As my first post here I have decided to discuss the financial services industry, the downfall of its reputation and a discussion on the topic of bank executive remuneration. This is an issue which has received wide coverage in the print, broadcast, online news and the blogosphere. With the High Pay Commission calling for greater transparency in the setting of executive pay and for employees to sit in on remuneration committees. Excessive executive pay is just another reason why some may feel that they are getting robbed by the bank.
The reputation of financial services appears to have been in free fall in the last few years. With various institutions being adversely affected. Some examples of contributors to the free fall include prosecutions for mis-selling of financial products, pressure from the public, shareholder groups, the government and the media over executive pay particularly where executives were rewarded despite making losses. The industry bore the brunt of the blame over the recession in the UK and globally, a lack of transparency and clarity. It is easy for those in the financial services industry to simply argue that this is all merely anti-capitalist sentiment and turn a blind eye while their reputations slowly crumble.
The financial services industry must take more responsibility over the remuneration of executives, by for example not giving bonuses to executives who under performed or expose the institution to dangerously high risk. Disproportionate levels of remuneration for executives benefit no one other than those executives. The justifications for these levels of remuneration tend to be either that the executive performs better as a result and/ or there is a high risk that the executive may leave the institution. I can’t help but wander whether they want executives who who only care about their pay and don’t care about the company, as they are willing to leave if not paid the same or higher remuneration as the previous year.
I suggest that the financial services industry puts an increased focus upon corporate citizenship, CSR and philanthropic activity. This could involve investment in local communities, helping some of those who are not as financially fortunate, but nonetheless industrious. I would also suggest taking measures to educate the public about banking, why it’s done, how it’s done and how it benefits shareholders, customers and the wider society. They must drive the idea that the financial services industry is the oil that drives the engine of growth.
Additionally, banks need to begin rewarding savers. Currently they are putting money in the banks but not actually getting a good return on their investment. The banks are not lending enough to business. This all makes the industry look as though they are simply hoarding its customers money, thus resulting in an unbalanced relationship between the bank and the customer.
Unfortunately there is the possibility that the banking industry may remain to some extent unpopular whatever happens, as they look after the world’s finances. This naturally makes it one of the most scrutinised and criticised industries in the world.
I’ll leave you with a parting thought for now.
“A hundred years from now it will not matter what my bank account was, the sort of house I lived in, or the kind of car I drove…but the world may be different because I was important in the life of a child”
Forest E Witcraft