Work to improve culture in finance firms recognises that, to change behaviour, it is necessary to get to its ‘root cause’. Since culture essentially describes the way an institution ‘is’, including how those within it behave, attention has focused on the need to shape culture to influence behaviour. Regulators and firms have a different but overlapping agenda here. Regulators are principally interested in behaviours that could prejudice regulatory objectives and, more widely, destroy public trust in the finance sector. Firms are more focused on franchise preservation and enhancement (including energising staff) and avoiding regulatory infringements as part of that. However, in each case, the underlying objective is for firms and their staff to behave in a way that takes more account of the needs of others – that is not driven by narrow financial self-interest.
Yet work on the culture of financial firms is nonetheless heavily influenced by assumptions that echo common narratives and economic models that treat finance operators as if they were driven by exactly that – financial self-interest. For example, attempts to motivate firms to address their culture often appeal to controlling ‘misconduct risk’ – the firm’s self-interest in avoiding damage. There is also considerable regulatory emphasis on the need to use financial incentives to generate behaviours consistent with the desired culture.
There is much wisdom in this. However, work among finance regulators also suggests a growing recognition that appeals to self-interest alone are not enough to change culture; that it may be necessary to gear culture change to a broader sense of mission or purpose that engages aspiration. Nonetheless, the relationship between the two themes of private and public interests is rarely addressed. Likewise, industry discussion of culture often uses words like ‘integrity’ and ‘ethics’ (as in corporate codes), which seem to indicate a recognition of the need somehow to draw on wider aspirations to achieve broader valued goals. However, their substance and their relationship with self-interest is rarely unpacked. It is here that the recognition of a social licence for financial markets has so much to offer.
