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Sustainable Growth vs Business Greed: Bankers - Give back the marshmallows!

10.08.2009


There’s a major problem with greed: it is difficult to kill. Those that are genuinely not greedy are rare. They are respected but they are rare. Those that “have” can afford the moral high ground of disrespect for the greedy. Those that “have not” are righteously angry with the greedy, but are also more often than not readily hypocritical if and when their chance comes. Human nature is simple we look after our own first and others second.


But even understanding this core fact we still can’t believe what we are seeing.
Despite the massive bail out of the banks, huge bonuses are to be paid again. The recent rally in the stock market from the depths of last year is the cause. Clearly these investment bankers have earned their money and their bonuses. After all they have personally guided the development of share prices and market confidence. Their experience, know-how and sheer intelligence have been the drivers of recovery. I don’t think so.


Billions and even trillions of £, $, € etc of bail out have been needed. Governments have pledged tax payers’ money for decades ahead to pay for it. And now with a minor improvement in the stock market we see bonus cultures returning, bonus money that should be being returned to our governments.
I do not buy the argument that bonuses are essential to acquire or keep the best people. These people are in positions already. They are being poached by one bank from another bank. Net gain to the economy is zero at best, but most likely it’s negative. Why? Because all this musical chairs does, is to move talent between rival shareholders, upping the ante each time. This is blind irrational management. It is management without accountability or responsibility. It is heads of banks demanding the “best” talent because its core systems processes and people can t deliver without a “rain maker”. How can this be? Banks have been around for hundreds of years. They have no excuse for not having high quality management in depth.


The most damaging issue however is not even this. It is that they developed a banking system that they themselves did not understand. They developed products they couldn’t value or manage. They allowed highly intelligent specialists in their companies to lead growth, but growth from short term complex trades that reflected a hubristic level of greed and a spectacular disregard for the true value of money as the driver of societal wealth not banker wealth.


To put it in consultancy speak the banks had no regard for their corporate responsibility. They see corporate responsibility as donations to charities and being green. They miss the point. Corporate responsibility is not just about such actions – it starts with an understanding of and a discipline to respect and manage the business with prudence and managed levels of risk. Corporate responsibility is all about understanding the long game, about sustainable managed growth and the context of your company in society. I am not advocating charitable status for banks, and I do not believe in nationalisation. I am however expecting that banks be treated differently reflecting their specific and core role in commerce.
 

In his great book “Emotional Intelligence: Why It Can Matter More Than IQ” Daniel Goleman recounted an experiment with children who were offered either one marshmallow now or if they waited a short while they could have two marshmallows. Those who showed the emotional intelligence of delayed gratification were more likely to succeed. Perhaps the bankers should stop stuffing themselves with marshmallows today and look to the long term. I suspect greed is difficult to kill – the recent return of ludicrous banker bonuses proves that point. Once you have a penchant for marshmallows you get used to them. Even excessive amounts will not make you sick especially if you are a banker.
 

The first step however is to recognise that long term sustainable growth is the only road ahead. And that means bankers have to give back the marshmallows to the governments that bailed them out and learn that delayed gratification will produce long term success. Bankers under control – now there’s a radical thought.
 

Andrew Lester

© Andrew Lester all rights reserved August 2009