Corporate values of the 25 largest European banks: Exploring the ambiguous link with corporate scandals

J Public Affairs. 2018;18:e1700. https://doi.org/10.1002/pa.1700 Corporate value statements communicate what a firm aspires for and what drives their value creation. In addition, corporate values often also define which behaviors are acceptable and which are not. Ideally, corporate values are representations of a firm's informal corporate values and organizational culture. However, in practice, there is an inherent tension between the aspirations and actual values and ensuing behaviors of and within a firm—let alone the potentially different interpretations of abstract corporate value statements. In this paper, we set out to provide more clarity on what corporate values are, how they are inherently ambiguous, and how in practice they compare to firm involvement in scandals. For this purpose, we study the corporate values of the 25 largest European banks after the financial crisis. “Integrity” appeared to be the most common value among the 25 banks, followed by “customer focus.” Nonetheless, over the past 6 years, 15 out of the 25 studied banks were involved in one or more scandals. Scandals can be systematic or caused by rogue employees, and benefitting the firm or their customers—in the latter case, providing an interesting interpretation of the customer focus value. Additionally, we found that courage or its synonyms were barely mentioned among banks' corporate values, potentially providing an additional explanation for the fast size of the financial crisis. Finally, we found that banks that had inclusive social principles such as respect, solidarity, and equality did not face large‐scale scandals.

In our study, we build on the work of Donker et al. (2008), but instead of analyzing the relation between firm performance and corporate values, we look at the corporate values of the 25 largest firms in one specific sector. Additionally, we take an approach that also looks at the negative side of corporate values where economic value is not created but destroyed (following, Dempsey, 2015;Edmondson & Cha, 2002;Lencioni, 2002). Specifically, 15 out of the 25 studied firms were involved in one or more scandals in the past 6 years, albeit that the degree and type varied. We look for similarities and differences between the corporate values of the involved firms and potential involvement in scandals. In addition, we question which values appear to be mostly missing among these large banks.
Our study contributes to the literature in three ways. First of all, we provide an analysis of corporate values in a sector under close public scrutiny. This adds substantially to our understanding of the complexity and ambiguity of corporate values in relation to internal organizational dynamics and potentially ensuing scandals, that is, Mertonian innovation. Second, by studying the relation between corporate values and scandals, we contribute to a more fine-grained understanding of why in principle desirable corporate values-such as integrity or customer focus-do not prevent undesired behaviors focused on short-term economic value creation but possibly leading to economic and social value destruction in the long run (also see Mueller et al., 2015). Third, by comparing characteristics of the firms in our sample, we explore the possible effects of such characteristics on the selection and outcomes of corporate values.

| THEORY
Defining and implementing corporate values are top priority for leaders in their quest for value creation (Humble et al., 1994;Kuratko & Audretsch, 2009). Formalizing corporate values provides clarity for employees and mitigates employee convictions about right and wrong (Nwachukwu & Vitell, 1997). Also, corporate values are found to influence the perception of the importance of ethics (Singhapakdi et al., 2008). Moreover, they also have an impact on employees outside the work environment (Cambra-Fierro et al., 2008). Often, management development is used to transmit corporate values (Kamoche, 2000).
However, large-scale corporate values programs can lead to mixed and confused responses among middle managers although they are required to disseminate the message (Turnbull, 2001). Edmondson and Cha (2002) mention how employees can misinterpret corporate value programs and brand them as ambiguous or even hypocrite. In particular, Lencioni (2002) (Hollender, 2004). Various authors have composed lists of values often used by firms (e.g., Donker et al., 2008;Humble et al., 1994;Norburn et al., 1990). Corporate values that are often mentioned are integrity, responsibility, trust (Donker et al., 2008), people, competitiveness, customers, quality, and productivity (Humble et al., 1994). However, some firms may choose more outlandish corporate values to emphasize their distinctiveness.
Despite the possible variation in corporate values, links have been established between corporate values and firm performance (Donker et al., 2008;Yoshimori, 2005), often mediated through corporate social responsibility (Vilanova et al., 2009). Nonetheless, the sheer presence of explicit corporate values is not a predictor of corporate social responsibility (Mijatovic & Stokic, 2010). Also, corporate values were found to influence organizational innovativeness (Dibrell et al., 2015). Interestingly, one study found that corporate values only had an effect on firm performance when the market-to-book ratio was relatively low (Donker et al., 2008).
The importance and meaning of specific values vary across nations. For example, Norburn et al. (1990) found that corporate values are important for marketing effectiveness but the effects differ per country. In some countries, a people and quality focus has an effect, whereas in other countries, informality and innovation or a combination of both types of values. Furthermore, corporate values were found to take on a new meaning when implemented in a foreign subsidiary (Gertsen & Zolner, 2002; also see Nelson & Gopalan, 2003), especially over a longer time (Berlin, 1996). Also, companies with a global scope might encounter problems with the management of their corporate values (Panapanaan et al., 2003).
All in all, the defining and implementing of corporate values are a complex process-leaving plenty of room for ambiguity. Corporate values have inherent paradoxes that need to be actively managed (Vilanova et al., 2009). Verhezen (2010, for example, points out how a focus on compliance can lead employees to remain mute when personal or corporate values are undermined. Furthermore, large distance may exist between top management and employees, and therefore, different interpretations can lead to undesired behaviors. This may lead to value destruction instead of value creation, as we have already pointed out how corporate values might lead to backlash. Likewise, the same may hold for the effect on innovation, that is, Mertonian innovation instead of innovative activities that lead to value creation. Nonetheless, also those not working at top management are responsible for the extent in which they follow or not follow corporate values (Dempsey, 2015). We selected the 25 largest banks based on total assets in June 2016, as this is the most commonly used measure of bank size. By selecting the 25 largest European banks, we have banks headquartered in 10 European countries: the UK (5), France (5), Germany (3), Spain (2), Switzerland (2), Italy (3), the Netherlands (3), Sweden (1), and Denmark

