One of the many very interesting points made at our New Year reception in January by Dr Simon Longstaff, executive director of the Ethics Centre, was when he commented on the behaviour of executives in financial services.
He said that it is not an industry populated by monsters. It is not full of wicked individuals thinking ‘How can I do something terrible today?’.
Simon argued that these are invariably good people led by institutional arrangements to do bad things, adding that it was a problem that goes beyond banking and finance and can be seen in business, religion, sport and politics.
Our own relationships with executives in financial institutions bears out the fact that there are mostly good people working in financial services.
We have never been asked to help cover up misdemeanours and have found the executives we deal with to be passionate about the services and products they offer and the benefits they bring.
With the release of the final report of the Hayne Royal Commission, it is a point worth remembering. And it is because of this basic truth that financial services will continue to provide valuable services to their clients.
As Simon also said, the banking and finance industry faces a moment of truth with the Hayne Report and must ask itself once again “For what purpose do we exist? What is the good we do in society? How do we define our values and principles and how do we live with them?”.
Right now, there is a sense of disappointment, scepticism and ultimately cynicism abroad in the Australian public about financial institutions, so that people really don’t know whether to trust their own experience in dealing with them.
This means that financial services organisations must do at least three things.
They must change the way they operate in the ways outlined by Hayne, change perceptions about their way of doing business, and be seen to adopt ethical standards.
As Simon said, people want an organisation to say who they are and what they stand for, and clients want their own experience to be proof of that.
Reputation cannot be fixed by being better than competitors at such things as service or product design, and getting all the nuts and bolts right.
More than that is required which, as Simon said, gets back to principled behaviour. In other words, a more ethical approach.
It’s when the industry failed to see this, and consequently cut corners because technically it’s allowed to, it ended up in the position it now finds itself.
However, Simon warned that organisations can’t adopt ethics simply to help the bottom line.
“If you do it for the dividend, you won’t get the dividend. It’s not a Pollyanna-world where every ethical decision is met with instant rewards. It’s a case of being ethical for its own sake.”