Another withdrawal from the Trust Bank

Jul 06 2012 by Bob Selden Print This Article

As the son of a banker, I can remember living in country towns where my father (and the other bankers in town), were highly regarded. They often served on the committees of the local sporting, charity, religious and many other community organisations.

In fact, although there were probably no research surveys in those days, I would suggest that Bankers were held in as high regard as Doctors, Nurses and Pharmacists. In other words those who looked after our finances were as highly regarded as those who looked after our health.

It was not unusual to find an anonymous gift (generally foodstuff of some sort) left on our front doorstep as a likely "Thank you" from a customer who had been helped by my father. Bankers were indeed a trusted profession.

Where have bankers slipped to today in the ranking of most trusted professions?

In a recent Australian study by Readers Digest, the top 10 most respected occupations were:

  1. Paramedics
  2. Firefighters
  3. Rescue volunteers
  4. Nurses
  5. Pilots
  6. Doctors
  7. Pharmacists
  8. Veterinarians
  9. Armed Forces personnel
  10. Farmers

Where did bankers come? 29th, equal with charity collectors and lawyers and just in front of) journalists (oops and behind truck drivers. They were only five places ahead of sex workers! Last on the list of 40, were telemarketers.

A similar study in the US in 2011 had bankers rating just as poorly on the question of honesty and ethics.

What got me thinking about this issue of trust, was the latest debacle by the once highly regarded 322-year old Barclays Bank in the UK (it has assets about the size of the entire British economy!). According to regulators in Britain and the United States, Barclays has manipulated important global interest rates with the knowledge of senior management.

This global interest rate is known as "LIBOR" (London Interbank Offered Rate). It's the average interest rate banks estimate they would be charged if borrowing from other banks. Individual banks submit their figures daily to the British Bankers Association, who then post a filtered average rate.

Many international financial institutions, mortgage lenders and credit card agencies set their own rates relative to (and typically higher than) Libor. The Libor rate is used as a benchmark for interbank interest rates worldwide (The British Bankers Association has some 223 members from 60 countries).

Because Libor is derived from a filtered average of the world's most creditworthy banks' interbank interest rates, one key outcome for individual banks is a tangible demonstration of the extent of their financial health which impacts very favourably on their cost of funds.

It seems that Barclays, even before the onset of the GFC was manipulating the rates it submitted to improve its financial standing, ability to raise funds (at the best rates) and ultimately, improve its bottom line.

And it's not just Barclays. According to the Wall Street Journal, others being investigated are The Royal Bank of Scotland, Bank of America, Citgroup, JPMorgan Chase & Co, UBS and Deutsche Bank.

The Fiasco at Barclays has claimed the scalps of its Chairman, Marcus Agius, CEO Bob Diamond and COO Jerry del Missier. del Messier has been accused of ordering 14 traders in 2008 to submit dishonestly low borrowing rates to make the bank look good.

But it is Diamond who must face the music. There is no "rogue trader" this time to blame. The problem is endemic and comes from the top.

What's led to this financial debacle? And more importantly, what are the lessons for managers and leaders?

Let's start at the top. The CEO sets the tone for the organisation with his or her style and entrenches a culture with their actions.

As reporters Landan Thomas and Mark Scott comment in the New York Times "In every way, Mr. Diamond, who grew up near Boston but eventually became a British citizen, brought American flair to the stodgy world of British banking. Charming, with a gleaming smile, he was a relentless promoter of the Barclays brand, attaching it to golf outings, soccer leagues and even to London's new public bicycle rental system.

But his embrace of the American-style pay and bonus culture became one of his main vulnerabilities.

Mr. Diamond paid his people, from whom he demanded and usually got unstinting loyalty, extremely well — and he was very well rewarded himself."

Since 2005 he has received $182 million and will get a golden parachute of $35 million.

It's been reported that Bob Diamond is said to have believed deeply in the idea that a common culture underpinned a bank's success.

"Culture is difficult to define," he said in a lecture in 2011. "I think it's even more difficult to mandate – but for me the evidence of culture is how people behave when no-one is watching."

He also spoke frequently of his "no jerks" policy — a reference to eliminating any bad apples in his bank. It seems as though in Bob Diamond's case, actions have differed from words.

One measure of trust is that others see that "What we say is what we do". Stephen Covey makes the point in his book The Speed of Trust that trust is often overlooked and certainly underestimated in its power. He calls it "the one thing that changes everything."

For Covey, trust is not a soft-skill nor mythical quality. He demonstrates that trust is a hard-edged, economic driver -- a learnable and measurable skill that makes organisations more profitable, people more promotable, and relationships more energizing.

In fact, it's not just organisations where a relationship between high trust and success exists. In their research Paul Zak and Stephen Knack have found a positive correlation between trust and a country's GDP. "In all cases, the countries with the highest trust levels have the highest per capita incomes and GDPs. Because trust reduces the cost of transactions, high trust societies exhibit better economic performance than low trust societies."

Their research in 2010 found that the top three most trusted countries (in a three-way tie) were Denmark, New Zealand and Singapore. (You can check out your own country's ranking at Speed of Trust).

Managers, who aspire to become leaders therefor, must have trust in the people with whom they work and develop and exhibit a style that stimulates trust in themselves and the organisation.

Much has been written on the subject of developing trust. My own pet suggestions for developing a trusting culture are:

  • Do what you say you will do
  • Be as honest as you possibly can be – surprisingly, we all lie form time to time (see my column Lies, Lies, Lies for some suggestions on how to diminish this human frailty)
  • Disclose – let others know what you are both thinking and feeling about a particular topic or issue
  • Admit when you have made a mistake

I'm sure you may have other ideas. I'd like to hear your suggestions and experiences with trust.

As I re-read this article I kept wondering "what would my father have thought of today's bankers?" Thank goodness he's not around to see their demise.

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About The Author

Bob Selden
Bob Selden

Bob Selden, is an author, management consultant and coach based in New Zealand and working internationally. Much of his time currently is spent working with family businesses. He's the author of the best-selling What To Do When You Become The Boss. His new book, What To Do When Leadership Is Needed, was released in July 2022.