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Blog : BOARD TALK

We Need To Remember We Have A Real Choice

Posted on February 23, 2014 at 9:15 AM

A lot of what we think of as choices are not - they are simply habit.


By that I mean we don't think about them - or at least, we don't notice ourselves thinking about them until we give ourselves a jolt. In a developed society in particular, the way we work and what we do is also a daily choice - more accurately, a multitude of them.


So I have spent the last week wondering if I am crazy to ask why we can't change the way choices are made by professionals and the institutions they work for, when they appear to have become habits. It seems to have happened under the cloak of 'market forces' when it comes to our banks.


Take banker's pay - much of  the UK media coverage continually repeats the argument that it is essential for it to remain at very high levels. Writing in the Financial Times, Philip Augar, the British author best known for his books on finance, recently looked at the question of Barclay's bonuses and the challenges faced by the bank. 


Here's the link, - if you can't access FT.com, here are a few snippets of what Mr Augar said: " The crux is that investment banking is a global industry and pay rates are set in New York....(Barclays) is up to its neck in investment banking as a result of its acquisition of the rump of the collapsed Lehman Brothers business and the expansion of fixed income, currency and commodities trading under the leadership of Bob Diamond, whom Mr Jenkins replaced. If it wants to stay in the business it has to pay competitively; the alternative is to get out."


He considered the possibility of Barclays remaining in investment banking but paying less, but dismissed it, saying " while Barclays sticks to its big league investment banking strategy, it has little choice but to pay up."


I am not an expert in the world of finance, but I just don't 'get' this argument. It is used time and time again to reinforce a cycle of behaviour without ever looking at the essential core of the business: its people. Would they all exit investment banking in London for New York if they were paid less? Actually, I doubt it. If they would, then they are motivated by the money alone and surely that is an inherent part of the problem.


There is also the other choice Mr Augar mentions - for Barclays, or other banks for that matter, to get out of investment banking altogether. 


Since that piece was written, RBS appears to be moving in that direction. Bloomberg  reported that Ross McEwan, who replaced Stephen Hester as CEO in October, will next week detail his plan to shrink RBS’s investment-banking and overseas units to focus on consumer and commercial banking in Britain.


It followed the FT story saying RBS was "preparing a dramatic retrenchment that would see it become a much smaller UK retail and commercial bank in a move that is expected to slash staff numbers by at least 30,000 in the coming years." The bank, which is 81 per cent owned by the government, is next week expected to announce its withdrawal from many of its riskier investment banking activities alongside a plan to offload much of its international business" said the FT.

 


There is a lot of analysis on that level, but the links are never made with individual or corporate choice. It all sounds far removed from the concerns that irk folk on a daily basis. And so the 'disconnect' grows between a world of corporate power and the average citizen trying to get on.


But, in a world of social media, what is changing is that there is more real interaction between consumers and the banks that are meant to serve them - and as a result we are beginning to hear directly hearing from individuals with power. Here is Ross McEwan's piece in The Guardian on Feb 10 for an indication of some of the thinking behind RBS moves to come.


"Our first priority, however, has to be to put customer banking back in the heart and soul of RBS" he said. 


Euan Sutherland at the Co-operative Bank has also been finding new ways to communicate. " We're listening and then leading. If I was running a plc in the midst of a strategic review I would go to my shareholders and consult. My customers are my shareholders, " he said.


Cynical journalists may dismiss these attempts at direct communication as mere PR, but I think they matter. Because they make it clear that there are everyday choices involved going forward, and there is no pre-written map for the future of UK banking. 


Why can't we make choices about the way our businesses - including banks - are run to reflect our values as a country? Yes, it's an international world of finance, but that should not assume the lowest common denominator prevails. 


I am aware there is still much sniggering about the Dutch banking oath. When I mentioned it to someone, he said "yes, but they are Dutch...' Exactly - a compliment to the Dutch, I say - national identity is still possible to declare in a global marketplace.


In fact, I would argue redefining national identity with a unique stamp on our banking sector is essential to long-term competitive advantage. 


I have been quite nervous about articulating this - but then I read Bill Nighy's piece on bankers being heroes and I felt a little braver. There is simply no point in talking about innovation as the holy grail if we won't even do it in the way we think about things. 





Categories: Behaviour, Pay, Ethics