The net effect of a generation of regulation is that the City for the most part is now staffed by ethical people, but one can no longer say the same for their organisations – which expect their employees to do unethical things when the need arises.
The financial business used to be based on long-term relationships where trust and fair dealing generated long-term rewards. Now it is based on transactions – firms and clients come together to do a deal, and then part, so perpetrators of bad behaviour suffer less of a penalty.
These thoughts have been prompted by the publication of a new book, Ethics and Finance, by FT columnist John Plender and hedge fund economist Avinash Persaud. Among many well-made points it highlights the fact that the reward and bonus structures in modern business create a positive incentive for executives to cut corners.
Though executives are supposed to be incentivised to deliver results, all the elaborately constructed systems come back in the end to getting the share price up. If it rises then it does not matter much what else the executive has done. If it falls then no amount of good work will save the executive at fault.
This puts the PR industry in the eye of the storm. Many companies seem to hold the view that all manner of disreputable behaviour can be offset by a public display of tree-hugging and vigorous PR to underline what a good corporate citizen the company appears to be. As a tactic it undoubtedly works in quite a lot of cases, but there is often a price to be paid – usually in the form of an uncomfortable TV documentary or some such which picks up on the ethical wavering.
People say the key role of the PR professional is to tell senior management the uncomfortable truths that no one else dare utter – because if ignored these truths will return to harm the business. That is a worthwhile and demanding role. But looking around at the litany of corporate own goals one wonders how often it happens.
Anthony Hilton is City commentator on London’s Evening Standard