It would be unfair to say that most of Australia’s biggest businesses have an unsophisticated view of the corporate reputational challenges they face.
But when Anna Whitlam brought together some of Australia’s leading Corporate Affairs practitioners recently, there was a ripple of recognition as one of them lamented the simplistic management call for ‘better comms’ as the antidote to reputational challenges.
They were all people who recognise the importance of an experienced communications and issues management team. But they also know that Corporate Affairs is most effective when it has a seat at the management table and the ability to help shape cultural and operational practices to prevent reputational crises.
They came to an Anna Whitlam People Thought Leadership Roundtable to hear from J T Macfarlane, a banker who has thought long and hard about the seemingly intractable issues of corporate reputation affecting banking and many other business sectors.
J T is a Director of ANZ Banking Group, a former Executive Chairman of Deutsche Bank Australia and New Zealand and former CEO of Deutsche Bank Australia
Chatham House rules prevent us reporting JT’s own insights and comments. But we can quote from two important pieces of work that have played a large part in shaping his recent thinking. One is a recent speech by the Bank of England’s Chief Economist, Andrew G Haldane, and the other the publication of Australia’s first Ethics Institute Index by the Governance Institute, formerly the Chartered Secretaries Association.
The key point from the Ethics Institute Index is that Australians as a whole believe that society is not operating to the ethical standards they would like to see.
Interestingly, the ethical standards people expect differ from sector to sector. They say that they have high expectations of standards in government, health, education and banking and finance - but that their expectations of standards in small to medium enterprises and the media are not as high. And they see the biggest gaps between actual and expected ethical standards in government and banking and finance, which goes some way to explaining the attention these two sectors attract.
In his speech Andrew Haldane talked about what he called the ‘Great Divide’ between the public’s view of banking and finance and the views of people who work in the sector. A Bank of England survey found 40% of the public had positive or neutral views of the sector compared with 69% of those who worked in the sector. The most common words the general population used to describe the sector were corrupt, self-serving, destructive and greedy.
Despite those perceptions and a clear sense that the general population do not trust banks, Haldane noted that banks in the UK get very high satisfaction ratings from customers based on their personal interactions with their bank. While he was talking about British banks, his comments are just as valid in Australia and the Ethics Institute Survey reveals a similar gap here between community perceptions of banks and what customners say about their personal interactions with their own bank.
According to Haldane, this apparent contradiction is explained by the distinction between personalised trust and generalised trust:
- Personalised trust is built up through repeated personal interactions. This trust is reinforced when people regularly visit their local bank branch and know the staff and manager.
- As banking business models change, there is a risk that service to customers will become less personal.
- So personalised trust and the goodwill customers feel towards their banks could fade and they could become more reliant on generalised trust.
- Events like the global financial crisis and the role of banks in creating that led to what Haldane calls a 'high speed blow-out of generalised trust’.
Haldane talks about the risk of ‘the shareholder centric model’ leading to short-term thinking. He quotes one report to the UK Government back in 2013 that suggested changing the British Companies Act to require bank directors to ‘ensure the financial safety and soundness of the company’ ahead of shareholder returns.
In Australia most bankers would probably argue that safety and soundness is a focus of local Boards and management and the performance of the banks through the GFC and since demonstrate that this is the case.
Despite that favourable performance and stability, the banks cannot shake off the calls for a Royal Commission on banking – and it will take more than greater investment in comms to do so.
