Greed, for lack of a better word, is good. Greed is right. Greed works. Greed clarifies, cuts through, and captures, the essence of the evolutionary spirit. Greed, in all of its forms; greed for life, for money, for love, knowledge, has marked the upward surge of mankind and greed, you mark my words, will not only save Teldar Paper, but that other malfunctioning corporation called the U.S.A. ~ Gordon Gecko
It has been three and a half years now since the fall of Lehman Brothers and the beginning of the global financial crisis. All during this time there has been an intense and often public debate (and more recently the demonstrations of the global Occupy movement) about how to prevent another financial meltdown and more bailouts. The big issue worrying the tax paying public and businesses the world over is unless real change is implemented in how banks conduct their business and how they are regulated, the world could easily find itself in the same situation as before; the combination of excessive risk taking and lax regulation leading to another global financial crisis.
While everyone seems to be focusing on regulation as the key strategy for bringing the situation under control, I believe that other avenues should be both understood and explored if a sustainable solution is to be created. One of these important avenues is the corporate culture within banks and large financial institutions. Warren Buffet, one of the more savvy investors of the past three decades made a bold and profound statement in a recent annual letter to the Berkshire Hathaway shareholders:
“Culture, more than rule books, determines how an organization behaves.” – Warren Buffet
In addition, another insightful comment comes from Paul Moore, former head of risk for HBOS, now part of Lloyds TSB.
“There is no doubt that you can have the best governance processes in the world, but if they are carried out in conditions of greed, unethical behaviour and an indisposition to challenge they will fail.” – Paul Moore, former head of risk, HBOS
Paul Moore got fired for his comments at the time; a testament to the openness of the previous banking culture to criticism about its internal culture and ways of working.
And just yesterday another condemnation of the culture of greed and self-interest within banking burst upon the news media and immediately went viral. Greg Smith, Goldman Sachs executive director and head of the firm’s United States equity derivatives business in Europe, the Middle East and Africa, abruptly resigned and a copy of his resignation letter was published in the New York Times – Why I am Leaving Goldman Sachs. It’s all about the shift from a former culture of “service to clients” to a culture of excessive greed and profiteering.
We strongly believe that reshaping corporate culture, in conjunction with prudent regulatory changes, can work together to help build a stronger, more responsive and responsible banking industry. One of the challenges in this approach is that the importance and business impact of corporate culture is not well understood. Too many refer to culture as the “soft stuff” with little relevance to the analytical business world of global finance.
To help those in the banking industry, and the regulators, to better understand corporate culture and its value to business performance, we have written an article entitled: Why Banks Should Focus on Culture, Now More Than Ever. This article focus on:
- What is Corporate Culture and Why it Matters to the Bottom Line?
- The Determinants of Corporate Culture.
- Is the Culture of Banking Broken?
- How to Reshape Corporate Culture
As I have been following the “antics” of the big banks and their leadership, I have posted a few observations and comments on my leadership blog about culture and leadership in banking:
- Another Clue that Big Banks are Doomed
- Finally, someone stands up to the Big Banks
- Bankers must be better citizens . . .
- The Courage (?) of Banking Leadership . . .
In each case the culture is a direct reflection of the leaders and illustrates one of the key principles of corporate culture:
“Organisations quickly become shadows of their leaders – that’s the good news and the bad news!”
For those who need a better understanding of how the financial services industry has changed from a highly professional institution of “public service” into a “corporate pirate” (or as they call Goldman Sachs: The Vampire Squid), you should read the informative article by Demetrie Comnas on The Origins of the Banking Crisis.
Culture can change, but it takes leadership!
Tight Lines . . .