility of all social actors.
Professor Aleksandra Kuzior stressed that research and technological innovation are an
important element of sustainable development. She noted that in the core document that
constitutes the concept of sustainable development - “Agenda 21”, the terms “innovation”
and “innovative” appear almost 50 times in different contexts, particularly with regard to
green technologies and the development of the information society. The innovation trend
is also maintained in the final document of the Rio + 20 “Future We Want” Summit.
The issue of sustainable development is present both in scientific discussions and in
practical activities, although more and more unbalanced actions are still being observed.
There is therefore a need for education for sustainable development, as prof. Aleksandra
Kuzior stressed.
The panel discussion on sustainable development of Silesia attracted numerous
stakeholders. Students from Silesian universities, Silesian University of Technology
and Katowice University of Economics, are involved in various aspects of sustainable
development and corporate social responsibility and representatives of local governments.
The problem was considered very important and the panelists outlined directions
of development taking into account the balanced development of the region.
ISSN 2451-456X
