By Vince Siciliano
UBS. JPMorgan Chase. Wells Fargo. Barclays. And now, HSBC. Since the U.S. mortgage meltdown, “big banks," titans of global business, have continually been caught in ethical failings. Tax avoidance, interest rate manipulation, commodity and currency speculation, and money laundering, among other charges, have all surfaced -- calling into question banks’ ability to act in society’s best interests, not just their own or their clients’. Are we to assume that all banks are bereft in acting morally?
Pundits speculate whether banking culture is to blame – big banks today seem defined by their speculative ventures, self-congratulatory cleverness, loophole exploitation and profit maximization. With big bailouts as rewards for ethical missteps, it is a win-some-lose-none environment that has emboldened bankers to take increasing risks with little punishment or accountability. It is a system of inherent incentives that encourages maximum profit without engagement or responsibility in an exterior world.
Would a culture shift turn banking around? If bankers were given better hours, down-time, happy hours, counseling – would they make more ethical decisions?
While happier employees may improve office culture, there will be no impact on the underlying values of the organization. Without a stronger code of values, these efforts are no more than Band-Aids on bullet holes. They collectively fail to address the rotten core of where the greater banking industry has gone. So long as banks are solely focused on short-term interests and are rooted in maximizing profit, there is no intrinsic motivation for change.
How then are we to create a better model for companies, organizations and individuals, so they may opt out of a banking system that inherently puts short-term profits ahead of right action? How can they begin to prioritize long-term interests for both shareholders and the common good?
There is a lesser-known model of banking that is based around a different premise. It takes a long-tail view of banking and finance, and includes all stakeholders. This we call values-based banking.
Values-based banks still prioritize capital and seek to maximize returns: The catch is that, to these banks, there are three kinds of capital under management: financial capital, social capital and environmental capital. Their commitment is not just to their shareholders, but to all their stakeholders.
This can become a powerful regulator for ethical action.
As long as there are single-bottom-line banks, singularly focused on short-term profits, shareholder capital and maximizing financial returns, there is no incentive to change culture.
Unlike single bottom-line banking, triple-bottom-line banks align their money with their values. They use their capital to help finance “real economy” businesses selling products and services, not speculative ventures. They adopt transparency principles to give public insight to how their money is being used. They consider the long-term impact of their lending decisions, in projects that support quality of life for all. They create community by forming authentic client relationships with like-minded businesses.
These banks are growing in number, as clients find them to be better, more trusted and morally-aligned partners. Perhaps the largest network of such banks, the Global Alliance for Banking on Values, is an international network of 25 independent banks with assets of nearly $100 billion that is collectively using finance to deliver sustainable prosperity for people, communities and the environment.
GABV banks are able to drive culture from the inside and find financial success as well as a clarified company vision that resonates and builds trust with partners and customers precisely because of their values.
As a society, we pride ourselves on a higher moral compass, motivated by things other than money. We are multi-sided, measuring our wealth in altruistic terms like ethics, family, nature and spirit. But when it comes to money and banking, why do big banks tend to leave these values at the door? Because we have never insisted otherwise.
Banks that have long embraced a profit-over-people mentality should take a lesson from those independents operating from a strong foundation of values. They may realize if their business model reflects a higher standard of values, their culture will follow, and they will better serve their customers, the public and the planet with a higher good.
In the meantime, banking customers around the world should take a better look at where their money spends the night. They should hold banks to a higher standard and demand better, or take their banking elsewhere.
Image credit: Flickr/401(k) 2012
Vince Siciliano is president and CEO of New Resource Bank. He leads New Resource Bank in serving values-driven companies and organizations working to achieve well being for our community and the planet. The bank seeks to transform the banking industry into an agent of positive social, environmental and financial change. Headquartered in San Francisco, the bank is dedicated to advancing sustainability through every aspect of its operations from the loans it makes to its commitment to using deposits for good. As a founding member of the Global Alliance for Banking on Values, New Resource Bank champions a community of values to transform banking and create a better world.Siciliano currently serves on the advisory boards of the American Sustainable Business Council, the Ken Blanchard Center for Faith Walk Leadership, the Sustainable Accounting Standards Board, and the Regeneration Project. He began his banking career in Bank of America’s International Division and has previously served as president or CEO to a number of San Diego financial institutions. Siciliano is a graduate of Stanford University, and he earned a master’s degree in environmental planning from the University of California at Berkeley.