We live in uncertain economic times. We have come through a credit crisis, and we hope we are now emerging from one of the most significant recessions in decades. Which route should we now take, as an industry, to lead us most effectively towards recovery, prosperity and success?
Clearly the industry still has changes to make to ensure that the mistakes made by parts of it are not repeated in future, and this is of the utmost importance if our industry is to be put on a firm footing for success. Customers and the general public may not distinguish sufficiently between highly trustworthy, ethical and efficient firms and those whose standards were lower. Therefore customers must be wooed back and convinced of the reasons why they can once again place their trust in the industry.
Avoiding the issue is simply not an option, and leaving these problems to the regulator, government, or the European Union will serve neither the industry as a whole, nor its individual members. The solutions they are likely to impose will take longer, be more costly and less adapted to companies’ individual circumstances than solutions which companies may readily introduce and implement themselves.
To be real and lasting, organisational change must come from within. To be effective, it must come from the top. The most dynamic and forward-looking members of the industry have already implemented many beneficial changes, but for others, the route may seem insufficiently signposted, or too time-consuming and costly to follow, on top of all the daily pressures of running their businesses.
This is why the Financial Skills Partnership has developed a set of standards as part of its Leadership 21stCentury programme.
The FSP has been working with best practice employers, major industry bodies such as the Association of British Insurers, the British Bankers Association, the Financial Reporting Council and the Financial Services Authority, to distil the industry’s combined wisdom on board effectiveness and board diversity into a set of simple and easy-to-apply standards which everyone in the industry may use as their guide to good practice.
These draft standards do not impose any additional requirements over those already in the FRC’s Corporate Governance Code and the FSA Handbook rules.
They are designed to help firms see clearly what a good standard of application would look like in each area of responsibility. Once the standards have been finalised, the FSP will also develop a simple but robust measurement and reporting system to help companies implement them.
To be effective, change must be envisioned and led by the board which needs to model the values it proclaims in its own behaviour and practice. That way, it has the best chance of taking the company’s senior and middle management, and eventually its entire workforce, with it.
An effective board needs to be competent, informed, critical, dynamic, effective, self-assessing and self–improving. To profit from the entire spectrum of available skills sets, it needs to be open, diverse, inclusive and connective. It will demonstrably practise the accountability and transparency it demands. To encourage optimal contributions from the company’s management and employees, it must also be a safe and supportive space where the Chief Executive, subject specialists, and anyone else who needs to, can share matters of importance to the company with the board without fear of blame or stigmatisation.
These are your standards and we are keen to hear of best practices from across the sector and from all sizes of company,therefore it is essential that your company’s voice is heard before they are given their final shape and go live. Giving your feedback need not take long, and can be done online on our website whose address is below. You can also join one of a number of focus groups led by supporting organisations.
If standards can be raised in the industry as a whole, customers will be better served, employees better motivated, and shareholders and other investors have greater confidence in the integrity, stability and long-term value of individual companies and the industry as a whole.
Liz Field is chief executive of the Financial Skills Partnership
The FSP consultation can be found at http://www.financialskillspartnership.org.uk/skills-resources/Leadership-21C-consultation