A number of senior figures at the Financial Conduct Authority have recently given speeches on the subject of culture and governance. The latest of these was Marc Teasdale, the regulator’s Director of Wholesale Supervision – Supervision Investment, Wholesale & Specialists Division, who spoke at The Investment Association’s Culture in Investment Management Forum in September 2020.
Does your firm have a ‘statement of corporate purpose’ or similar? This would be a something that sets out the firm’s core values, and examples can be found on the websites of many firms, large and small, across all business sectors.
Then, if a firm does have a statement of corporate purpose, do the employees know what it is and understand it?
Mr Teasdale described the experiences of a friend who recently visited a seminar at a financial firm, where only half of the attendees were able to identity their own firm’s statement of corporate purpose when presented with a straight choice between the statement in question and the equivalent statement of purpose of a well-known high street retailer. Those failing to identify the correct statement included the senior manager of the firm who was leading the session.
The FCA director then spoke about the regulator’s four ‘drivers of culture’ within a firm, and how all of these have particular relevance to a firm’s senior management:
- Leadership – the ‘tone from the top’ that is set by the management
- People policies – the types of behaviour that are encouraged and discouraged within the firm. This has relevance in areas such as remuneration, progression, promotion, recruitment, diversity and inclusion, speak-up culture and psychological safety. Within a firm, what do ordinary employees feel they need to do to be rewarded?
- Governance – how decisions are made within the firm
- Purpose – how the firm makes its money
Linking back to his opening remarks about statements of corporate purpose, Mr Teasdale said on the last of these four drivers:
“We see a firm’s purpose as being a description of its economic function, and how it makes money. On one level, this is just a description of a firm’s business model. But we also go further and say that in order to understand how a firm’s purpose drives its culture, you need to understand how a company describes, to itself and others, the essential purpose of the firm, its products and its services, and so its reason for existing, and why the world would be worse off without the value it provides. We are also critically concerned with how far we can see this purpose tangibly driving the decisions made at all levels of the firm.
“We recognise … the social value inherent within a business providing financial services and products well, and with a strong sense of the need to demonstrate positive outcomes for the customers it serves and the markets it operates in. In our experience, where a firm is unable to articulate its purpose in this way, we are more likely to see poor outcomes for consumers it serves and the markets it operates in.”
Summarising, he said that while it was important that everyone knew what the firm’s statement of purpose was, and understood it, it must not just become a “slogan”, but must “be seen manifestly in the choices that a firm and its employees make day in, day out, at all levels.”
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