Finance has to be trusted
6/25/2014 12:47 PM
By Dan Sweeney
Director, Institute for Enterprise Ethics
Mr. Mark Carney, the Governor of the Bank of England made this statement in a speech before the Inclusive Capitalism Conference in London on May 27, 2014. More completely, he said: “For markets to sustain their legitimacy, they need not only to be effective but also to be fair. And nowhere is that more acute than in financial markets.” (To view the speech click here: Carney
. Pay particular attention to the timeframe 6:15 to 10:30).
Yet, according to the Edelman Trust Barometer (Edelman), the Financial Services Industry is the least trusted of the 15 industry sectors surveyed. With 50 percent of the “informed public” indicating a positive level of trust, the same level as in 2013, the Financial Services Industry compares very poorly to the Technology (79 %), Consumer Electronic Manufacturing (75 %) and Automotive (70 %) industries.
Clearly the global financial industry, as well as the entire global economic system that relies on legitimate financial markets has a challenge ahead. How can they establish, or hopefully reestablish, the necessary level of trust among the public they are supposed to serve starting from such a deficit?
Mr. Carney observed that the unchecked financial markets of the 1990’s and 2000’s devoured much of not only the financial capital but also the social capital necessary for the long term dynamism (and trust) of capitalism itself. He went on to observe that if the industry is to rebuild trust in the capital markets, they must rebuild the social capital that underlies that trust.
Mr. Carney defines social capital as “the links, shared values, and beliefs in a society which encourage individuals not only to take responsibility for themselves and their families but also to trust each other and work collaboratively to support each other.” Social capital might also be described as the common set of moral standards, ethical norms and behavioral vales shared among members of a society. The quality of such social capital depends on the ability of society and its members to create and express a shared sense of their society, a shared sense of belonging to that society and a shared sense of responsibility to each other as members of the society.
In Mr. Carney’s words of advice to the financial services industry, “Individuals and their firms must have a sense of their responsibilities to the broader system.” And, “Individuals must challenge themselves to the standards they must uphold.” And, I might add, the leaders of organizations must challenge themselves and their organizations to live up to those standards.
Finally, Mr. Carney admonished us that the task of rebuilding social capital “isn’t an abstract issue, it’s not a naïve aspiration. But we need to recognize there is a tension between pure free market capitalism which recognizes the primacy of the individual at the expense of the system and social capital which requires from individuals a broader sense of the system.”
In my view, and I believe in the views expressed by Mr. Carney, the job of reinvesting in the social capital required to restore the public’s trust in our economic institutions lies squarely on the board tables and in the executive suites of the companies that operate the capital markets and require the public’s trust. These individuals in such significant leadership positions must stand up to this job with seriousness, diligence and a concern for what Mr. Carney calls “the broader system” rather than merely attending to the parochial interests of their businesses. Because of the scale and impact of their businesses on the world around them, they have this responsibility and they owe it to the rest of the world to embrace that obligation.