This article was first published in the September UK edition of Accounting and Business magazine.
Here’s a secret I will share: people who work in financial services are motivated to join the sector by the prospect of earning good money. Shocking, eh? In an employee attitude survey conducted by the Chartered Institute of Personnel and Development, salary was the most commonly identified factor that attracted City workers: followed closely, it should be said, by career opportunities and then challenging and interesting work. Enough employees also mentioned the benefits package and annual bonus to make it noteworthy for the CIPD’s researchers.
The money clearly makes up for other deficiencies; that standard dinner-party question, ‘so what do you do?’ has only one in three City workers proudly proclaiming they work – metaphorically at least – in the Square Mile. For the two-thirds majority, the reason for their social shame is driven by the way that the City culture incentivises inappropriate behaviour and that the pay cheques are still just too big.
The pressure is on the City to drive forward a range of reforms on corporate governance – not only from its own employees but from the public and politicians – but the pace of progress appears to be somewhere between glacial and non-existent.
The MPs on the Business, Innovation & Skills Committee recently voiced fears that the year-old Kay report – which was focused on creating measures to bring long-term thinking in equity markets – was going nowhere. They called for a clear, measurable and achievable target for implementation. But their analysis was disputed by both the government and the Association of British Insurers – whose members control about a fifth of the UK stock market – who sought to reassure. Plans for an Investor Forum to improve shareholder/company dialogue and reforms of the Stewardship Code, as well as improving the alignment between pay and performance, were all well in hand.
We are used to hearing from City bosses, but less so from the voice of the rank and file of financial services workers. Their perceptions of what is happening in their industry suggest that they are with the MPs in thinking that more work is required to rebuild trust and readjust priorities. The CIPD found that fewer than half of respondents rank customers as their organisation’s most important stakeholder, while a third consider shareholders to be their number-one priority.
City workers acknowledge that there are cultural change initiatives under way led by senior executives. However, fewer than a fifth think these initiatives have been effective in leading to real change; the rest suggest that the attempts have been superficial, or only moderately so. That should be counted as good news that some parts of the banking sector are having at least partial success in changing the culture to become more customer-focused and more responsive to the views of society as a whole. In some parts of the City organisational values are strong, and are reinforced through practices such as staff appraisals and performance reviews.
However, it is clear that other parts of the industry are largely operating as they were before the financial crash and the massive government bailouts. Values continue to be ignored, with management failing to bring to book those who flout the stated values and even rewarding them for doing so through promotions and handsome rewards.
It is really difficult to enforce cultural change in an organisation if its leaders neither want it nor see the need to do so. And that is why financial services remains a sector under fire, with critics arguing that it has only just started on a journey of fundamental culture change. Those critics want the City to earn their high rewards by becoming focused on creating long-term value for the customer and society. They will struggle to get their way; for some, being consistently profit-focused and resolutely short term is the only long-term game in town.
Peter Williams, accountant and journalist