Building an international league for ethical leaders
by Alex Varley-Winter, TTF’s Head of Media Relations & Investigative Reporting
The overwhelming need for change in financial services is not discussed as often as it ought to be, so let’s start with a brief recap:
- U.S.-based analysts at Violation Tracker have found that since the year 2000, the financial services industry in the United States has paid out $325,206,110,617 in fines for violations. Their database reveals what appears to be a high degree of recidivism in the industry. Sometimes, corporations are caught breaking the law, pay what might appear to be astronomical fines, but later go on to repeat the same offenses. What’s going wrong?
- This year, in addition to a global pandemic, wildfires have raged and climate breakdown is rightly high on governments’ agenda. Yet big banks’ support for the fossil fuel industry was revealed by a coalition of environmental NGOs to have increased this year, and every year since the Paris Agreement of December 2015, with $2.7 trillion in investment in fossil fuels from some of the world’s biggest banks since 2016.
A growing mismatch between profit, value and indeed survival is globally evident. Despite this, it can still be lonely at the top for financial services leaders who want to effect change for the better.
Transparency Task Force is publishing a series of video interviews with ethical financial services leaders – thankfully, a growing group of influential people. I’m featuring a couple of them here.
We are also creating an international league for ethical business leaders in the financial services space. I hope that the discussions below give a closer idea of what is driving that project.
Jason Hsu on the need for courage and realism
Jason Hsu is CIO of a global investment management group and spoke at a Symposium we ran last week. He explained that he has been creating a ‘wealth experiment’ in London around purposeful leadership. Why?
“Let me share a story with you”, he said, “I once hired a senior executive who was mentoring one of our younger folks.” He watched the pair discussing ‘the fact that bankers are paid … half a million to start, probably well over a million if you do well. And teachers and engineers and others are paid fractions of that.’
The senior executive then surprised Hsu when he then told the mentee his interpretation of that fact: “‘we need more bankers, they create more value for society’.”
“That was insanely alarming to me. I thought to myself – ‘at what point did we lose the ability to have some common sense and look at the prices that the market reveals and say “that’s just wrong”? When did we lose sight, between price and value?’ Value is what we create, price is what we extract.”
If you are paid a ‘princely sum’ for doing ‘almost nothing’, Hsu added, why would you not consider the possibility that “the market isn’t working, there’s a bubble.”
Sleeping giants & courageous investors
Hsu reflects: “For a lot of people leadership is about the power, the control to get things done, and I think for a group of us here it’s about a lot more.
“The people at the very top set the tone for an organisation. Why is that important? These days whenever we see a major blow-up, inevitably you find the leader at the very top – different situations, different problems. Almost always they repeat the same – ‘I didn’t know.’
… “You can’t wake up someone who’s pretending to sleep … If you don’t want to know, no mounting knowledge at your disposal can change the ‘not wanting to know’. … How do we get people to want to know?”
“So we have to start with the ‘why’. Why does our industry exist, what do we do? Can we start with people who care”.
“A lot of people today are involved in E.S.G. investing. The way I think about E.S.G. investing is that we need courageous investors. Because without courageous investors backing courageous executives, you can’t answer the question ‘are we willing to grow slower’?”
You can see a full video interview between Transparency Task Force’s Andy Agathangelou, the Centre For Inspired Leadership’s Deborah Henderson, and Jason Hsu here.
Deborah Henderson on how fear does not work in finance
“What are the circumstances going on in the world today that might help us to engage in how a shift in financial services might happen?”
The question is posed by Deborah Henderson, Director of the Centre for Inspired Leadership. She has been conducting TTF’s series of interviews with ethical financial services leaders, towards our goal of growing an international network of support for their work.
Henderson has sensed for decades that change was needed but interestingly, she comes at this from the perspective of guarding the wellbeing of people working within the sector, as well as acting for society as a whole.
Core to that, she has looked at the impact of fear in driving behaviour. At a Symposium we ran last week she recalled one feature of her career in investment banking: “Back in the eighties and nineties, I was told as I was hiring people, ‘Just remember Debbie, we hire insecure over-achievers. And we make sure we keep them that way.'”
“If that’s still part of the sector — and this was investment banking — then the method of the hiring is to hire people who are hungry for those incentives, and you perpetuate more of the same. Focus on fear-driven values is going to give us exactly that.” – more fear.
One of the many problems with fear, is the way in which it stifles creativity. Henderson explains: “The profile I saw time, and time, and time again for groups in financial services … is either on the fight, or the flight, or the fold, of modalities, and very little or not as much on their creative competencies. … This actually delivers lower performance. Our money system can sometimes have people be blind to this.”
