Ethical Issues And Compliance At The Bank Of America

Management Perspectives

Research Paper (undergraduate), 2014

12 Pages, Grade: 97.00


Table of Contents


Executive Summary
The Ethical and Compliance Issues
Internal Business Environment
External Business Environment

Response to the ethical challenges
Strategic Planning and Organizational Structure Change
Management Roles
Functions of the management
Measuring the success of the strategic responses
Possible ethical issues in implementing the strategic plans






Bank of America is a financial service corporation with holding and assets in the United States. It is headquartered in North Carolina, the town of Charlotte. The bank operates approximately 5,700 retail banking offices across the United States. The bank also runs an online banking system where clients can access services online or even their accounts.

Bank of America has a divisional corporate hierarchy. This hierarchy is traditionally used in the service industry. In the Bank of America, the hierarchy is evident in the commercial section, the retail section, the asset management section, and the investment section. The divisional organizational hierarchy requires the segregation of larger business sections into semi-autonomous unit. Each semi-autonomous unit is headed by the Executive Officer. The executive in the sub-section performs limited managerial tasks such as hiring and budgeting of that respective section. However, the general hierarchy of the bank is composed of the Chief Executive Officer; Global Technology and Operations Executive; Co-Chief Operating Officer; Global Strategy and Marketing Officer; Global Head of Human Resources; Chief Risk Officer; Global Chief of Legal; Corporate General Auditor; Co-Chief Operating Officer; Legacy Asset Servicing Executive; and the Chief Financial Officer. The cashiers form the lowest level of the corporate hierarchy.

As a business entity, Bank of America has an upper edge in competitive advantage over other banking institutions. The bank is ranked among the top fifty in the Fortune 500 Companies (Bank of America 2014). The excellent performance of the bank is associated with its robust Corporate Social Responsibility activities. Bank of America serves all classes of bank consumers ranging from individuals, small and medium businesses, and large corporations.

Executive Summary

Ethical issues and compliance are a challenge facing Bank of America. Ethical issues affect all the stakeholders in a given business. There has been a perception that the financial institutions across the world tend to be more unethical than any other forms of business. This perception could be justified by the issues facing Bank of America.

Complaints of constant lapses in the ethical culture of the bank are rife. The most recent ethical scandal was where the bank is accused to be only interested in short-term returns and not paying attention to the products that are suitable for customers. According to Mujtab (2010:23), the implementation of the Payment Protection Insurance by the Bank of America is an unacceptable measure in respect to the Finance Act (2001). This insurance policy saw overdraft charges being imposed on small business account holders. Interest swaps were also charged on small business holders, a thing that is only done on large corporations by other banking institutions.

On the 25 June 2012, the Financial Services Authority (FSA) announced that it had found numerous errors in the way Bank of America had sold complex financial products to around 25,000 small and medium sized businesses. These interest swabs were designed to protect small-sized business customers. However, the mis-selling by the bank resulted to severe effects on the small businesses. The ethical concerns raised here were that the policy was too complex for the business owners to appreciate and that the product was conditional upon the clients. The bank has come under immense public condemnation calling for cultural and management change.

This report analyses the external and internal business environments that could be the cause of the ethical lapses; giving steps towards mitigating the lapse.

The Ethical and Compliance Issues

Internal Business Environment

1. Employee Behavior

Bank of America, like many other banking institutions, employees a large number of employees from different backgrounds. This poses the threat of ethical issues resulting from the employee behavior. Some employees spend a lot of time checking personal email accounts at the expense of serving the customers. Some employees in fact, tend to check the accounts of clients and reveal details to unauthorized persons. There are also claims of harassment and it is reported that the respective managers fail to deal with the cases appropriately. There are legal consequences associated with employee behavior. Some of these consequences could prove detrimental to the business. For example, if the Executive Officer discriminated against an employee based on their religion, gender, or ethnicity when making promotional recommendations, the victim could seek legal action. In the event where the bank is at constant legal tussles, a negative image is portrayed and this may cost it client relations.

2. Client Relations

The Chief Executive Officer is also concerned about the ethical issues involved with the relationship between the members of staff and the clients. When dealing with clients, it is expected that the employees demonstrate ethical practices. For example, the marketing and advertising officers have been accused of feeding the clients with false information regarding the products of the bank. The terms of service of the various accounts were not given to the clients as required. The officers were only interested in having a large number of people opening bank accounts so as to earn a large percentage of commission.

Some employees equate moral behavior with legal behavior by disregarding the fact that some legal behaviors may not be moral. Legitimate banking operations such as swabs tend not to auger well with most small scale business clients.

3. Conflict between company demands and professional duty.

This could also be a cause of ethical lapse at the Bank of America. Some bank agents are purely self-interested and, therefore, choose to perform actions which contain the best returns to themselves. For example, some marketing officials sell indexed annuities to the aged clients. Since the bank pays a high commission for certain products and low commission for some, the marketers disregard the client’s needs and assume that the bank will support the applicability of the favored product. The employees in this case respond to the rewarding system rather than the clients’ needs. It is worth noting that this response to rewards is counter-productive to the operations of the bank.

4. Customer Service

Most banks aim to provide quality services to their customers. At the Bank of America, the culture of focusing on clients’ complains has not been embedded within the systems. The possible causes of this ethical lapse are poor staff incentive schemes, poor working procedures, and lack of management engagement. The complexity of retail banking system as employed by the Bank of America is classified unethical by some consumers. For example, current accounts operate at no fee. However, the bank recoups the costs incurred through penalizing overdrafts and bounced cheques highly. The free current accounts reduce market competition making it difficult for minor institutions to compete the bank favorably.

External Business Environment

1. Technological influences

Technological factors influence ethical lapse at the Bank of America in numerous ways. The bank has developed high technology applications and systems that have come to work against the operations. The installation of the Wi-Fi internet for office operations has seen many employees concentrate on social networking rather their professional duties. Some employees are addicted to live chats which makes them to wear in such a manner as to please the person at the other end rather wear professionally. Wearing casual clothes has also affected the working relations with the conservative class of clients.

The installation of the Closed Circuit Security Cameras (CCTVs) has raised the issue of privacy infringement. Some of the cameras are located in areas that the employees find uncomfortable like the washroom doorways and the changing rooms. Cameras in the office are also uncomfortable to some employees who perceive it being spied on.


Excerpt out of 12 pages


Ethical Issues And Compliance At The Bank Of America
Management Perspectives
La Trobe University Melbourne
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ISBN (Book)
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ethical, issues, compliance, bank, america, management, perspectives
Quote paper
Marvin Namanda (Author), 2014, Ethical Issues And Compliance At The Bank Of America, Munich, GRIN Verlag,


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