| METHODOLOGY
(1). Here, we need to point out that the banking sector in the UK, Germany, France, and to some extent Spain, is in total substantially larger than in the other mentioned countries. Additionally, we provide the market capitalization in April 2016 and the average total return on assets and equity in the past 5 years. Please note that we did not find a significant relation between bank size in total assets and the average return on assets or equity. We retrieved this data from Yahoo! Finance and YCharts. For an overview of our sample, see Table 1.  governance." Thus, we limited our search to illegal behavior that evoked a public outcry. Furthermore, we only included scandals for which the respective banks were sanctioned, as we deem this is an objective indicator of the severity and justification of the scandal.
We split scandals in two types: systemic and isolated. In this, we follow Kuhn and Ashcraft (2003), who distinguish between firm-spe-

| Clusters of corporate values
Our analysis of the corporate value statements of the largest 25 European banks, indicated that these banks emphasize a diverse set of values, beliefs, and ethical standards. We have categorized these values in six overarching groups (see Table 2). We based the clustering of the corporate values on the targeted audiences and/or stakeholders of said values: (a) the profession, (b) customers, (c) shareholders, (d) regulators, (e) employees, and (f) other stakeholders and/or wider community. We chose to cluster along stakeholders based on our grounded analysis of the various value statements (see Glaser, 1992).
Although service sectors firms somewhat differ with respect to suppliers, we do see substantial overlap with various stakeholder categories mentioned in stakeholder theory (Freeman & Reed, 1983;Donaldson & Preston, 1995). Where appropriate, we put the related stakeholder group in between brackets in Table 2. Although "doing the right thing" can be considered a more generic category, we do believe it mainly relates to the profession as such, and therefore, we relate it to the trade association group of stakeholders.
At the core of most mission statements is a focus on doing the right thing. Fifteen out of the 25 banks refer to values that promote good and righteous behavior, such as "fairness" and "professionalism," with a majority of these banks mentioning integrity. Integrity, in the words of Charles Marshall (2003), refers to "doing the right thing, even when no one is watching." It constitutes a virtue of wholeness and incorruptibility. Banks that refer to integrity in their mission statement indicate that they attach great value on "doing the right thing, not just what is allowed" (Deutsche Bank) and that they stimulate "showing the courage to do and say the right thing" (Barclays). Additionally, integrity includes "not ignoring, tolerating or excusing behavior that breaches the banks" values (ING). Interestingly, BNP Paribas, ranked number two on the list, promotes a culture of (rule) compliance. Thus, rather than being value-based in their business operation, their focus lies on following legislation and procedure. One can question whether following the rules automatically aligns with doing the right thing. Following the law does not by definition imply that behavior is conducted in a morally acceptable way in all situations-and additionally constitutes the bare minimum of acceptable behavior.
Another important value for most banks is a focus on clients or customers, with 14 out of the 25 banks claiming they attach great importance on serving their clients and customers with the best solutions and products. For example, Deutsche Bank presents itself as being "client centered," whereas Nordea Bank states that "a great customer experience is the essence of their work and identity." A third core value mentioned is a focus on performance and shareholder value. Thirteen out of the 25 banks mention the importance of specific standards that can be linked to the performance of the bank and the creation of shareholder value, such as "sustainable performance" (e.g., Deutsche Bank, Royal Bank of Scotland, and Credit Suisse), "excellence" (e.g., Barclays, Credit Suisse, and Intesa Sanpaolo) and "prudence" (e.g., BBVA and ING). Fourth, eight out of the 25 bank mention values that refer to being responsive to (financial) regulators,   Table 3.

