Joseph F.X Zahra's blog on Newsbook.
In this second of a series of three contributions on the conclusions of a consultation meeting held in Malta at the end of January by the Dublin Group on Finance and the Common Good, focus is on financial institutions self-responsibility which seems to be questioned by regulators. The summary which follows has not been written by me but it gives the conclusions of the second part of the consultation.
Some large financial institutions are showing the way by committing publicly to responsible finance and stewardship. They organize intensive communication from the top about corporate ethics, as well as mechanisms allowing employees to report on inappropriate conduct of peers or managers. Employees are asked to explicitly adhere to the corporate Code of Conduct, translated in the different languages, in spite of strong linguistic and cultural differences. They also organize specially designed training programs on conduct risk management. It is essential that these cases of best ethical commitment are duly circulated in the business world.
Many institutions are also developing philanthropic programs geared at consumer financial education, non-profit and community led innovation, and support for the most financially excluded. A question is raised in this respect: are the social goals set for these programs best served by the corporations themselves, or by independently managed organisations? There may be a point for economies of scale and independent supervision in larger, professional solidarity organisations. A dialogue between corporations and charities should be developed in this context, where both can learn from each other.
Philanthropy should not prevent the ethical questioning from reaching the mainstream operation itself: some banks have started to assess the economic value of products from the point of view of customers and systemic risk, thus addressing one of the traditional Catholic Social Teaching demands, that every business decision has an ethical dimension. For some products, it is feared that excessive complexity may impede such examination. Also, some financial institutions are introducing products that respond to the needs of the undeserved, unbanked and youth entering the mainstream, often informed by the work of non-profit and community organisations. Thus a pro-active attitude is possible where inclusive finance becomes a business policy, not just a philanthropic plus.
As on other points, opinions on ethical reconstruction differ: for some the changes in corporate culture are more difficult, especially when recent management trends develop a mercenary soldiers’ attitude in the ranks of business organisations. The high number of recent cases of financial misconduct and consequent sanctions show persistent ignorance of the economics of ethics: short term investment perspective with no ethics ends in shareholders’ suffering. Ethical reconstruction also needs to be supported by education: there is a permanent need for reform in economic and financial teaching. Ethical literacy needs to be part of economic and business administration studies in an integrated way so as to make economic teaching closer to real world problems.
The re-regulation trend has developed the “ticking boxes” approach of ethics, which is the opposite from a true ethical construction. The ethical culture of an organisation must start from below, but example of accountability and social impact criteria must be given at the top, and it is urgent that contents issues, as opposed to formal matters, return to the boards. Management selection criteria need to include the capacity of ethical discernment. In financial matters, Churches are expected to be role models especially on matters of transparency and socially mindedness.