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July 15, 2012 7:33 pm
Corporate culture: Lofty aspirations

By Andrew Hill
It may not be possible to change the behavior of scandal-hit sectors

On July 4, Bob Diamond, Barclays’ former chief executive, spent just under three hours answering questions from a House of Commons committee about the UK bank’s role in the industry-wide rigging of benchmark interest rates. Committee members and Mr. Diamond himself kept coming back to one lofty concept, directly referred to 50 times during the hearing: culture.

There is a lot of it about. Culture was the “secret sauce” at Goldman Sachs, of which there is now “virtually no trace,” according to Greg Smith, a disgruntled former employee of the US investment bank. The “ingrained conventions of Japanese culture” were behind the crisis at the tsunami-hit Fukushima nuclear plant, says the man chairing the probe into the disaster. British pharmaceutical group GlaxoSmithKline has made “a culture of putting patients first” a priority, having clamped down on aggressive selling and marketing of blockbuster drugs that this month resulted in a $3bn settlement with the US government.

Five years after the global financial and economic crisis began, political and regulatory reforms have either not yet taken effect or have failed to allay public fury and frustration about corporate excess. In the financial services sector, dissonance be­tween banks’ traditional image as prudent and conservative, and successive revelations of misselling and misbehavior – particularly in investment banking operations, such as those at Barclays – has fuelled the anger.

It has also shifted the political rhetoric from a focus on legal and regulatory solutions to a wider debate about the need to change a corporate culture focused on short-term profits and bonuses. As Texas Democratic Representative Rubén Hinojosa told Jamie Dimon, JPMorgan Chase chief executive, at a June congressional hearing into a trading fiasco that has cost the US bank $5.8bn this year: “There needs to be an evaluation of not only prudent regulations but also the broken culture of Wall Street.”
Increasingly, bad culture seems to be the obvious culprit at organizations and industries in crisis, and good culture the potential savior. If only it were that simple.
Culture is not hard to define, though it took until the 1980s for its application in business to be properly explored. Roger Steare, who advises companies from UK financial group HSBC to London-listed energy group BP on leadership, culture and ethics, says: “It describes the way human beings behave together – what they value and what they celebrate.”


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