St Paul's Institute

The Individual in the Firm

by Barbara Ridpath

Posted: 15 Dec 2014

This article is based on remarks made to a conference in Dublin on 24-25 October 2014 organised by the Fondazione Centesimus Annus - Pro Pontifice.

What is a corporation but a collective of individuals, whether these are owners, management or employees? We need always to consider the individual and the collective responsibility that we have when we consider the firm.

Scholars at the University of Chicago convinced the world to believe in perfect markets, where resources are efficiently allocated when we each pursue our own interest. According to this logic, there is no need to seek the welfare of others because the welfare of others is best served if I serve only my own interests. Such behaviour neglects the consequences of our actions on others. This thinking derives from Adam Smith but misses the critical component. Smith presumed that each individual involved in the market exchange brought with him to the transaction all his ethical and moral background. People forget that.

As individuals, we know there is nothing more lonely and meaningless than a life lived only for oneself. Inadvertently we have created a world that poorly serves the human who is meant to dwell in community with others. How does this affect the individual in the financial services industry, who is increasingly being asked to work hours that mean the vast majority of his or her waking life is spent on the job?

That person wants to feel not only valued and respected but also that they are making a contribution. While some are satisfied with 'just a job,' many think in terms of careers and vocations, and define themselves in no small part by what they do. Some belong to professions: doctor, lawyer, or priest, for example. In finance, it might be foreign exchange trader, asset manager, or risk officer.

The ability to define oneself as belonging to a group of professionals is increasingly useful in a world where few are long employed by the same company anymore. There was a clear shift in the 1990s from career bankers, where individuals were scrupulously trained and moved around and up the organisation until retirement, to a hire and fire mentality based on annual results. Training programmes were outsourced or dropped.

It is not clear who broke the bargain first, the employee or the employer, but once that happened the loyalty, the values, the culture and the ethics became much harder to maintain. Staff began to think of themselves as investment bankers, traders or securitisation specialists, finding identity in their sub-profession instead of their employer. They moved up in pay fastest by moving across institutions. Such moves also left their personnel files behind them, with a clean slate in a new shop.

People began to be called headcount or 'FTE' for full-time equivalent, or even human capital, instead of people. To protect the carapace of the manager, we denied the humanity of the employee. In the worst cases, hiring and firing are outsourced. For entry level positions these days most firms outsource the initial screening and interviewing, using management time to see only the top candidates. What does it say about an organisation's commitment to its staff, when it subcontracts its hiring process?

Is it any wonder in this environment that behaviours began to change? Soon, bosses did not want to be told bad news. Chains of intermediation grew so long and complex that few of those trading recognized that the money moving down a wire belonged to a real person somewhere, representing their savings, their children's education, their home, or the funding for their retirement.

Dehumanisation affected customers as well. Customers interact far more frequently with an ATM than a banker these days. When you do speak to 'your' banker, you get a touch tone system that occasionally will give you a human voice 1000 miles away when all electronic interventions fail.

When global organisations have over 100,000 staff, and millions of customers, we will not return to a world of personalised service. So how do we humanize the financial conglomerate?

How do we reintroduce the individual to the corporation?

Where can the individual go for support? How do we encourage staff to ask the tough ethical questions needed to keep a company on the straight and narrow? The individual employee needs nourishment: from community, from family and from faith. Peer networks can help, as can professional networks. A cushion of cash can also help, as you can actually afford to walk away from a job where you are asked to do something you think wrong. Even without such a cushion, some have the courage to do this. In a brilliant short book by Derrick Bell, an American law professor and civil rights professor called Ethical Ambition[1], Bell explains how and when he felt he had to take a stand at the cost of his career, not by whistleblowing, but by walking away.

We also have to change the collective, the corporation.

Even with the strength and support of family, faith and community, it is difficult to come to work every day if what you are being asked to do is incongruent with your own beliefs and ethics. And yet, almost no one in financial services consciously sets out to do evil. People mostly want to be good, and want to be proud of what they do. They want to be proud to tell their partners, their parents, their children and their neighbours what they do for a living.

And yet how can you be fair at home and unfair at work; truthful with friends but not colleagues or customers? It is incongruous, indeed schizophrenic, to ask someone to believe or act in one way at home and another at work. At some stage the collective, that is the corporation and its behaviours, must be considered as well, so that what we are asking of the individual at work is not inconsistent with his beliefs and ethical framework in his life as a whole.

Where to begin? The firm is the obvious unit. You cannot treat customers fairly and not treat employees fairly. You cannot short the supplier and benefit the shareholder in the long term. You cannot treat senior management well and the contract cleaners poorly. The first step is to remember there is a human being at the beginning and end of any and every transaction. It is here that senior staff must model the behaviours they want the rest of the firm to adopt. Such fundamental issues must pervade the company's mission, and be consistent throughout its management structures, its product design, its performance management systems and its customer service.

How to do this in a globalized financial system?

More problematic is the globalization of finance and business. It is difficult enough to talk about values and ethics in the heterodoxy of modern London, yet we need to find a vocabulary in our search for the common good that works for all faiths, and no faith, without losing its value and meaning in the process.

Recently the Christian vocabulary of the common good, equality and stewardship has been borrowed by business. Either the Church has been remarkably successful in providing an alternative narrative or, more cynically, it is possible that business is using the language of the Church cosmetically. Here it matters deeply whether the effort is real or a veneer of reform.

How will we know? The proof will be in changed behaviour: the treatment of employees and customers, the retention of staff, as well as the treatment of outsourcers and their environmental footprint. The individual will recognize change in the financial services community when he or she can bring his or her authentic self to work; where what they are asked to do in the course of making their living not only is in line with the values they maintain in their lives but provides support for those beliefs. They will contribute to the definition and fulfilment of the purpose of the corporation that gives it its license to operate because it fills a social purpose as well as enriching its shareholders.

This subject is gaining momentum; it is our job to ensure that it includes a fundamental integration between the individual within the corporation, and the corporation within the community.

[1] Derrick Bell, Ethical Ambition. Bloomsbury, New York and London, 2002.

About this author

Barbara Ridpath is the Director of St Paul's Institute.

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The opinions expressed in this article are those of the author, and do not necessarily represent the views of St Paul's Institute or St Paul's Cathedral.