Issue 6 / February 2009 Crunch Time for CSR
Post credit crunch, society is calling
louder than ever for financial services
companies to take ethical values right
to the core of how they do business.
Great expectations Learning lessons from history
nullPulling back now [from CSR]
Despite the diplomatic rumpus this caused, Post credit crunch, society is calling louder
should be unthinkable for reasons
this unprecedented action was merely than ever for financial services companies
that go to the heart of the sort of
a reflection of how low financial services to take ethical values right to the core of
had fallen in public esteem. Society has how they do business. This call is nothing
business we all should try to be:
high expectations of those to whom they new – six years ago, the UK’s Financial
one based on unchanging core
entrust their finances, and is offended when Services Authority (FSA) stated: “We do
values, one committed to building
they fall short of expectations. There was an not seek compliance for its own sake.
outcry when a UK newspaper revealed how In any case, mechanical compliance has
lasting relationships – with
banks were creating charitable trusts to done little to prevent problems in the past...
customers, employees, suppliers,
shelter billions of pounds of mortgage The principles [of the FSA] – our high level
and our communities – and one
backed securities from tax payments.
standards – are based on ethical values.
able to take long term decisions in
There was no suggestion that the practice But it is not clear that this ethos is fully
was illegal – but using the name of charities understood, or applied consistently,
what is a febrile short-term
with little intention of ever making charitable by everyone working in the industry”.
payments was widely condemned as
This FSA report – “An ethical framework
for financial services” – was published in
This expectation of ethical behaviour also 2002.
One of those helping to implement
Chairman of Barclays
extends to leaders of the industry. The new it recently explained what happened next. References
chief executive of the collapsed Northern “Howard Davies retired as FSA chairman,
So how do financial services move forward?
Rock had hardly got his feet under the desk and the new Financial Services Skills
As the entire banking system appeared to
before facing criticism for the bank’s rate of Council took over responsibility for ethics.
teeter on the verge of collapse, the
i Tichy, Noel M., et al “Corporate Global Citizenship: Doing Business in the
Public Eye?” Lexington Books, June 1998
mortgage repossessions, running at twice This new body sacked the man who had
immediate focus was quite correctly on
the UK average. Commentators took commissioned [the] paper and went back
fiscal actions: reducing inter-bank lending
ii Porter M.E., and Kramer, M.R. “Strategy and Society - the link between
Competitive Advantage and Corporate Social Responsibility” Harvard
particular exception to the fact he had to concentrating on rule compliance.
rates, rebuilding capital ratios, etc. –
Business review, December 2006.
previously been board director responsible The ethical project was over, the window
technicalities largely incomprehensible to the
iii “Corporate Social Responsibility - It’s No Longer an Option”, Towers Perrin,
for CSR at Barclays, and therefore should of opportunity was closed and five years
majority of the population. However, the
have been more sensitive to these issues.
later the consequences are clear. While there
global financial system ultimately relies on
are many proximate causes of the current
confidence in the economy and trust in the
With rising expectations of ethical behaviour,
financial crisis, the ultimate cause is ethical”.
industry – and this is where ethical renewal l2=1079363670&r.s=sc
preserving the licence to operate for
With hindsight, it is clear that both
and a deepened commitment to CSR are
financial services is not going to get any
v “From risk to opportunity - How global executives view sociopolitical issues”
regulator and regulated had failed to reach
vital. Companies should look for ways to The McKinsey Quarterly, October 2008
easier. One commentator summarised the
the ethical bar that society was expecting.
make CSR part of their core strategy, and
mood of the public as follows: “...it would
vi Porter M.E., and Kramer, M.R., op.cit.
ethical behaviour part of their core values.
appear that too many people working in Despite the failure of the regulatory
Society may not understand how banks
vii “Northern Rock Foundation cuts back”, Charity Finance, November 2007
the banking and related sectors have approach, there are already calls for more
operate, but it does know how it expects
viii Benjamin,A. “Sifting through the ashes”, The Guardian, September 24 2008
forgotten the fact that the rich/poor divide regulation – stronger and some would argue
them to behave.
ix Salman,S. “The pin-striped philanthropists”, The Guardian, November 5 2008
continues to grow; that they bear a primary potentially lethal doses of a medicine that
responsibility for the wellbeing of the UK’s clearly hasn’t worked. The financial services
x Griffiths,I., and Cobain,I.“Revealed: how UK bans exploit charity tax laws”
The Guardian, Wednesday December 5 2007
10 million or more pensioners and 17 industry has to convince society it has a new
million-plus investors; and that the security ethos. Dropping CSR in an attempt to cut
xii Keen,R. “Virtue is a necessity” The Tablet, 8 November 2008
of many millions with mortgages and costs during the downturn would not be xiii “An ethical framework for financial services” Financial Services Authority,
the employment stability of the nation’s helpful here.
workforce are largely dependent on their
xiv Jamison,C. “Changing the Climate: Spiritual steps for Sustainable Living”
prudent and unfailingly honest
- the Operation Noah Inaugural Lecture given at the Church of St Alban the
Martyr, London on November 11th 2008
xv Writing in The Telegraph, November 12 2008
6 / Perspectives on the future Perspectives on the future / 7
| Page 2
| Page 3
| Page 4
| Page 5
| Page 6
| Page 7
| Page 8
| Page 9
| Page 10
| Page 11
| Page 12
| Page 13
| Page 14
| Page 15
| Page 16
| Page 17
| Page 18
| Page 19
| Page 20
| Page 21
| Page 22
| Page 23
| Page 24