Ethical Drift – FX and Communications industries compared

Marketing and PR, like many other industries, relies on a mostly principles-led approach to self-governance. But is this the most effective way to uphold standards or does the sector need regulation with a few more teeth?

Marketing and PR, like many other industries, relies on a mostly principles-led approach to self-governance. But is this the most effective way to uphold standards or does the sector need regulation with a few more teeth?

The recent launch of the full FX Global Code was a stand-out moment for the FX industry, which itself is not short of notable events. The Code is unrivalled in its scale and scope – and the level of interest in its contents from all areas of the market is a good indicator of just how necessary it is.

But unlike laws or regulations, the FX Global Code is a voluntary set of principles and guidelines which in themselves carry no formal penalties if they are broken. Other scandal-fraught industries – including journalism – also continue to be mostly self-regulating. But in light of recent events in marketing, can our industry continue to be guided by best practices, standards and ethics, or does it now need to be more formally regulated?

Repairing the damage

The FX industry is working hard to restore its reputation following a spate of benchmarking scandals, most notably around the largest 4pm London Fix. This has even involved government intervention – manipulating a critical benchmark such as the WMR Fix is now punishable under UK law.

But alongside government and regulatory initiatives, in 2015 the Bank for International Settlements also established the Foreign Exchange Working Group (FXWG) – leading to the development and final publication of the FX Global Code of Conduct last month.

The launch of the Global Code is a huge leap forward for the industry and one I believe will lay a strong foundation for the market to not only rebuild trust, but also to thrive. Yet the fundamental questions which remain around the launch of the Code also apply to other key, yet mostly self-regulating, industries such as PR and marketing. These include:

  1. How can a principle-based code apply to vast and complex industries, markets or sectors?
  2. Who is responsible for monitoring and flagging-up any breaches of these principles?
  3. Should there be penalties for confirmed failings?
  4. What would those penalties look like and how would they be enforced?
  5. As well as penalties, are there any incentives to encourage participants to comply with essentially voluntary industry standards?

Professional standards

In the communications sector, we also have various codes of practice – such as the UK Advertising Codes created by the regulatory body the Advertising Standards Authority (ASA). Individual practitioners can become a member of the Chartered Institute of Public Relations (CIPR) or the Chartered Institute of Marketing (CIM).

Yet the world of media and marketing has also needed to do some soul searching, particularly considering recent events. The 2017 Edelman Trust Barometer, a global annual study, showed that the media saw the greatest decline in trust of any institution in 2016-2017, falling to just 43%.

Not surprising since 2016 was the year that ‘fake news’ hit the headlines. This means there is more pressure on media outlets than ever before to fact-check stories and verify sources. But coupled with the need for news to be ‘now’ and ‘ours’ i.e. fast and exclusive, how achievable is this in reality?

And it’s not just this new breed of fake news and click-bait copywriting that’s of concern – PR in the wrong hands is just as prone to using spin, deliberately creating misleading headlines or trying to cover up facts. Online advertising also recently suffered a reputation damaging crisis when Google-owned YouTube was found to be running major ad campaigns alongside unethical content, including messages of hate and intolerance.

Aiming higher

But does it really need to be this way or should some level of government or regulatory intervention be considered for the communications industry? I don’t think so – for no other reason that I think it would be almost impossible to police at a regulatory or government level. Marketing messages are developed with specific audiences in mind and – depending on the target age group, ethnicity, culture or industry – what may be considered clever and funny for some may be highly offensive to others.

How can we safeguard marketing against ‘ethical drift?

If you look at the FX Global Code’s approach, it relies on the professionalism of the industry and its united desire to promote best practice in daily trading. Certain Central Banks will require participants to formally sign-up to the code. In FX and the creation of registers will allow clients and the industry to view at a glance who has done so.

The expected logical result is that any firm NOT actively signed up to the code, or known not to be adhering to its principals, will be given a wide berth in the market, while those that are will be favoured.

And I think the same dynamic is at work in marketing, with big name brands such as McDonald’s and the UK government having stopped their online advertising spend with YouTube until action against the unethical content was taken down.

And just as there is the world of difference between the majority of the FX market (populated by professionals) and the so-called FX cartel members, the same is true in the world of PR and marketing.

In the same way that it will take the goodwill and united hard-work of the FX industry to ensure its image isn’t tarnished by future wrongdoing, the responsibility for safeguarding the morals and ethics of PR and Marketing also falls on our industry’s collective shoulders. We must all work to protect the integrity of our own brands and those of our clients’ by ensuring communication is fact-based and standards are upheld, as well as being constantly vigilant, and intolerant of, any sign of ‘ethical drift’.

Does your company need a more professional marketing touch? Talk to MD Consulting about how we can help. Or take a look at our video here.
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