The behaviour she then saw emerging in those institutions was “autocratic, arrogant, critical, distant.”
If you would like to be involved in ours and Henderson’s project, to support ethical leadership, please get in touch.
Press Timeline of relevant articles:
16 Nov 2020 – Bank of England ‘failing’ on climate change reform by Philip Aldrick for the Times
16 Nov 2020 – Fed moves closer to joining global peers in climate-change fight by Ann Saphir for Reuters
09 Nov 2020 – Ombudsman inundated with complaints about loans by Katherine Griffiths for the Times
09 Nov 2020 – Spike in personal pension cases at ombudsman by Rachel Mortimer for FT Adviser
09 Nov 2020 – Regulator: Climate risk ‘looms even larger’ than pandemic by Avery Ellfeldt for ClimateWire (U.S.)
08 Nov 2020 – How financial services watchdog has reacted to UK consumer worries in Covid by Hilary Osborne for Guardian
08 Nov 2020 – Five predictions for banking regulation in a Biden presidency by Jon Hill for Law 360
05 Nov 2020 – Martin Lewis warns of ‘epidemic of scams’ after ICU nurse loses £8,000 by Scott Edwards for Wales Online
05 Nov 2020 –FCA bans adviser trio jailed for sex offences by Rachel Mortimer for FT Adviser
03 Nov 2020 – ‘We haven’t received a penny’: Business interruption insurance row intensifies as owners fear payout delays, by Elizabeth Anderson for iNews
03 Nov 2020 – Aviva’s shares fiasco highlights weakness of the city watchdog by Patrick Hosking for the Times
02 Nov 2020 – Banks have done little to help the country through the pandemic, so why is the government rewarding them? by Simon Youel for the Independent
29 Oct 2020 – Calls to sack Malta financial regulator CEO by Cristian Angeloni for International Adviser
27 Oct 2020 – U.S. group urges Biden to use financial regulation to control climate change by Valerie Volcovici for Reuters
27 Oct 2020 – ‘Impact startups’ continue to raise funding during the pandemic despite difficulties faced by the wider tech startup sector by Sebastian Klovig Skelton for Computer Weekly
26 Oct 2020 – Why there must be thorough probe of claims made by Bank Signature Forgery Campaign – Greg Wright for the Yorkshire Post
26 Oct 2020 – Critics demand action over ‘flawed’ British Banking Resolution Service by James Hurley for the Times
24 Oct 2020 – Banks look to debt collectors to recover bounce back loans by Nicholas Megaw, Stephen Morris and Daniel Thomas for the FT
23 Oct 2020 – Bank Signature Forgery (film) by Nicholas Wilson for Corruption UK
22 Oct 2020 – UK fraud agency suffers string of senior departures by Kate Beioley for the FT
22 Oct 2020 – HSBC froze £1.5bn of customers’ cash in ‘dormant accounts’ – report by Kalyeena Makortoff & Juliette Garside for the Guardian
22 Oct 2020 – Work harder to find fraud, watchdog tells auditors by James Hurley for the Times
17 Oct 2020 – MPs pursue claims bank signatures were faked on court papers by Rupert Jones for the Guardian
16 Oct 2020 – We need universal digital ad transparency now by Laura Edelson, Erika Franklin Fowler and Jason Chuang for TechCrunch
15 Oct 2020 – Rising COVID-19 Rates Send NatWest Misselling Trial To Video by Bonnie Eslinger for Law 360
15 Oct 2020 – MPs Push Agencies to Act on Forged Signature Claims by Law360
13 Oct 2020 – Mark Carney says banks should link executive pay to Paris climate goals by Kalyeena Makortoff for the Guardian
12 Oct 2020 ‘It is time to reboot the competition regime for the modern, digital age’ by David Wighton, The Times
12 Oct 2020 – Gina Miller blasts FCA complaints scheme changes ‘unfair, immoral and illegal’ by Cristian Angeloni for Portfolio Adviser
12 Oct 2020 – MPs call for input on Pension Schemes Bill by James Phillips for Professional Pensions
10 Oct 2020 – Give pension trustees power to fight scammers, say MPs by Kenza Bryan for the Times
08 Oct 2020 – Freedom to transfer pensions should be stripped where scams are suspected, industry experts urge by Jessica Beard for the Telegraph
08 Oct 2020 – Planned pensions shake-up passes first Commons hurdle by Law 360
08 Oct 2020 – WPC chairman says transfer rules ‘must be changed’ by Amy Austin for FT Adviser
07 Oct 2020 – Tech giants share blame for pension scams, MPs told by Law 360
