How to solve a problem like culture
For Australia’s financial services industry, 2018 was a problematic year.
As revealed in its final report, the Hayne royal commission uncovered numerous counts of misconduct at the hands of the big banks, shedding light on a toxic ‘bonus culture’ that permeated through to executive levels. These findings were undeniably grim, but also unsurprising.
Over the years, the industry has often been at the centre of misconduct allegations, and these have been perpetually blamed on its persistent problem child: culture. How to deal with this problem of culture once and for all? The answer lies in the mindset of future generations, and their changing attitudes around the viability of companies being tied solely to their profitability.
New priorities = new outcomes
In its 2018 Global Millennial Survey, Deloitte discovered that 83% of millennials felt that business success should be measured by more than financial performance. And millennials aren’t alone. Globally, an intergenerational push for companies to engage in socially and ethically conscious business practice is gaining momentum.
In his 2018 letter to CEOs, BlackRock chairman Larry Fink called upon business leaders to “demonstrate the leadership and clarity that will drive not only their own investment returns, but also the prosperity and security of their fellow citizens”.
Putting people before profit
When businesses create an environment in which profits are prioritised, they generate a culture that deprioritises customers, and when profits become the sole objective it’s only a matter of time before customers begin to suffer.
Fundamental to any successful, sustainable business is ensuring that its purpose is clearly defined and that all actions undertaken by the business are aligned to, and not at odds with, that purpose. While we understand that profit is undeniably important to a healthy finance industry, we reject the idea that it can only come from an unethical climate.
This is short sighted and unsustainable and possibly the biggest issue uncovered by the royal commission.
Ethical, sustainable investment
Australians are making it clear that ethical investment is imperative, and are demanding more accountability and transparency from their investments.
How to deal with this problem of culture once and for all? The answer lies in the mindset of future generations, and their changing attitudes
In a 2018 Responsible Investment Benchmark Report, Responsible Investment Association Australasia found that over the past 10 years the average responsibly invested share fund returned 6.3% a year, compared to a 3.8% annual return for the average large-cap Australian share fund.
Get woke, go broke? Apparently not.
Commitment by businesses to measuring and bettering their social impact is becoming increasingly important to consumers; however, it’s important to do this in a transparent way.
It’s imperative that businesses don’t use social impact as a way to o‑ set bad behaviour or, in the case of the big banks, fix some bad PR.
At Pure Finance, our donation model, Pure Community, forms an indivisible part of our service offering and is managed alongside our day-to-day operations. And now, an idea.
In 2018, the major banks reported an after-tax profit of $29.5bn for the full year.
If they were to adopt a 1% ‘profit for purpose’ donation model (Pure Community donates 10% of Pure Finance’s company profit), this would equate to an incredible $295m that could facilitate positive outcomes for communities both in Australia and across the world.
Diversity and equality
One topic that has been left untouched by the royal commission but that is, in our opinion, a crucial element of industry reform is the need to achieve diversity and equality in the financial services sector.
Businesses that are diverse in both gender and culture are proven to deliver better outcomes across the board, and this will play an integral part in bringing about the cultural change we seek in financial services.
A new financial future
Implemented responsibly and ethically, financial services have an immense capacity to be a force for good in people’s lives, at both an individual and community level.
Those of us who work in the industry have an opportunity to write ourselves a new future.
One that will not only seek to better the lives of customers but also be accountable for the wellbeing of the communities and environments in which our businesses reside.
We believe that implementing this ideology, on an industry-wide scale, is the future of finance.
Brendan Dixon is the founder and managing director of Pure Finance, an ethically minded finance company. He is also the founder of Pure Community, a ‘pro t for purpose’ initiative.