Passing the buck

Not too long ago this column dealt with the issue of ethics in the insurance business and lamented the fact that the “utmost good faith” principle which is the cornerstone on which insurance has been built over the past 300 years is being severely tested daily. No longer can a nod of the head or a simple verbal agreement be counted on and everything is reduced to writing where the parties are only too quick to rely on some ambiguity or loophole as an excuse to break the contract. While there are universal principles in treating with ethical behaviour difficulty arises when you have to take into account the local culture and what is deemed acceptable by the majority of the population.

Take the recent case of the New York Stock Exchange when the CEO resigned as public pressure mounted. He did nothing wrong and was never accused of any wrongdoing. The Board decided to reward him with a payment of US$140 million, but when that information reached the public there was a hue and cry where the right thing was to resign in order to end the controversy. Investors in the Stock Market felt that the payment was inappropriate for a regulator and made their views known. Further the Chairman of the Board Compensation Committee also resigned, so there were two casualties on what can be best described as an issue of poor judgment. Just imagine the same thing happening in Trinidad and Tobago.
Firstly, we do not have a resignation culture which is the norm in developed societies where people take responsibility as in the case of the Japanese or the English. Instead we find every reason to pass blame or put a different spin to justify action or inaction and mount a public relations campaign knowing that soon there will be some other distraction and the dark clouds will blow away. In many ways the society makes the call on ethical behaviour.

Take another example — Western Union. As you know they are in the foreign exchange and remittance business. A class action was filed in the United States District Court for the Eastern District of New York alleging that Western Union made misrepresentations or failed to disclose to customers the fact that they received a more favourable exchange rate for converting US dollars into foreign currency and vice versa than they provided to their customers. Western Union denied all the allegations of wrongdoing and that they did not violate any law and that their advertisements were neither false nor misleading. The Court has not made any determination of the merits or demerits of the case. However, Western Union has proposed a settlement with which the attorneys for the class action have agreed and the matter could involve a payout of US$50 million inclusive of legal expenses.

It may be that Western Union came to the conclusion that it was in their best interest to reach an agreement as a business decision rather than to contest the matter given the uncertainty of the Court. However, if there was no merit at all in the class action then they might have defended it to the end. The moral of the story is that consumers have rights and in particular in developed countries the consumer lobby is extremely powerful and that leads to best practices and superior customer service. We in Trinidad and Tobago are a long way from what is the norm in the developed countries and consumers are not sufficiently protected in the law and they do not aggressively seek redress. It is true that the system does not facilitate action, in particular the legal route, as it is too costly and time consuming and so consumers are discouraged as it is not worth the hassle.

There are numerous circumstances where there are misleading advertisements or situations that have a marked similarity to the Western Union case right here in Trinidad and Tobago. Nothing is done and no action will be pursued since the captains of industry will view that as good business sense — buy cheap,  sell dear — no disclosures and no consideration for ethics or the principle of right and wrong. What passes as unacceptable behaviour in the developed countries is surely seen differently in our society and the public will generally see nothing wrong and that is the difficulty in making judgments on business ethics not only in Trinidad and Tobago but in developing countries in general. The insurance industry and member companies of ATTIC have been grappling with the issue of ethics with a view to going back to the “good ole days” when someone’s word was his/her bond. It is a matter of trust and the assurance of being treated fairly as a matter of right and not as a favour. It is clearly recognised that the breakdown of family and the school system over a long period has in large measure contributed to the state in which we find ourselves where people cannot differentiate between right and wrong, and where right or wrong depends on a particular set of circumstances.
 
This debate is coming at a right juncture in the history of the insurance business where the key decision makers largely did not come up from the belly of the insurance industry but rather from other areas of business or from other professions where the principle is usually caveat emptor — let the buyer beware and the making of profits is the overriding consideration. In addition, the business of insurance is fast changing and with consumer needs shaping the future of insurance and the wider financial services sector issues of ethics will feature prominently and leaders will have to make judgment calls. The choices that we make will determine whether such actions were transparent, ethical and with the best interests of all stakeholders in mind and not in personal self-interest, and in the final analysis whether we have discharged our duty of trust. It will not be easy as the business becomes more complex and the pressure to deliver shareholder value builds.
E-mail: daquing@cablenett.net