1. What ethical values do you think would be essential for a bank to uphold? Suggest three ways a bank could strengthen those values in its employees through HR policies and practices.
2. Which of the HR skills described in this chapter would be needed to prevent the kinds of problems described in this analysis of the financial crisis?

One force behind the financial panic that accompanied the bursting of the real estate bubble in 2008 was the trading of risky mortgages that were treated as relatively low-risk investments.
Why would otherwise prudent banking and insurance executives do something so foolish? One explanation is that they had financial incentives to do so: performance standards and bonuses that rewarded them for taking chances. For example, banks rewarded loan officers with pay based on the number and size of the loans they made. This system brings in lots of business, but if the compensation system includes no penalty for loans that go bad, there is no incentive to be careful not to make loans that are too risky.
Another problem comes from cultures that glorify individuals who bring in lots of business. That might sound like a good thing and in good times, it may well be-but a culture that doesn't glorify prudent decisions that look out for the entire company's longterm interests is likely to fall victim to carelessness and excessive risk at some point. A company may even find that some individuals engage in cheating or questionable activities to boost their star status. Then the company sacrifices its long-term reputation for the glory of a few individual stars.