Thunderbirds are go! The world seems to have stepped back from the brink, for now, with an international rescue package designed to unlock the world’s financial markets. The cataclysmic meltdown did not happen as the IMF warned and the markets seem to be responding favourably. But a week is a long time in the financial markets right now.
The hubris and greed of the financial services industry leadership worldwide is disappointing and bewildering. To make matters worse, their failure in the UK was rewarded with £16.8 billion in bonuses according to the Office of National Statistics. The failure of the government authorities to regulate is equally shameful, allowing obscure financial instruments to be traded and credit bubbles to be inflated out of all proportion, which would inevitably burst.
What on earth was going on and did they give no thought to the misery which will ensue? We’re back to hubris and greed, placing responsibility firmly with the leadership for allowing such a culture to take hold.
The word “hubris” is taken from the Greek for insolence. It is a defined as a tragic flaw; fatal arrogance towards the Gods; overreaching; over-confidence. And it is inevitably punished.
So what is the answer? It’s time to emphasise the importance of leadership and culture.
By leadership I am not just referring to the CEO, I mean the whole leadership infrastructure – that includes the Directors and Non-Execs who have onerous responsibilities in the area of corporate governance, senior managers and other influential individuals who may not be called leaders but are looked up to as such.
So far as culture is concerned, I am referring to the behaviours and values of the organisation. A powerful way in which culture can be reinforced is through the reward system. So if bonuses are based around short-term goals such as pumping up the credit bubble, then it’s inevitable that increasingly risky products will be sold and the bubble will ultimately burst.
It’s time for a more responsible leadership which is prepared to build for the future and values longer-term goals – a leadership which has a clear sense of direction and encourages an adaptive culture which balances the needs of employees, customers and shareholders.
Achieving these changes is expensive and the industry’s current addiction to short-termism needs to be overcome before there is a willingness to make this important investment.
Mike West