Banking works on the principle of short term borrowing and lending

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The banking crisis has led to many questions and concerns regarding the people of the United Kingdom as they feel they are being punished because of the risks taken by the leaders of the financial system. Rebuilding consumer faith in banking and the security of their money deposited would require improving regulations, strengthening and embedding ethical and best practice values in the banking culture. To bring a much needed change in the banking sector, one must consider intervening and advising which helps individuals work and survive in complex situations. Culture change in organisations requires its people to behave, think, and believe differently. Behavioural change does not occur over night but happens over a period of time. Employees are required to change their perceptions, they need to believe in the change and think it is necessary. The reward systems should be satisfactory, and most importantly, employees need to see the behavioural change expected from them being practiced by their seniors, for any kind of cultural change to happen within an organisation. This crisis has made this change difficult, as the banking heads seem to be making large amounts of money as bonuses at success and not losing anything when they fail. The change to be implemented has to go top-down & bottom up but the top employees are earning more than satisfactorily, have skills to make more profits and have no one to model behaviour from, other than peers who have made this the predominant banking culture.

Many external factors affect the behaviour of the banking culture. Factors like society, market, investors, companies, assurance functions etc. Certain behaviours are mandatory with certain factors, like for example; society - legality, sustainability, propriety: market - avoidance of anti-competitive practices, communication with the market: investors - communication with investors…etc. These behaviours need to be addressed and challenged to improve the situation today. Bankers need to understand their role and responsibility within the society, they also need to visualise and understand the consequences of their risk taking behaviours on tax payers. Banking organisations need to realise their responsibility to change their banking culture in order to regain trust, revise their values and belief systems to help uplift the economy. In order to do so, consultancy plays a vital role. Consultants can help organisations bring about change regarding culture, values, leadership …etc.

Occupational consultancy follows the basic rule of input, output and feedback of that input. As explained above, behavioural change is complex and takes time. This paper aims to provide a change program that can help British banking regain its confidence by changing their culture, values and leadership management.

Banking culture is a fundamental pillar of bank performance, both bad and good. Organisational culture is defined as 'a complex set of values, beliefs, assumptions and symbols that define the way a firm conducts its business.' (J.B.Barney, 1986). Research by Steven Davis suggests that there is a significant difference in what banking culture is today and what they aspire to be. He explains the culture further by saying that large banks are mostly viewed as having a mind set in which people look at their own interest rather than the organisation as a whole, at times people forget what customers what and what is best for them (Davis, 2004). Banking culture has led to the rich and powerful in the banking industry to get richer while leaving serious consequences for others like redundancy and debt. It is hard to bring about change when the top management is benefitting the most from the embedded policies and ways of working. As described in the case-study, the bankers liable or blamed for the crisis apologized without paying a price for their ill-decisions. Bankers are still making money because of the bonus culture, even though the banking sector has had a meltdown.

To change their behaviour is difficult as there is resistance in even understanding the consequences of their risk-taking behaviour. In the case-study bankers are asked if they feel 'bad' for being in a hated profession or if they are bothered about the fact that people do not trust them with their money, their answer was no. This shows that the bankers are not willing to take the responsibility of this crisis over their shoulders, and if people do not feel responsible they do not think there is a need for change, especially when they earn much more than the prime minister! Change programs always face resistance but this situation has led to no other option.

Another problem in implementing a change program is the lack of communication. An open communication environment not only highlights the loop holes but also brings out the risks involved in any decision. If there is an open environment, communication is usually top to bottom and vice versa which would let bankers think about their decision twice, as they would be aware of all the possibilities and everyone in the organisation would not only have a chance to voice their opinion but this way, a decision can be thought through. In the case-study, it is mentioned that bankers are ruthless and can even go behind each other's backs, this means there is a lack of communication and especially top management are free to make decisions as they choose. Communication not only makes a decision carefully thought through but also makes it an organisations responsibility, as not only one person is responsible for it, hence this would also reduce the notion of the bonus culture where making money for individual interest is considered normal.

This cultural change programs intends banks to adopt a customer oriented culture where individual interests are not the focus, and people collaborate to maximise the profits of the bank by providing a client centered service. Open communication is key and risk management is discussed, hence possible consequences can be uncovered, diagnosed and avoided in an open and transparent environment.

Banking like any other field, is bound by ethical boundaries. These are certain ethical and moral principles that banks need to abide by. Banks need to encourage environmental and social enterprises, their investments should not only regulate the economy but also help society as a whole. This code of conduct is defined by many agencies and government policies that help protect the rights of the investors and public. In this crisis, both government and banks acted in an unethical fashion, and as seen in the case-study, the bankers apologized and got out of the situation penalty free. The ones who left their jobs are still doing well and earning just as much. Banks failed their ethical/moral obligation by recklessly providing money to people whom they knew or should have known had no means of meeting the loan commitments. Bankers also just focused on their own interests and did not ensure the bank's footing for long term survival. Even though top banks in the UK are in debt of taxpayers, the senior management is receiving high salaries and bonuses for their work. People should be rewarded for good performance but when the organisation as a whole is in debt, they should think of ways to improve the situation to gain the trust of the taxpayers. People who borrow money are constantly bombarded with advertisements regarding loans and to a certain extent they should also be held ethically responsible for this situation. People who were not confident that they could fulfil their loan requirements should have not borrowed debt. The borrowers did have a choice even though they were constantly bombarded with marketing efforts. Borrowers should also be held responsible for undertaking debt they could not handle.

