Values in the City

Bankers were painted in varying shades of amorality and incompetence after the banking crisis.  The City Values Forum has spent two years trying to re-set and restore standards of integrity among London bankers.

The Forum's conference, on 15 October, publicised their progress. They have plenty to say on what integrity might look like.  With help from the City HR Association, they have produced a 'Gold Standard' for 'Performance linked to values'.

But they have ducked two important issues, raised by Anthony Hilton. The first has to do with implementation.  How do you ensure that the desired values are lived consistently from top to bottom of the organisation?

Andrew Hill in the FT has highlighted the importance of behavioural change programmes, but a vital part of the answer is leadership: as John Griffith-Jones of the FCA commented, "If [tone] comes from  halfway down… it just doesn’t have the same impact”.  It is even worse if the leaders set the tone but don't live by it - what Philippa Foster Back pithily calls the "say-do" gap.  Who has the means or authority to bring top leaders back into line - assuming that their double standards are recognised for what they are?

The second problem has to do with bonuses, a complex and poorly understood subject.  It is easy to announce that incentives will reflect not only success but also how success was achieved. But there is an important information asymmetry.  It is hard for leaders reliably to know how success was actually achieved - whereas it is easy for peers to know the truth.  Thus a high achiever, known by his peers to be cutting corners, may be rewarded by leaders who think he is 'doing the right thing'.  The effect will be as corrosive as leaders' double standards.

This highlights a broader problem of implementation missed by the Forum.  All organisations run on people power, and it is the behaviour of people, collectively and individually, that typically makes and breaks organisations.  However, few if any organisations systematically capture, let alone manage, people risks whether from the leadership or elsewhere.  This is a clearly identified hole in risk management systems.  As Anthony Hilton put it, "The ... issue for boards having set a culture is how to know with confidence that its values really are being lived throughout the organisation. What does success look like and how do they measure it?"

The City Values Forum's latest proposals are blind to this fundamental problem of implementation even though it was drawn to their attention two years ago.  That is a missed opportunity.

Anthony Fitzsimmons
Reputability
London

Anthony Fitzsimmons is Chairman of Reputability LLP and, with the late Derek Atkins, author of “Rethinking Reputational Risk: How to Manage the Risks that can Ruin Your Business, Your Reputation and You”