06 Oct 2020 – FCA opens 85 cases over pension scam concerns by Amy Austin for FT Adviser
03 Oct 2020 – Record number of savers fall victim to investment fraud as scam adverts stay on Google by Andrew Ellson for The Times
02 Oct 2020 – A New Theory of Soil by Alex Varley-Winter for SustainAct
11 Sep 2020 – The Hut Group facing fresh questions over governance after it reveals one of country’s best-known private equity barons to oversee pay policy by Lucy White for the Daily Mail
10 Sep 2020 London Capital and Finance investors relieved after court ruling opens route to compensation claims by Ben Chapman for the Independent
08 Sep 2020 – Change in law needed to stop scams, says Timms, by Amy Austin for FT Adviser
05 Sep 2020 Crime Agency under fire over bank signature forgery by Andy Verity for BBC
24 Aug 2020 – Financial Conduct Authority rushes to minimise compensation for its failings by James Hurley for The Times
04 Aug 2020 – Have your say: Will the WPC’s inquiry into the impact of pension freedoms be too overshadowed by Covid-19 impacts? by Professional Pensions
03 Aug 2020 – ‘“I’m 39, have lost my job and am in debt – can I unlock my £18k pension?” … DON’T do it!’‘ by Steve Webb for This is Money
01 Aug 2020 – ‘I lost £2.3m after I was conned into transferring my pension’ by Jessica Beard for the Telegraph
31 Jul 2020 ‘Common sense’ prevails as pension freedom withdrawals fall 17% — But drop is expected to be ‘a short-term blip’ by Robbie Lawther for International Adviser
31 Jul 2020 – HMRC figures show plunging pension freedom withdrawals by Hope William-Smith for Professional Adviser
28 Jul 2020 – MPs launch inquiry into pension scams by Tom Kelly for Daily Mail ; UK Pension Scams Under Scrutiny After 2015 Relaxation in Rules by Reuters & MPs launch wide-ranging pension scams probe by Justin Cash for MoneyMarketing
24 Jul 2020 – US business groups seek steps to stamp out online fraud by Leonie Barrie for Just Style
21 Jul 2020 Londongrad Calling: Is Europe’s Laundromat the ‘New Normal’? by Mark Conrad
17 Jul 2020 – Year ‘dominated’ by FCA shortcomings as 205 complaints made, by Rachel Mortimer for FT Adviser
29 Jun 2020 – MPs Pushed to Launch Pension Scam Inquiry by Amy Austin for FT Adviser & Lawmakers Urged To Open Inquiry Into Pension Scams by Martin Croucher for Law 360
14 May 2020 – Under Rising Pressure on Climate, JP Morgan Rejects Shareholders’ Calls to Disclose Carbon Footprint by Alex Varley-WInter for DeSmog
11 May 2020 – FCA urged to build public trust in independent reviews by Rachel Mortimer for FT Adviser
30 Apr 2020 – FCA was warned three years ago about mini-bond firm Blackmore Bond, which collapsed with £45m of savers’ money by Ben Chapman for the Independent
15 Apr 2020 – Met police lose two thirds of finance officers as fraud soars by Ben Ellery for the Times
25 Mar 2020 – Care Home Wants NatWest Docs in Misselling Fight by Law360
20 Mar 2020 – Connaught review delayed as Covid-19 concerns loom by Rachel Mortimer in FT Adviser
07 Jan 2020 – It’s time to keep your pensions promise, Boris! The PM pledged to help these victims of a huge scam FOUR years ago – and they’re still waiting by Tom Kelly for the Daily Mail.
29 Dec 2019 – ‘Lambs to the slaughter – tens of thousands of savers have lost up to £10billion in rogue pensions schemes sanctioned by the government… and now the taxman is threatening VICTIMS with fines’, by Tom Kelly for the Daily Mail
15 Aug 2019 – Victims hit by Connaught’s collapse blast City watchdog for ‘whitewashing’ independent review by Lucy White for Daily Mail
05 Jul 2019 Government-owned bank ‘forging signatures’ in repossession cases by Andy Verity for BBC
18 Jun 2019 – “I came home to find my house had been stolen!” by Angela Ellis-Jones for the Daily Mail
20 Jun 2019 – FCA orders review of its handling of Connaught collapse by Rachel Mortimer for FT Adviser
29 Mar 2019 – MPs call for inquiry into alleged forgery of signatures by Andy Verity for BBC
15 Feb 2017 – RBS accused of fraud & forgery by customers and ex-employee by Andrew Hosken for The World Tonight BBC Radio 4
23 Sep 2016 – Which? makes scams super-complaint by Adam French for Which?