In ethical terms, the society as a whole should take responsibility for this crisis situation, as lenders, borrowers and governing agencies should be held responsible for extending outside the ethical boundaries. But why is it, that only the public is suffering and the senior bankers are still enjoying large sums of money?

Regulatory authorities should try to keep a strict check on the financial system, trying to eliminate the reward culture or the culture of incentives to get out of this crisis. A strict check in my opinion is the only way values can be part of the organisation culture. When strict measures are taken against actions that are unethical only then people follow these guidelines. The UK government asked Sir David Walker to provide a system for governance in banks. He suggested a major point that banks should communicate the pay of individuals who earn bonuses and make the organisational decisions about pay and bonuses transparent (Regulation, 2009).

This program suggests that there should be regulatory committee which would help people stay within ethical boundaries and suggest a bonus regime that is different, relaxed and flexible compared to the culture today. In this crisis situation, it is necessary that bankers understand the extent of the consequences and feel being held responsible for the situation at hand. The consequences of their unethical decisions have led the banking industry into this meltdown. Bankers should fully understand their ethical obligation towards taxpayers, investors, borrowers, public, environment and society.

The change programme will consist of a number of steps to ensure that risks are taken appropriately and those held responsible face the full consequences for their actions. The first thing that needs to be done is establish what the problem is and consolidate a systemic approach to act as a means of both prevention and cure. The two problems that led to the banking crisis were the high risks taken to achieve certain goals and the lack of governance in place to limit the amount of said risks, and the increase in loans made to consumers without making sure that the debt could be repaid. One other problem that needs to be addressed is the increasingly large remunerations made to executives below and at director levels. These remunerations are not a problem when awarded at times of growth and normal or abnormal profit but in situations where the company is making a loss the situation has to be assessed before such remunerations are given. A policy to include these remunerations in accordance with the current status of the company's profit will also be included in this programme.

One of the solutions for the lack of governance would be to set up a regulatory board of non-executive directors and a chairman, which would oversee all aspects of higher level decision making especially those involving risk taking on the part of the executives and the remunerations awarded to executives at or below director level. A regulatory authority such as the FSA should select the members for the new board itself after careful consideration. Each new member for the new board should be interviewed, making sure that he or she has the relevant experience and qualities required for the position. For future additions to the board after it has been set up these interviews should be carried out by senior board members to assess whether the individual fulfils the requirements of the role. A chairman should be elected from within the board members and should have relevant experience and a track record of successful leadership in a prior significant board position. Each member of the board of non-executive directors should receive business awareness training and a personalised induction so that they understand how the business is run and hence make more effective decisions. If the board members have any questions outside of what is being discussed during the meetings then there should be a support committee to advise the members on the topic in question. The board should be balanced and through the training and induction, have the necessary knowledge required to partake in board discussions, especially on topics such as risk strategy. The board members should be able to and be encouraged to challenge proposals on strategy that are suggested by the company executives until they are satisfied that the decisions are based on accurate and comprehensive information.

The chairman of this new board will have certain responsibilities. The chairman should commit a majority of his time to the board and give priority to the board over all other business time commitments. It will be the chairman's responsibility to ensure that the directors of the board are fulfilling their obligations and that there is effective communication between the executive and non-executive directors. There should also be a person who is in charge of communication between the board as a whole and the shareholders. The board itself should be assessed after a certain period of time preferably by an external assessor and a report of the assessment published, after which the shareholders will ask whatever questions they have regarding the performance of the board.

The board should also set up a remuneration committee to deal with the extremely high remunerations being given to executives. There should be a threshold set by the remuneration committee such as the average bonus awarded to executive directors. If a trader's bonus is greater than that of an executive director's both in terms of short term bonuses and yearly bonuses then certain measures should be taken to ensure that the executive continues to provide consistent and long lasting growth instead of high risk short term abnormal profits. One thing that can be done is to spread out the yearly bonus over a number of years and in the case of the investment banker leaving the organisation he or she will only get what is due that year. Investment bankers and executive directors who receive above average bonuses should also be forced to keep a higher percentage of their bonuses in company stock so that in the case of an immense decrease in the value of company stocks the upper level management will be affected as well and this policy will be an incentive for them to ensure that the current crisis does not repeat itself. Increased taxation on above average bonuses will also benefit society overall rather than concentrate large amounts of money in very few hands. With respect to the outrageously large pensions that the higher level executives were receiving the remuneration committee should investigate if and why the pension is different than what was originally agreed in their contract and report directly to the board about what action to be taken if any is necessary.

In terms of the excessive borrowing by consumers the bank will have to revert to stricter credit control policies which were in place prior to the problem which led to the current crisis so as to ensure that the bank tried to make sure that it is not lending money to those that cannot repay it.

 The financial crisis has been massive and to a certain extent irreparable, this unforeseen event has made the British economy and public pay the price for failing organisational structures and cultures. Banking organisations have put 'responsibility' in a an individual category, and it is about the responsibility of their role; which is to make profits and bonuses even if the investments have no long term gains. This bonus culture of being rewarded in order to be motivated, has let bankers be immune to the horrible consequences and they do not feel responsible, though the banks are in serious debt, the top management somehow is being rewarded for their work. All this shows that with in organisations there is some form of moral muteness, as people do not speak regarding this problematic issue. An open organisation where communication is transparent and criticism is not ignored, it is likely that in the next crisis more banks would be able to stay out of it because people spoke up to show that their growth model might not work in the long run.

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