NEW YORK: Lucas van Praag, former head of global corporate communications at Goldman Sachs, said banks should avoid the "heads down" approach to restore the financial industry's reputation.
Van Praag, who led communications at the firm for 12 years, cautioned against taking the "easy response" to repairing the banking industry's reputation, which is "keeping our heads down" and increasing CSR efforts.
"CSR is important, but [banks] shouldn't rely on it to repair reputation," van Praag said.
Instead, financial institutions should make "structural, operational, and cultural" changes, he explained. Banks need to focus on making sure they have more than enough capital; dial down their rhetoric; and address the "too big to fail" perception, he advised.
It is also important for banks to demystify what they do for the public, van Praag said.
"Banks need to work hard to explain what they do and why it matters to society," he said.
Additionally, the industry should address its culture by putting clients first and holding individuals accountable, he said.
"Culture is driven from the very top. Banks need to take the initiative to reset the moral compass, and do it often," he said.
Van Praag served as the chief spokesperson at Goldman Sachs during and after the financial crisis of 2008. He said banks were not solely responsible for the crisis, despite the generally accepted view that they were. Misperceptions about the financial industry were rampant in the media at that time, but it was often difficult to counter accusations because of the complexity of the answers, he said.
"We realized we had four core audiences, none of which were mainstream: employees, clients, shareholders, and our 337 regulators. However, the common link among them was that all got most of their information from the media," van Praag said.
With that in mind, Goldman Sachs decided to engage the media because it was a "one-stop shop," van Praag said. The firm adopted an aggressive communications strategy of "refusing, rebutting, and correcting" misinformation, he explained.