Monday, November 28, 2011

The Banker's past, the Occupy's present, and CSR's future.

Corporate Social Responsibility is on everyone’s lips these days. The looming Occupy Wall Street movement also sparked added interest on CSR in the financial industry. More and more people are pressuring big companies into fair play and demanding that banks change their ways or perish. Historically, those companies and firms (take Ford for example) that have yielded to the external pressures of fairness have yielded profits in the long run and success and sustainable growth from their embrace. Corporations like Pepsi, Coke, and a whole salute of others are amongst the new breed of CSR practitioners joining the movement and shifting their policies and enforcing internal mandates voluntarily to balance social and environmental impacts with their economic incentives. Yet the financial industry seems to lack the motivation to make the transition perhaps still hoping the good days of gold parachutes and government cutting blank checks.

But the banks will have to comply and the tax-payers will not lend their friendly hands for the second time; once bitten, twice the shame. No matter how much bankers would like to believe it’s business as usual, there is no denying that things haven’t been the same since the market crash in 2009. We see this with consistent continuations of bankruptcies and the same old story of greed turn ugly. The recent MF Global insolvency is a reminder that still too many experts are lost wonderers at the top tiers of decision making in the financial industry. With the recent successful OWS bank transfer actions, putting more than one million supporter’s accounts into community banks, signaled the force and desire for banks to be held accountable for their local impacts; no one can deny the forces of the masses, no one will sensibly think this is businesses as usual.

We also have seen bank’s stocks plummeting. Bank of America is at its historical low, even amongst one of the few that promises hopes and rebounds, and even at the talks of rallies and stabilized U.S. economy in the near future compared to the European markets, these banks seem to draw more negative opinions in the bloggersphere than any other sector—making their comeback doubtful and perhaps not significantly profitable.

Banks have become, increasingly, proponents of CSR. Some give extensively to charities, pay their employees generously and contribute to the environment with LEED certified buildings and sustainable operating practices. Hitting the low benchmark on their stock prices, these banks are paying close attention to their corporate reputations; at wake of Occupy Wall Street’s bank transfer movement, they are all the more sensitive to how the public sees their efforts. In addition to reputations and stock prices, their ability to recruit top talents will be at risk. Stanford recently launched a Stop the Brain Drain movement hoping to redirect students away from the unsustainable and short-sighted employers like the Lehman Brothers and Bernie Madoff. When Ford’s “doing well by doing good” attracted business students, it created a mass labor and markets that bumped up the size of our middle class – its embrace of no bail-outs and innovation in the recent years also prove to be a smart move helping its stock prices rebound with a vengeance. I also noticed Pepsi’s recent efforts helping to solve world’s water problems and equity issues help boost its public image around the world and held its stock prices steady while everyone else’s stock tanked just before the Thanksgiving holidays. When corporate powers align themselves with the good, everybody wins; when they align themselves with the bad or the ugly, people get angry and everyone loses.

On a slightly different topic, many have argued that we are losing manufacturing and our economy is tanking because of off-shoring to less regulated places like China. I would have to argue otherwise that it’s not the lack of regulatory environment that has made China successful, but the fact that China has implemented successful policies, step by step, that has made them competitive and successful. China is also paying close attention to CSR and its own financial and energy sector. It has recently placed more aggressive laws and enforcement mechanisms that help the various industries to improve its operations in more sustainable ways. Although its CSR practices are still separated from its rich tradition of Confucian virtue ethics, it’s new embrace with Confucian teaching only marks their attention on the subject and their shift of national policy and focus into CSR.

In light of what is happening in China and given the persistent Occupy Wall Street movement, I’d say that it’s impossible for the banks to ignore CSR as a viable policy in their practice. Fiduciary duties will have to be update to include social impacts and environmental safeguards; political wills should focus on effective and efficient regulation of the banking and financial industry to prevent bubbling and corruption. The financial industry as a whole and the various professionals will need to think about how much they could improve their reputations by actively supporting sensible laws, compromising and productive politicians, to fix income inequities and executive compensations. Doing well by doing the right thing is invariably the next century’s story, it’s time for everyone to write history together, to show true leadership in unity for the human experience. CSR not only is a viable option to equalize income gaps and reduce environmental burdens on all of us, it also gives corporate interests the chance to remake their images and profit models. The banks and the financial institutions stand to benefit from this paradigm shift most since they seem to be below par the most. The only thing we can do now is hope they have seen the power of the people and recognize that OWS is not going away and that “bank transfer days” commits the political wills of the people readily available to the fighters for a free and fair history.

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