| Involvement in scandals
A majority of these banking scandals were systematic rather than isolated in nature, where unethical behavior occurred over a longer period of time and involving several employees and/or upper management. For example, 30 staff members at Rabobank were involved with and subsequently punished for the manipulation of the interbank interest rates and related "improper conduct" (Webb, 2013). Furthermore, deficiencies in the antimoney laundering and compliance requirements at Standard Charted, BNP Paribas, and HSBS were, although identified by upper management, ignored over a period of several years (White & Barlyn, 2016), allowing for a large amount of financial transactions to be carried out without them being properly monitored. As such, behaviors that lead to short-term value creation but long-term value destruction were apparently commonplace in the larger firms in the sector.
Based on our analyses, individual or small group violations are the exception rather than the rule, although such isolated misconduct might be settled out of court. Nonetheless, we do point out that isolated scandals only occurred in banks that also had systemic scandals.
Most scandals were rooted in a context where structural deficiencies in the regulatory compliance requirements were recognized but not corrected. The resulting penalties were considerable, with BNP Paribas sentenced to a record $8.9 billion settlement resolving claims that it violated sanctions against Sudan, Cuba, and Iran (Raymond, 2015). In addition, UBS paid $780 million in fines, interest, and restitution to avoid prosecution by the United States on charges that it helped wealthy Americans evade taxes (Vicini, 2009

| Relation between corporate values and scandals
Having discussed the occurrence of scandals, we will now examine whether there is a connection between specific corporate values and the occurrence of scandals. One clear finding is that although 15 banks value integrity, professionalism, and fairness, this does not mean that large-scale unethical behavior and compliance infringements did not occur. Rather, the opposite seems to be the case: Out of the 15 banks that mention integrity as a core value, only UniCredit Group, BBVA, and Intese Sanpaolo have managed to prevent involvement in a major scandal. The banks that did face large-scale scandals were thus unable to maintain the integrity of and professionalism within (parts of their) organization.
In addition, a majority of the scandals can be traced back to illegal financial transactions for customers, with 14 out of the 25 banks having faced fines for facilitating tax evasion, money laundering, and financial transactions to individuals or organizations in sanctioned countries.
In 2014, Credit Suisse, who promises its stakeholders to be client focused, was fined $2.5 billion after pleading guilty for helping wealthy Americans avoid taxes (Rushe, 2014). In addition, Nordea Bank promises its clients a great customer experience although the bank has recently been fined for helping wealthy customers dodge taxes and was mentioned in the Panama Papers (Farrell & Kocieniewski, 2016).
A similar focus on serving clients can be found at banks that were fined for money laundering, such as BNP Paribas ("client satisfaction"), and banks that performed lucrative transactions for individuals or organizations in sanctioned countries, such as Banco Santander ("great bank for customers"). The exception to this rule is Lloyd Banking Group, which was fined £28 million after it pressured employees into selling products that were deemed unnecessary for some clients (Jones, 2013). Here, we found that a value that in general would be considered "good" can be interpreted and implemented in a way that is detrimental to society (for a more detailed discussion in another sector, see Koelewijn, Ehrenhard, Groen, & Van Harten, 2014), the financial system, and-in the end-the bank itself, as short-term profit is canceled out by value destruction in the form of fines and reputational damage.
Another important finding is that banks explicitly mentioning values emphasizing inclusive social principles, such as "respect" (e.g., UniCredit Group, Intese Sanpaolo, and KfW Group), "solidarity" (e.g., Group BPCE and Credit Mutuel), and "equality" (e.g., Credit Mutuel and Intese Sanpaolo), did not face large-scale scandals. Such values indicate a wider social interest as opposed to human factor-oriented values that are mostly internal to a bank and are known to contribute to performance, for example, "team spirit" and "creativity." Also, words that can be interpreted in various ways or considered to be rather generic might be more a case of window-dressing, than providing vision when contextualization is lacking. For example, the value responsibility can be viewed from legal, ethical, and economic perspectives-and thus the interpretation of what is responsible behavior can differ substantially (see also Salls, 2005

