Money, like few other things, can do funny things to people. More specifically, even those with more than enough of it can demonstrate abnormal behavior because of what it means to them (self worth, superiority, etc.). Someone who would normally be considered a decent person may take actions that are surprising due to a fear of loss, not of money, but of various things that money might represent to them. Because money has this somewhat unique influence on people, in the context of entrusting others with your money it's worthwhile to consider what framework or moral underpinning support their handling of (your) money.
Codes of ethics are important (you can see ICI's Code of Ethics and Standards of Professional Conduct here) but insufficient. This is true because there are plenty of decisions that are genuine dilemmas, not easily categorized or answered by reference to a guiding document . It's here that a moral compass informs the judgment that will ultimately prevail. Working with people who possess an appropriate moral compass is a key to minimizing problems.
Although this is especially true in the investment management world, it applies to any business. Yet, what seems like an obvious truth, like many things, can be difficult to implement. Consider the manager who discovers that an employee has intentionally fudged their timesheet, adding just an extra half hour. Is it really that big of a deal? The employee can be corrected and the cost of the act can be quantified as nominal. But is it nominal? The employee has clearly shown a willingness to cheat their employer- a poor moral compass- and the problem with character deficiencies is that they require a strong cop; to be constantly policed. Liberate poor character from burdensome monitoring and bad things ensue. The broken compass shows up elsewhere, it's not an isolated event.
The manager who doesn't act in this situation, maybe because they see the hassle of going through the hiring process again, maybe because they justify the offense as being of small scale, or whatever other reason, brings their own judgment into question. Keeping an employee with demonstrated poor ethics implies that the position is of very little value . This must be true because if the position was of value that employee would have meaningful influence over things important to the business, which no competent manager would allow. This means that the position occupied by the unethical employee must not involve: interactions with customers or suppliers; influence on any of the company's finances (including the expense of their own pay); or influence on other employees who they might contaminate. If such a position of so little consequence existed, then it shouldn't be difficult at all to economically rehire an employee who possessed a better moral compass. Keeping an unethical employee, then, is unjustified and if done probably reflects the leadership quality, or perhaps even the ethics, of the manager who refuses to dismiss them.
Lack of competence, within reason, can be corrected. Lack of character should be eliminated.
What makes a good moral compass?
In 1971 John Rawls communicated an influential idea within A Theory of Justice which he called the veil of ignorance. Under the veil of ignorance, everyone is imagined to be ignorant of all of his or her particular characteristics, for example, his or her race, sex, intelligence, nationality, family background, and special talents. Rawls then asks: What system would people design under a veil of ignorance? The idea is that fairness and impartiality would be ensured if a decision maker was ignorant as to which side of the table they would sit on after the decision was made and they had to live with it.
This is similar to the analogy of a wise mother handling her son and daughter arguing after dinner over who gets the most pie. Having heard enough of the bickering she declares that the son gets to cut the pie however he likes, to which he beams and gives a taunting look to his sister. The mother then tells the daughter that after her brother divides the pie as he sees fit, she gets to choose which piece she wants.
This basic concept, which was communicated long ago by Matthew: "So in everything, do to others what you would have them do to you", is a strong underpinning in the ICI moral compass. In those situations where black and white are not available colors for a potential decision involving someone else's money we'll ask, "what would I want if my and the client's role were reversed?"; "If I was responsible for making this decision and then random chance chose which side of the decision I had to live with, would I choose any differently?"
In perhaps an even more practical sense, possessing a well maintained, functioning moral compass is a good investment as a business, particularly a money management business. Unethical behavior is short sighted, eventually exposed as stealing from yourself.