Another financial scandal could be brewing

New Zealand is still vulnerable to a repeat of the financial services scandals that led to the global financial crisis, a new report has found.

The report, released by Chartered Accountants Australia and New Zealand, said while rules and regulations for the sector could help stop bad behaviour, there were also unconscious factors that needed to be addressed.

It said modern financial institutions rewarded employees for delivering specific outcomes, often without taking into account the means by which they were achieved.

Many of those working in the industry perceived rules and regulations to be the main influ- ence on their behaviour, it said.

Respondents were less aware of the powerful influence of cultural factors, specific to the banking and financial services industry, on deterring or encouraging unethical behaviour.

One example given is compensation structures, such as bonuses. It said people were sometimes under intense pressure to get deals done to qualify for per- formance bonuses.

‘‘Individuals in business cannot and should not delegate ethical choices to rules and regulations,’’ the organisation’s New Zealand country head Kirsten Patterson said.

‘‘As the report says, the challenge is to ensure ethical standards have an appropriate place in workplace decisionmaking and activities. And that applies to all businesses.’’

The report said it was unlikely that many of those involved deliberately – or consciously – behaved badly.

‘‘A good deal of unethical behaviour is unconscious,’’ the report said.

‘‘A more plausible explanation is that an industry-wide culture of tacit endorsement enabled wrongdoers to somehow justify their behaviour, irrespective of the ethical implications.’’

It also dismisses the idea that failings are down to a few.

‘‘Blaming the industry’s ethical failures on a few ‘bad apples’ conveniently deflects attention from the cultural issues affecting the industry as a whole. Would it not be more useful to address the culture or the system that grow ‘bad apples’ and allows them to thrive?’’

It recommends providing a clear set of principles to guide decision-making, more diversity and inclusion in the workplace to counter ‘‘groupthink’’ - identifying a ‘‘laddish’’ culture as a problem.