| Relation between bank size and corporate values
In addition to the analyses of clusters of corporate values, involvement in scandals, and possible links between the two, we also checked if other factors might explain differences. For example, do Europe's 10 largest banks differ from the other 15 banks in our sample? For most banks, the emphasis is placed on both "integrity" and a "focus on clients." Integrity was evenly distributed among the sample and did not occur more with the largest banks. The value of focusing on clients, however, was observed more often at larger banks. Specifically, seven out of the 10 largest banks mentioned "a focus on clients" as a core value, whereas only three out of the 15 smallest banks explicitly referred to being focused on customers. Because the larger banks have a more international presence, client orientation might be more important in an internationally competitive market, but it might also be easier for them to help their clients in avoiding taxes.
Also, smaller and less international banks will have more difficulty in shifting irresponsible practices to countries with less tight oversight regimes (see Surroca, Tribó, & Zahra, 2013). In support of this point, we found that the largest banks were less inclined to be transparent in their business operation: None of top 10 banks referred to transparency as a core value. The largest bank that mentioned transparency in its mission statement was UniCredit Group, which is ranked 14th on the list. Finally, we tested statistically if there was a relation between bank size and average return on assets and equity over the past 5 years, but both relations were not significant and (very) small effects.

| DISCUSSION AND CONCLUSION
The goal of our study was to shed light on corporate values, and how they relate to firm behavior after a period of substantial upheaval.
For this reason, we focused on the 25 largest European banks and studied if certain corporate values meant that firms would not be involved in scandals-or only in isolated cases.

| Key findings
In this study, we analyzed the corporate values of the 25 largest European banks and examined whether there was a relation with the occurrence of scandals. Values that refer to doing the right thing, such as "integrity," appeared to be the most common values among the 25 banks, independent of bank size, followed by "customer focus" and institutionalized goals such as profit making but via additional means that were not institutionalized. Such Mertonian innovation illustrates how short-term value creation can lead to long-term value destruction. Although a majority of these banks mentioned values that are related to doing the right thing ("integrity," "professionalism," and "fairness"), these banks could not prevent employees from behaving in an unethical way. In addition, one could argue that the importance that banks attach to serving their clients has taken extreme forms: The various scandals were often related to actions that were favorable to the clients of the banks, such as the facilitation of money laundering and tax avoidance. Furthermore, the biggest banks in our sample were not too keen on transparency. Although too nuanced to draw hard conclusions, very big banks that are global players appear to have different ways of working and aims than the other banks.
Although the imposed sanctions were considerable, our analysis shows that the sanctions did not have lasting effects on the financial stability of the bank. This is in accordance with the findings of Armour, Mayer, and Polo (2011), who studied the impact of announcements of enforcement of financial and securities regulation by the UK's Financial regulators on the market price of penalized firms. They concluded that reputational losses are confined to misconduct that directly affects second parties who trade with the firm such as customers and investors. The value destruction caused by scandals is thus limited.

| Limitations
The study has a number of limitations

| Research implications
Our study has provided an analysis of corporate values in a sector that is being questioned for its moral behavior. We indeed found that the corporate values are perhaps aspired for, but certainly over the past 6 years cannot be considered practices for most banks in our sample.
As such, we demonstrate that a set of corporate values by itself do not provide a sufficient condition for preventing corporate wrongdoing-and can potentially lead to a public image of hypocrisy and undermine the bank's reputation. Interestingly, these effects seem to be limited when it comes to shareholders (Jory et al., 2015;Kuhn & Ashcraft, 2003). Thus, although Mertonian innovation, in the form of short-term economic value creation, leads to long-term economic and social value destruction, the economic impact for the firm involved seems to be limited.
Second of all, we found that corporate values can lead to undesired behavior, most prominently with the corporate value of customer or client orientation. Employees were indeed in some occasions very customer focused, perhaps also in relation to their bonus structure and consequently behaved in ways that served the customer and sometimes the bank but definitely not society. Furthermore, transparency was not a prominent value among the bigger banks in our set. We wonder if both culture and practices at the "global players" differ substantially from banks that are relatively smaller but also more local.
More research is needed to compare the big global banks to banks that are more regionally oriented. An interesting finding to explore further over a larger set of banks is whether banks with inclusive social principles indeed engage less in undesired behaviors.

| Practical implications
That banks value integrity does not automatically mean that their business operations are sufficiently sound and responsible. Stating that integrity is valued is one thing; implementing this corporate value in business operations and decision-making process is another (Stevens, Steensma, Harrison, & Cochran, 2005