How Select should criticisms of banking culture be?

It appears that everyone is running around shouting about the latest financial services scandals (Libor/Euribor, Interest Rate Swaps).  Heads are being demanded on the proverbial platters but that seems to me to miss the underlying issue.

Questioning Bob Diamond (late CEO of Barclays) in front of the Treasury Select Committee, Mark Garnier MP [Conservative, Wyre Forest] highlighted that owing to the culture of Libor Rate Setting within Barclays for years prior to 2007 Rate Setters were not reporting attempts by traders to fix the reported rate (on behalf of the bank).  This depicts a cultural mismatch between attempted criminal behaviour and reporting to senior management or Regulators.

In the USA the Federal Reserve had noted that banks on average were reporting their borrowing costs some 36 basis points below what was being signalled via other measures.  A number of Regulators also noted in various reports at the time of the Financial Crisis in 2008 that there was a mismatch between the reported rates of interest being paid by banks and independent measures - indicating that something was amiss.  However nothing else ensued to ascertain whether something was wrong.  This led Andrew Tyrie MP, the Chairman of the Treasury Select Committee to hint that the Regulators "were asleep at the wheel".

Diamond has acknowledged that the problems (at Barclays and in other Financial Services scandals) have arisen due to the culture in place - but nothing has been said about how that might have been made more robust.

Regulators banks and politicians have missed the fundamental issue that how we allow people to manage culture in large corporations is the seat of this type of problem.  More to the point, there are no natural checks and balances that make it easy for employees (whatever organisation they belong to) to point things up as being adrift from an acceptable standard.  John Mann MP [Labour, Bassetlaw] highlighted that Diamond and his senior team apparently had not even attempted to question the possibility that things might not be OK despite the reports that had been floating around since around 2007.  A teflon response indicated that Diamond and those of his ilk simply don't want to step up and recognise that they have a responsibility to ask questions before things are highlighted as having gone wrong.

The pressure to ask such questions would be more acute if the organisational culture had a clearer set of benchmarks for end-to-end impacts on all stakeholders.  This, in turn, would put pressure on other organisations to behave better.  Transparency is a huge incentive to be seen to be doing things right.  Transparency, however, requires effort to be maintained.  It seems, for the past few years at least, that hasn't been the top priority of those in charge.

Integrity? What integrity?

There has been plenty splashed all over the media in the last weeks about sleaze and lack of integrity in general. Whether that has been the expenses issue in Parliament, the treatment of retired Gurkhas or the contempt for shareholders in setting the remuneration of senior execs at Royal Dutch Shell and elsewhere.

What much of these issues have in common seems to be a lack of willingness on the part of the few to listen to the concerns of the many. Just why this should be so is probably worthy of a treatise on mankind - but I'm going to keep things short. Instead I will simply pose a question. Just how do you change the culture of diverse organisations to take account of their stakeholder interests?

One argument - put forward by Jim Sinegal the CEO of Costco (the cut-price warehouse "club") is to focus solely on what the customer wants. Everything else follows.

So the follow-on question (in true Parliamentary tradition) would be to ask - How on earth have so many senior people in so many places managed to forget who the Customer is?

Greed is not good - no matter how alluring the fictional Gordon Gecko might have appeared to be. Instead the challenges we all face are how to share what we have in ways that benefit us all.

Time for a bit of soul searching at all levels - and let's remember that the behaviours that have received such recent approbation were born out of common attitudes. Step back in your own "world" and look for ways of breaking the cycle.