How many specialist compliance staff will keep an organisation ethical?
Or at least stay safely within regulatory boundaries? At HSBC for example, the answer is “twice as many as before.”
The bank has doubled its compliance staff to 4,500, nor is it ploughing a lonely furrow. Other banks and financial institutions too are busily trying to reduce reputational and other forms of risk by hiring armies of compliance specialists.
An extreme example of the search to ensure ethical behaviour is the Co-op bank, currently going through the tortuous process of trying to survive while sticking to its ethical values.
Apart from the normal compliment of compliance staff, the bank’s original owners the Co-op group say they have now embedded its values in a new constitution.
Alongside are a new ethical committee and an independent chairman. Meanwhile the bank’s new major shareholders confirm they want to retain the bank’s ethical values.
They would be slightly mad not to do so. After all, the bank’s USP (unique selling point) is its ethical stance. This has been a major factor in building the brand. Without it, the Co-op bank is just another financial institution with problems.
To the Bank’s CEO Euan Sutherland, retaining the ethical stance must look neatly sorted. But experience shows committees, independent monitors and compliance systems seldom actually deliver ethical behaviour.
What produces ethical behaviour is when employees and the other stakeholders feel fully engaged with the ethical stance and actively want to support it. Here this situation is far less clear.
So far though there has not been a big exit of customers. Many though are saying they will desert the bank because it is largely, if not wholly owned, by predatory hedge funds. Whatever these new owners say about retaining the original ethical stance, they probably have a very different understanding as to what it means to be ethical.
To give Sutherland his due, he has succeeded at setting the ethical tone. As a leader he has stepped forward and declared the importance of the ethical values of the bank. Now his job is to translate the tone into real action, one to convince employees to support the ethical stance.
Research around the world shows employee engagement generally, not just ethical engagement is falling. Yet the puzzle of how to generate highly engaged employees has already been solved.
It is when trust, values and a purpose-driven mission exist to guide leadership, decision-making and behaviour. These essential “enablers” give rise to an inspired group of highly engaged employees.
The rescued Co-op bank has at least a significant purpose driven mission, namely to retain its ethical values. Yet this, along with the CEO setting the tone will still not be enough to ensure genuine ethical engagement.
The Co-op employees will also need to experience the four essential elements of engagement: to feel valued, involved, developed and inspired.
This will be hard to achieve in parallel with plans already announced to close 15 % of the bank’s branches and the management’s prediction of half a decade focusing on major cost savings, stripping out risk and restoring the core business to growth.
With the bank not expected to make any money for its shareholders for possibly several years, the test of the ethical leadership of the CEO and his senior colleagues is only just beginning.