New ESRC research unveiled at Henley Business School reveals Financial Sector wants to change its governance culture
An innovative research project funded by the Economic and Social Research Council (ESRC) today announced its results at the annual Henley Reputation Conference. The 15 month 'Governance Beyond the Boardroom' project found that financial sector workers themselves want a change of governance culture to avoid another credit crunch and return the sector to economic prosperity.
- (1888PressRelease) November 18, 2010 - Based on new theoretical modelling, 21 in-depth interviews with financial sector workers from Chairmen of major banks to traders, and two seminars with leading academics and practitioners, the project's key findings were:
1. The role of the subagent (i.e. an employee outside the boardroom) is vital in understanding why the existing regulatory structure failed to prevent the disasters at Northern Rock, RBS, HBoS, and other banks in the period 2007-9.
2. There are 10 drivers of governance culture - from the business case, to managers' skills, to regulators' tick box mentality, to poor governance training that define a financial organisation's successful governance culture, or not.
3. The financial sector believes there is a direct relationship between strong governance culture and the bottom line - something academic researchers have so far been unable to conclude.
4. Corporate culture is driving force in how banks themselves think corporate governance regulation should be reformed. One Chairman of a Big Four bank said: "I am obsessed by culture, it's more about how than on what the bank focuses that makes the difference."
5. Working with the industry, the project has developed a toolkit approach to help financial sector organisations improve their governance culture. This toolkit approach will be rolled out in early 2011.
The project's Principal Investigator Dr Andrew Tucker said: "Banks' poor governance culture led to the taxpayers' bailout. It is vital that banks' governance culture improves so this doesn't happen again. This project has shown one practical way forward and I hope the toolkit approach is adopted by major financial organisations in the UK and around the world."
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