The quality of corporate governance in the financial services industry is highly topical in this post-credit crisis era.
We are living in uncertain economic times, and if companies in the industry want to become more successful in the future, they need to find new ways of doing things, become more appealing to their employees, satisfy their shareholders and investors, maintain customer loyalty, and regain public trust.
One key way to achieve future and long-term success is to drive cultural change. Leadership, a diverse pool of talent, and responsible behaviour and culture at board level will all be essential to the delivery of future success.
Effective leadership and management are the main levers for driving cultural change within organisations. There is evidence to suggest that company directors are keen to shift mind-sets and behaviours.
However, preservation of tried and tested models and traditional values are just as important to some of them. The key here is to keep the models and values that work, while incorporating new ways of doing things and gaining a fresh perspective.
Company boards now have an opportunity to change culture by getting involved in a consultation on voluntary standards, derived from best practice in the industry, which will raise the quality of corporate governance, specifically of boardroom leadership.
This set of voluntary standards is part of a wider programme called Leadership 21st Century, which has been created by the industry, for the industry.
The Financial Skills Partnership has been working with employers, major industry bodies such as the British Bankers Association, the Association of British Insurers, the regulators, the Financial Services Association and the Financial Reporting Council, to compile the industry’s experience of good board leadership into one set of good practice standards.
The aim of this voluntary set of standards is to provide direction and guidance, as well as tools and solutions, to assist firms with improving the effectiveness of their board performance and corporate leadership.
If customers are to regain their confidence in the sector and the products and services it provides, and hence maintain loyalty to the companies with whom they do business, it is crucial that board effectiveness and corporate leadership are improved in all organisations in our sector not just leading edge employers. Essentially, these standards are designed to help companies see clearly what a good standard of application would look like in each area of responsibility.
Modelling
To be lasting, cultural change needs to be modelled by boards and visible at board-level. By modelling these qualities, boards have the opportunity to build more robust and stable organisations, and to ensure that ‘everybody sings from the same hymn sheet’.
Transparency and accountability are tremendously helpful in fostering a culture in which board members and executive are empowered to contribute of their very best. An openness to new ideas is essential to good corporate governance and will bring about a culture in which decisions are based on sound evidence and are made in the best interests of the company, its shareholders, customers and employees.
Our work with employers shows us that boards which embody transparency, accountability and communication, listen to management and are interested in employee engagement in general, will have the best chance of survival in the long-term in the marketplace.
They will be also be able to grow and successfully compete not only in tough times but also when the economy picks up. With the marketplace constantly changing, businesses need to be prepared to move with the times, and dynamism and innovation are essential for success during the changes.
The Leadership 21st Century initiative could not have come at a better time. The industry’s statutory and regulatory landscapes are both about to be significantly changed. The Financial Services Authority will cease to exist on 1st April and will be replaced by the new Prudential Regulation Authority and the Financial Conduct Authority.
The new FCA will have greater powers, and its core focus will be on good conduct and on putting customers at the heart of all business. Additionally, the Banking Reform Bill is due to be on the statute books by 2015, once the recommendations of the Parliamentary Commission on Banking Standards have been taken into account.
The industry has a window of opportunity in which to agree and establish its own leadership standards and potentially avoid external prescription.
The FSP is consulting on its draft standards with the whole sector and is keen to hear from all sizes of company because it is essential that the widest possible spectrum of voices are heard before the standards are given their final shape.
The benefits of participating in the consultation will be manifold. An improved reputation will help attract the best diverse talent, new customers and investors - hence help to ensure stability in the long-term.
You may either give your feedback online, or by joining one of a number of focus groups. Please visit the FSP’s website and take this opportunity to have your say.
Liz Field is chief executive of the Financial Skills Partnership
