Barclays made all the right noises about policy and culture, at least in a few of Bob Diamond's statements to the press. The "no jerks" policy, the letter to employees that said:
"I do not accept the view that the behaviours revealed this week are representative of our culture. They are not.
"But I do recognise that our culture, and that of the industry overall, needs to evolve. The financial crisis revealed that banks need to revisit the basis on which they operate, and how they add value to society."
Jo Confino in the Guardian, is right to point out something we have published many times in Ethical Corporation:
"...research by the Institute of Business Ethics shows that the breakdown of trust is always the responsibility of the culture and leadership of an organisation, which allows individuals to believe that their actions are acceptable."
Dan Ariely, in his new book "The (Honest) Truth About Dishonesty" also makes this point.
When ethical boundaries are moved, either by top leadership, or consistently getting away with it, bad things happen in organisations and to people.
One of the fundamental problems for financial services companies in integrating responsible business into their companies is their inherent desire for secrecy. You are told only what you need to know, and competition is everything.
Wilfred Chow, a former MD at JP Morgan, and a thoughtful commentator who has been deeply interested in these issues for a long time, offers some advice to banks in the first of a series of articles being published on Ethicalcorp.com right now. Here's a few excerpts:
"A survey of studies and reports in the responsible investment space in the US suggests that governance reform efforts by institutional investors have revolved around relatively “traditional” ideas. These include installing more independent directors on boards, separating the CEO and board chairman roles, increasing shareholders’ proxy access, supporting majority (as opposed to plurality) voting for directors, giving input on management compensation, and the like.
While all of these efforts are important, currently there appears to be a relative absence of initiatives aimed squarely at the open culture model advanced here, which seeks to mate the burgeoning field of followership with sound risk management in the form of a genuinely open corporate culture."
The corporate governance lobby has focused on financial and tick box accountability thus far, argue some commentators, and in some cases made things worse, by not focusing on wider issues of culture and how companies operate day to day.
This may not have been intentional, goes the arguement, but shareholder accountability has been interpreted as maximising returns, rather than running a better company.
Lynn Stout, a professor at Cornell, warns of a "shareholder dictatorship" should shareowners hold too much power over company decision making.
Maximising shareholder accountability has led to stocks becoming the "playthings of hedge funds, warping corporate motivation and eroding stock market returns", according to this NY Times piece on her new paper.
The article, which you should read, goes on to say that:
"She calls for a return to “managerialism,” where executives and directors run companies without being preoccupied with shareholder value. Companies would be freed up to think about their customers and their employees and even to start acting more socially responsible."
I can see both sides here: A focus on Shareholder value (maximisation of which is not actually the legal duty of a company in the US, according to Stout and others) has clearly gone too far in terms of the power it has given short termists. That has affected how employees are engaged and feel engaged, in company culture.
Likewise, a focus on purely 'managerial capitalism' where top managers run the company as they see fit, without pressure from corporate governance and investor concerns, is not ideal either. Look at Japan's scandals.
The answer is somewhere in the middle. A balance. But large companies, particularly in finance, don't do balance very well. A balanced approach may lose out in the short term to more agressive competitors, and then you get eaten up as a result.
The only solution to all this is true leadership, leadership that has humility, that can listen, and that sticks around for a long time to learn lessons and implement them.
Getting the longevity right all depends on being able to listen and stay humble, without losing touch with reality, and not sticking around too long, say more than eight or ten years.
A tough balance to get right, but among the leading companies who maximise value for stakeholders (including shareholders) and society that seems to be one of the keys.
The debate will go on. I can't pretend to know the solutions.
But Barclays next CEO would do well to listen hard to advice on how to really engage colleagues, and to get them to speak up when they feel uncomfortable.
The example of Severn Trent provides some useful practical tips on how to do this. Further examples, such as from Admiral insurance, are here.