Protesters set up the Occupy Wall Street base camp in New York a month ago because the location epitomizes the economic forces that control the U.S. and global economies. As one sign read: “This is not a recession. It’s a robbery.” To many, it feels like just that.
The American financial services industry is in desperate need of reform. Many bankers have behaved as secretive corporate titans serving only their own interests, and insist the devastating consequences are not their fault. They are failing to fulfill their obligations to society – in some cases, even to shareholders – and a growing number of critics view the day-to-day behaviour of the financial services industry as unacceptable. If the industry doesn’t initiate reform from within, it will eventually have more extreme reform imposed from outside.
In 2008, the routine gambles of Wall Street almost brought down global capitalism and yet, so far, nothing fundamentally has changed. Restoring long-term confidence in the financial services industry requires more than individual banks changing their behaviour or even governments intervening with new rules. The industry needs a new modus operandi, where all of the key players (banks, insurers, investment brokers, rating agencies and regulators) adopt the three facets of collaboration: integrity, transparency and embracing the commons.
Integrity: Trust is the expectation that the other party will act with integrity – be honest, considerate and abide by its commitments. To re-establish trust, the financial services industry needs to have integrity as part of its DNA. But the cavalier manner in which many banking executives violated integrity was stunning. For example, they sold subprime mortgages to people who could never make the payments, bundled them into securities and convinced rating agencies to classify them as AAA, and insurance companies to insure them. They then sold these to unsuspecting investors. They violated all the values of integrity. Everyone in the process suffered, and the global economy was sent into a tailspin.
The 2008 meltdown and the euro crises we face today illustrate how interconnected our world has become. Organizations must be much more aware of what’s going on around them. It’s important to know the behaviour of others and the potential impact of the actions of distant third parties. If there’s anything Wall Street should have learned from the mess it created, it was that business cannot succeed in a world that’s failing.
In everything from motivating employees, negotiating with partners, disclosing financial information or explaining the environmental impact of a new factory, companies and other organizations must tell the truth, be considerate of the interests of others, and be willing to be held accountable for delivering against their commitments.
Companies need to act with integrity – not just to secure a healthy business environment but for their own sustainability and competitive advantage. Increasingly, firms that exhibit ethical values and candour have discovered that they can build trust with customers, employees, shareholders and business partners. This makes them more competitive and profitable.
Transparency: One of the reasons companies must have integrity is that they operate in an unprecedented, hyper-transparent world. Customers use the Internet to help evaluate the true worth of products. Employees share formerly secret information about corporate strategy, management and challenges. To collaborate effectively, companies share intimate knowledge with one another. And in a world of instant communications, whistleblowers, inquisitive media and Google, citizens and communities routinely put firms under the microscope. So if corporations are going to be naked – and they really have no choice in the matter – they had better be buff.
