Lessons from financial sector disaster?
18 september 2008
The one thing that fascinates me most is how this could happen in an industry that has a history of hiring the “brightest and most talented people on the labour market”. It is a no-brainer to conclude that the incentives for the individuals have been wrong. Not aligned with the company’s long term objectives, but designed to cater personal greed. However, this is not what I mean: I wonder about the impact of “group think”. How is it possible that nobody among these bright people had the understanding, the guts nor the impact to warn about what they were all working on? Never before the Sun King syndrome (overestimating ones own capabilities and underestimating everybody else's) had infected an entire industry. The result: reputations and ego’s shattered. A small group with a fortune on their private banking account; but an industry down the drain, resulting in an unprecedented restructuring of the global financial industry. And the “real economy” as a sitting-duck; waiting for the fall-out.
At this time I believe there are two lessons to be learnt, also for everybody in the area of sustainable entrepreneurship:
1. One has to organise counter-veiling powers, checks and balances. Not just a formal risk management system, but a culture in which it is promoted to voice ones dissenting ideas and concerns. Moreover I believe the financial crisis proves that a true stakeholder dialogue should be part of the board’s agenda. External opinions should be heard; not incidentally and occasionally, but in a systematic way as a means to get valuable insights on your company and industry. Only when top management is open to the voices of “jokers”, outsiders, challengers, will it be possible to avoid “group think”.
2. The second lesson is that performance should not only be measured in a relative way vis-à-vis the competition. In the near past risk has become redefined as the danger of falling short of the benchmark, rather than the risk of losing the client’s money. Benchmarking results in following the same routes and grey results. The benchmark practice results in dogmas, which may again result in group think. It is good to know how you perform in comparison with the competition, but this should not stop you from making your own decisions and keep thinking about your unique future.
In the area of sustainable entrepreneurship quite a few people feel they are promoting and protecting “the thuth”. They know what is right or wrong for the world, and for themselves. Sounds familiar?
Moreover in SR-investing benchmarking and “black and white” criteria are common practice.
John Wayne once said: “They tell me: Everything isn’t black and white. Well, I say, why the hell not? Well John, because the global economy is not that simple. As I see it: sustainability is an area defined by dilemmas! Nothing is “black and white”, dialogue and dissenting opinions should be stimulated. Not doing so results in a cowboy mentality. I’m optimistic about the way sustainable entrepreneurship is developing, but I really hope that dogmas will be avoided. Let’s continue talking, asking, listening, blogging…this will help to make sustainability stronger and more mainstream! And it will hopefully help avoiding a hard landing after having “enjoyed” a self created hype.
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Reacties op deze blog
Wouter Scheepens, 26 september 2008 21:44
Bouwe, I very much agree that sustainability should be fully integrated in the company and that now is the time to fundamentally re-think business models. This should include optimisation of value creation and measurement of impact, both for companies as
Present times in the financial sector could be evaluated as a disqualification of CSR. How can financials have become so greedy and instable with (in some cases) a high CSR-performance and beautifully written and illustrated CSR-reports? Good question.