On integrity, governance and business development
‘As pernicious as a lack of governance is, a lack of ambition is equally dangerous’. (Jaap Bosman, 2015). ‘In the UK, the Legal Services Act 2007 came into effect in 2011 allowing non-lawyers in professional, management or ownership roles to offer regulated legal services in England and Wales. PwC has, under the Legal Services Act, been granted an alternative business structure (ABS) license in order to provide legal services to clients. Deloitte is on the same path with Deloitte Legal. The Big Four have the clients contacts and, unlike law firms, they do not have an information gap regarding client’s operations, and are armed with operational excellence.’ (JB, p. 39). Macro-economic developments, cybercrime, regulation, technological risks, political interference: the top 5 of the ‘Banking Banana Skins’ in 2015 published by the Centre for the Study of Financial Innovation and PwC. Governance, compliance and integrity are not on the list. Yet reputation damage is a huge liability for the financial sector, even with the risk of bankruptcy, especially on these sensible fields.
‘Lawyers in a law firm work as a consequence of an external stimulus: they act when asked by their client. They wait for an instruction. Working in a law firm is a reactive occupation. How to switch to a more proactive stance. In a law firm there is no Board of Directors that will impose a different way of working. There is no concept of risk appetite for a law firm. If there was, the risk appetite would be zero. Therefore clients do not always receive the kind of advice they want. A client is not looking for zero risk, he is looking for a weighing of risks that answers ‘should I do it or not?’ This disparity between the needs of corporate clients and the risk aversity of law firm advisors seems hard to bridge.’ (JB p. 44).
More in depth
Financial Institutions, Insurance Companies and Law Firms all have three reputations to take care of: their own, that of the sector and that of their clients. The last two decades dark clouds blew over the skies however. This can be dealt with differently.
Solution: our service: Research on the cornerstones of trust, establishing the identity and integrity of the company, research on public opinion, a policy to develop integrity, a program to align the internal and external license to operate on corporate governance and compliance, and a communication program for internal communication and media policy.
Social license The difference between identity and reputation seems simple. The first is what you are, the second what others consider you to be, isn’t it? In practice they are far more intertwined. Apart from illegal activities, for many organizations it’s hard to accept that the world doesn’t see them as they would like to be seen, or stronger still: see themselves. ‘A key for shareholder success is to attain the highest possible price for their stock. A company’s share price determines the wealth of its stockholders.’* A root cause of the current crisis is the ‘overemphasis American corporations have been forced to give in recent years to maximizing shareholder value without regard for the effects of their actions on other stakeholders’.** They, however, do also carry opinions and provide for social license. When stockholder value only comes with a loss of integrity, or other social issues such as the environment, child labour and so on, one needs to address this publicly.
The relative value of values Many organizations dug into the management tool called ‘core values’. That seems a rather superlative word combination. Core should do and value too. Nonetheless it has become a standard word, so we’ll take it from there. Suppose reliability is a core value of the company. The company has to make an internal inventory to investigate what this reliability consists of or how it shows. Punctual deliveries, no loads of ‘terms of delivery’, no unexpected changes of contract: one can understand practically anything under the term ‘reliability’. Once the inventory is done, one has to investigate if the company itself in fact complies with its own core values. A self-reflective exercise that might hurt, since it might turn out the company is not half as reliable as it wishes it was. The reflex is time and again some sort of Code of Conduct, turned into a ten-steps-to plan and ask the employees to learn it by heart. Sometimes a telephone training follows in which one learns to speak with two words. This being accomplished, the core values are being advertised in slogans. When the rest of the world still doesn’t believe the message, than the campaign was not sufficient (or the rest of the world is not clever enough). This needs to be done differently and this is feasible too.
Trust Every organization needs the trust of clients or citizens, shareholders or stakeholders, guest countries, employees and so on. This is step 1: what corner stones is the trust built on. Expertise or empathy, reliability, it can be virtually anything. The financial sector relies on trust. The flagship might be the commercial part, for the public and public opinion functions such as salaries- and savings accounts, the daily money flows and the mortgage are the daily contacts and hence the carriers of reputation. Ever since Ralph Naders Unsafe At Any Speed (1965) consumerism was here to stay. With television then and our internet and social media today, transparency is also here to stay. Step 2 looks into the identity of the company, i.e. if one actually walks the talk and step 3 how to effectuate this. At step 4 research is done on public opinion, that is if society shares the same view. In step 5 the internal and external license need to align and step 6 concerns the policy to get there. A pension fund needs to meet the legal license. It also needs a political license. The social license concerns punctuality, but also the trust of society that a pension funds is the institution that can be trusted with our money until the time comes we need it.
Our service For some banks we were able to support them from step 1 tot step 3; for a couple of pension funds we developed steps 4 to 6. For law firms and auditors its is imperative they know where there clients as well as they themselves stand in the public eye and whether they have a social license. The past twenty years there have been an unfortunate number of firms that did not live to see the day, from Arthur Andersen in 2001 to Dutch Nijhof Group Accountancy & Tax in 2015. Neither their identity nor their reputation could stand the test.
Clients and the Issues Management Institute strive for optimal transparency.
Under circumstances it occurs however, that a company doesn’t want to see its name mentioned on the site. This will of course be respected.
*K.R. Gray, L.A. Frieder, G.W. Clark Jr. Corporate Scandals: the many faces of Greed, St. Paul Minnesota, Paragon House, 2005.
**C. Mayer, Firm Commitment: Why the corporation is failing us and how to restore trust, Oxford: Oxford University Press, 2013.
Clients and Issues Management Institute strive for full transparency.
It might occur that a company does not want to be listed on this website.
This, of course, is respected.