Marc Le Menestrel
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Can you teach ethics to The Big Bank?

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by Marc Le Menestrel (6/07/2008)

In early 2008 and hence before the public unfolding of the financial crisis, I was invited by a U.S. “Big Bank” to design, write and teach an interactive case-study that I wrote with Julian Rode about strategic ethical decision-making. I was to start with a theoretical session about the role of values and ethics in business. The teaching was part of a three-day Senior Leadership program.

The case contains a diverse range of issues which arise in the age of global financial capitalism: corporate responsibility, values-based consumerism, international regulations, political influence and public opinion (including media). These aspects of the relation between business and society are prominent factors in contemporary business decisions, yet alignment with business values is clearly not easy. This is a taste of the set-up:

“We are in the near future… The financial landscape is deeply shaken by a series of crisis and scandals, financial power continues its mutation and a coalition of international institutions, governments and social actors propose a global mechanism to regulate and tax financial transactions. The explicit political rationale is to contribute to the alleviation of poverty and to help the transition towards sustainability. It turns out that the newly elected U.S. government is favorable to the regulation. Moreover, social activits are in the street to fight for financial justice. The bank’s executive committee convenes and three Senior Executives propose three different strategies to react to the situation:

1) aggressively fight the politics and work on public opinion in order to avoid regulation,

2) wait and see while communicating good intentions,

3) align with the political effort and turn it into an opportunity to meet stakeholders’ expectations and re-invent the Big Bank.

2011 Wall Street protests strikingly resembles the situation describes in this 2008 case

The C.E.O. of the Big Bank has to decide about the strategy but, during the meeting, the Big Bank is the subject of an international grass-root campaign from activists who fight against financial injustice and for increased accessibility of the poor to financial services. The highly sophisticated campaign is lead by a former executive of the Big Bank, laid off officially for ethical reasons but convinced of having been scapegoated. She proposes a credible ultimatum to the C.E.O.: either he cooperates or he will be personally targeted. Media and financial analysts are already asking for the Big Bank’s reaction.”

The Network of Global Corporate Control (from Vitali et al., PLoS ONE, 2011)

So what should the CEO do? In the role of bank executives, participants are asked to prepare a detailed strategy at the operational and communication levels, including an appropriate reaction to the activists’ campaign.

Prima facie, embracing the political effort to fight poverty and promote sustainability by accepting the taxation and regulation is not an obvious profit-winning strategy. On the other hand, fighting against the initiative is raising the ethical issue of disregarding a social effort supported by a large range of stakeholders, not least the democratically elected government. Implementation also raises some ethical issues. The underlying question is the role and responsibility of business in society, and in the present case the role and purpose of a leading financial institution in the shaping of the regulation of international markets.

It is my experience that in practice, senior business leaders continuously face the problem of aligning 1) their own values about what is important and meaningful for them in their life, 2) the values of the company as explicitly stated in its communication but also as ingrained in its culture and implicit ways of doing business, and 3) the values of society as upheld by the multiple stakeholders.

For most business leaders, the dream of their professional life is to be true to their own values while working at their full potential for a company that shares these values and strives to serve society.

When working with them, it strikes me how much analytical reasoning about ethical issues in business is a must to achieve this goal, but one that needs to be complemented with emotional intelligence. For instance, it turned out that two major psychological issues were obstacles to proposing powerful strategies that align values at the individual, company and societal levels:

A Zoom on the network of major actors in the financial sector (Source: Vitali & al., PLoS ONE, 2011)

Firstly, regulation was perceived positively at the personal and global level while it was judged negatively from the point of view of the company. Even when some participants were identifying proactive business strategies that aligned with regulation, the problem was to accept the imposition of such regulation by the government. In a context where “no government intervention” is a pervasive attitude, it seems easier to cooperate with competitors against society than to cooperate with the government at the risk of challenging the position of industry coalitions.

Secondly, activists were perceived negatively even when the substance of their message was analyzed positively from a personal and societal point of view. In particular, the way of putting pressure onto the company was seen as aggressive and aroused negative affects. As a result, most participants ended up proposing strategies that were in line with the activist’ intentions, but refused to cooperate with them. This, however, renders social credibility and trust-building nearly impossible to achieve (or at least much more costly).

The senior executives’ perception of governments and civil society actors is thus a major determinant of the company’s ability to proactively implement ethical strategies.

To me as an academic, writing and teaching this case was a great opportunity. By going to the field and interacting with senior leaders of the banking industry, I experienced once again how much the role of business is changing and how senior executives are concerned about values. Working with such a Big Bank, I became convinced that we will not be able to avoid questioning the role of money in the world and in finance in particular.

The Topology of Global Corporate Control: nearly 40% of the control over the economic value of corporations in the world is held by a group of 147 corporations in the core, which has almost full control over itself. (Source: Vitali et al., PLoS ONE, 2011)

At the individual level, our relation with money is deeply ambiguous and a fascinating theme of personal development. But at the company level too, work on our relation with money is needed: it makes less and less sense to design strategies and take decisions with the sole objective of financial performance. Outside companies, stakeholders expect business to play a role in addressing major societal and environmental challenges. Inside companies, business leaders are willing to find opportunities to express their personal values and become agents of change, thereby creating the business world of which they dream.

Click here to download the full case-study