“The restoration of public confidence clearly…. is not something that can be fixed by a few rule-tweaks…. It is a question of culture and morality.”
—Financial Times editorial on the “rotten culture at Barclay’s” revealed by its recent $455 million settlement with US and UK bank regulators of charges the bank manipulated London Interbank Offered Rates (LIBOR).
I recently returned a telephone call from a fellow securities industry CEO to discuss the resignation of former Barclays COO Jerry del Missier in the wake of what has since become known as the “Lie More” scandal.
“Every few weeks,” I said to my colleague, “someone in our industry seems to find a way to take a gun and shoot themselves in the foot.”
“Yes…and sometimes in even more painful places,” he responded.
Since March, when my book Stewardship: Lessons Learned from the Lost Culture of Wall Street was published, I have been talking and writing about how the broken culture of Wall Street contributed to the financial crisis of 2008 and 2009. Across the country, I’ve spoken at events for client and community leader about how that culture has yet to be fixed. I’ve written in the national and local media about how, until it is fixed, we simply will not make progress towards preventing the kind of bad behaviour we keep reading about.
And every week, gun in hand, someone in our industry proves my point.
The financial services industry doesn’t even seem to understand what “culture” is.
Before he resigned in the wake of Barclay’s LIBOR settlement, Barclays’ CEO, Bob Diamond, was reported by the Financial Times to have said in a lecture, “Culture is difficult to define, I think it’s even more difficult to mandate—but for me the evidence of culture is how people behave when no one is watching.”
Really? Is that all culture is?
For me, culture is much more than that. It is a critical driver of responsible long-term business success. If you don’t get culture right, nothing else matters.
Culture is the organizational equivalent of personality. Culture is core values lived out in hundreds or thousands or millions of daily activities and interactions – between management and employees, between employees and their colleagues and between employees and clients. It is to the corporate legal entity what “soul” is to a human being. It is what existed before and what will endure after any given generation of leaders comes and then moves on.
Of course, not everyone agrees that with me. “Corporations have no soul,” wrote one highly agitated reader in response to a blog I posted recently at HBR.org (which deconstructed Mitt Romney’s statement that “Corporations are people”). Perhaps not. But corporations do have cultures. And to say (like the Financial Times did) that in the case of Wall Street, certain financial institutions have “rotten cultures” is to say, in effect, that those institutions have lost their souls.
I personally would never want to work at an organisation that has no soul. That has a broken culture. That treats its clients and customers and employees differently than one would treat fellow human beings in one’s personal life. That values its obligations to the communities in which its clients and customers and employees live and work any less than it values its obligations to its shareholders.
Coming as close as it ever has to throwing its hands up in the air in disgust, the editorial board of the Financial Times said LIBOR manipulation raises “questions about not just the leadership of one bank but that of the whole industry.” The FT continued, “For there to be real change of heart and expectation, it may…be necessary to retire this generation of flawed leaders.” (Which is something that seems to be happening of its own accord.)
The FT is right: the key to the path forward is leadership.
The single most important imperative for leaders of the financial services industry today is to help their institutions recover their souls. To get in touch with the stewardship mission, purpose and responsibilities that should define the role of financial institutions in the global economy. And to revive the client-service culture that should evolve naturally from those stewardship responsibilities.
As CFA Institute President and CEO John Rogers wrote in response to yet another blog I posted, “These times call for a league of like-minded folks to show leadership courage.”