Trust and Culture

Moran (2005) argues, "We audit and we regulate when we cease to trust", and personally I think it's evident that this is the case. After every big scandal or crisis the rules and approaches to auditing and governing change significantly in the hope of preventing similar things from happening. But are we missing a fundamental issue? Why is auditing and regulating not stopping further scandals from occurring?

I can understand the argument as to why we regulate and audit when we loose trust. We do it so that over time we can rebuild that trust we had and be assured that people are acting how we want them to. But it seems that every time we rebuild our trust, we loose it again. So what are we missing? Well to me it seems like we're failing to understand why we're loosing our trust. Something must be causing this recurring cycle of gaining and loosing trust that we find ourselves in, and I believe that something is Culture.

Culture is arguably one of the most important things in an organisation. Communicated in the right manner, a good culture can encourage employers and managers to work together to meet the needs of the business. A bad culture on the other hand can destroy an organisation. But what makes a good and bad culture? Well, that's open to interpretation. From my experiences, a good culture is one in which everyone is encouraged to grow to their full potential. A bad culture on the other hand is one in which you're seen solely as a worker and not as a person.

In the banking industry, it appears to me that managers operate in a culture where you're encouraged to take risky short term decisions in order to maximise short term shareholder wealth, rather than do what is best for the employees and the organisation in the long term. To me this is a bad culture. Yes you need to keep your shareholders happy, I dont dispute that, I just think that risking a lot to do that is the wrong message to promote. If I was a shareholder I'd be more interested in having a stable income for ten years than having a few years with large payments and a few with little to no returns. But that's me.

If I was in a position now where I could make a difference in the banking industry I'd be seriously questioning whether the culture being promoted is the right one. And fundamentally I'd be asking whether banks should be running in the interests of shareholders or stakeholders.

Nothing's going to fix the banking crisis over night, especially not a change in culture. But maybe if someone was to take this into consideration, it might prevent more problems in the future.