This essay is being published from the New York Fed by guest writers as part of Reforming Culture and Behavior in the Financial Services Industry: Progress, Challenges, and the Next Generation of Leaders. The views of the authors are their own and are offered by the New York Fed to contribute to discussions on this topic.
Reputational risk has become top of mind for many companies around the world in recent years. Stories of unethical corporate actions and behavior have affected public trust in firms in a range of industries, including pharmaceutical companies, banks, car manufacturers, airlines, internet providers, and software companies.
In financial services specifically, we believe addressing the issue of ethics starts with us — the business schools who educate the next generation of corporate leaders, and the firms who hire and employ them.
While firms are ultimately responsible for the behavior of their employees, business schools and financial services companies are uniquely positioned to effect broad-based change together. Our core focus is ensuring that ethics and integrity are inherently tied to success in the corporate environment. This goes beyond simply demonstrating compliance with policies and regulations.
Business schools must select and teach students who are committed not only to mastering business fundamentals and core capabilities, but also to acting in an ethical manner while making a positive difference in the world — supporting economic activity, creating value and jobs, and doing what is in the long-term best interest of a diverse set of public and private stakeholders.
In turn, financial institutions have an immense opportunity and obligation to hire, develop, and promote talent based not only on financial performance, but also on a demonstrated commitment to ethical decision-making, sound judgment, and integrity.
If we think of culture as the set of shared values that define “how things really get done,” reinforcing public trust in the financial sector requires constant focus on cultural values at the institutional level. Individual firms must ensure their talent management and business processes are aligned with values that truly put their customers and stakeholders first.
Culture at financial services firms matters far beyond Wall Street. Capital markets are critical drivers of global economic activity, and banking and lending activities affect the lives of millions of people around the world, through personal bank accounts, mortgages, retirement plans, credit cards, and so on. Therefore, the opportunity to reinforce strong ethical standards is critical and must not be wasted.
In order to explore how business schools and financial firms might collaborate on cultural change, last year we joined leaders from academia and financial services firms for a series of workshops, hosted by the Federal Reserve Bank of New York. Our initial discussion focused on creating a shared understanding of the industry culture and current practices within schools and firms, all aimed at strengthening a culture of ethics and integrity. These discussions concluded with a shared commitment to collaboration and action going forward.
Most notably, with support from the Federal Reserve Bank of New York, we are establishing a formal vehicle for continued collaboration and communication between leaders in business education and industry. There was general consensus among participants in the 2017 workshops that more communication and direct collaboration between schools and industry will be essential going forward. Our next gathering with business school deans and industry leaders is June 19, and we are looking forward to advancing the conversation.
There is precedent for business schools and industry working together on ethical issues. For example, every spring Michigan Ross brings academics and industry leaders together for the Positive Business Conference, which shares ideas and strategies for improving workplace culture along with the bottom line.
As the upcoming New York Fed conference nears, we find ourselves considering future innovations that might help further realize this cultural shift.
- What if … we commissioned a white paper by organizational or behavioral scientists at multiple schools focused on how banks are strengthening their culture of ethics and integrity?
- What if … companies sponsored on-site talks by researchers who can demonstrate (with data) that positive business practices improve profits?
- What if … a consortium of banks and schools teamed up to develop a series of case studies on ethics in financial services?
Despite the challenges associated with finding solutions to these complex issues, we are optimistic about the future. There are many examples of financial and educational institutions that are focused on ensuring ethics and integrity are at the core of their activities. We can also envision specific, realistic actions that could help further a culture of ethics and integrity in the industry, in collaboration with business schools. We look forward to continuing the conversation at the New York Fed’s conference on June 18 and to a future of substantive change.
This article was originally published by the New York Fed on Medium.
The views expressed in this article are those of the contributing authors and do not necessarily reflect the position of the New York Fed or the Federal Reserve System.