Bad banks and worse jokes



I will this evening take home a first draft of my annual lecture on enlightened enterprise, which I am due to give on June 9th. It is a very first draft and I am as close to the finished article as someone who has just torn the cardboard off a particularly hard to assemble IKEA flat pack cupboard: I have the concept, hopefully, the components too, but the assembly is still daunting.

As regular readers* will know, the theme of the lecture is the idea that insights into human cognitive processes create new challenges and opportunities for firms seeking to align economic competitiveness with social purpose.    

Anyway, not having time to write anything original I thought I would offer you an extract from the draft….  

‘ There is a common danger with exhortation about corporate responsibility that it becomes bland; everyone signs up and slaps each other on the back but not much really changes. But the behaviour change agenda does, it seem to me, open up some difficult issues. It requires in many cases some quite deep soul searching and rethinking.    

Take the record of banks and financial advisors. When it comes to issues of borrowing, investing and saving many customers wrestle with precisely those cognitive challenges I mentioned earlier. On the one hand, they are trying to weigh up short term needs and desires with longer term aspirations, on the other hand, the general limitations on our ability to be entirely rational (we tend, for example, to be too optimistic about our own prospects) are exacerbated by powerful information imbalances between companies and customers. Sadly the record shows time and time again that rather than taking their responsibility for dealing with customers in this vulnerable position seriously the financial services sector has seen this vulnerability as an opportunity to exploit.

In just the last fifteen years we have seen pension mis-selling, the continued fleecing of private pension savers with completely unmerited fees which can gobble up more than a third of their savings. We have the irresponsible selling of mortgages and offering of loans which has contributed to huge personal debt and rising numbers with negative equity, the charging of exploitative fees on overdrafts and most recently the mis-selling of payment protection insurance.

In the wake of the credit crunch the financial services industry faces many questions but looking at it from the perspective of citizens the one that stands out is simple; can the sector make money without exploiting people’s vulnerabilities?  Recognising that people find financial decisions challenging, an enlightened business model involves making money from providing wise advice and guidance not selling dodgy products.’

Some people might say this is a bit harsh but I was encouraged to write it when I read John Kay’s column in the FT on Wednesday yesterday (Along with David Aaronovitch, Kay writes columns with which I always agree). He concludes the column, which is on the PPI mis-selling, like this:

‘ Our prosperity depends on a self-enforcing culture of ethical business values, in which traders value their reputation and seek to develop long-term commercial relationships. That is the culture in which banks used to operate: it is time they did so again’

* PS: My regular reader is, of course, my mum. I was told a joke today and from the moment I heard it, I knew it would appeal to her combined interest in talking animals and philosophy. So, as it's Friday, here it is

A motorcyclist is driving down a road when a tiny bird lands just in front of him. He swerves to avoid the bird but just clips it. The motorcyclist stops to pick up the unconscious and wounded bird and takes it home. On the way he buys a bird cage and some bird seed. Painstakingly he cleans up the bird, tries to repair its wing and applies a splint to its tiny leg. Then he lays it gingerly down on the floor of the cage and goes to bed hoping against hope that it will recover.

In the early dawn light the bird regains consciousness, it opens one eye and peering up sees the bars of its cage ‘oh no’ it chirrups ‘I must have killed that poor motorcyclist’

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