How (not) to define banking culture

The Group of Thirty has recently published a report entitled Banking Conduct and Culture. The Group of Thirty is a high-profile think tank covering global finance with members such as Paul Volcker, former Chairman of the Fed; Mark Carney, Govenor or the Bank of England; and Mario Draghi, President of the ECB. As the subtitle indicates, the report is meant as a “call for sustained and comprehensive reform”:

“There must be a sustained focus on conduct and culture by banks and the banking industry, boards, and management. Firms and their leaderships need to make major improvements in the culture within the banking industry and within individual firms.” (p. 11)

A lot about the report is to be recommended. It provides a good overview of current interventions to improve organisational culture in banking. It urges leaders of banks as well as regulators to move beyond lofty value statements, towards a firm integration of an ethical culture into banks. It does so by calling for a “fundamental shift in the overall mindset on culture”, and making ethics count when designing incentive structures, performance management, and promotion paths.

Alas, the report fails at providing a helpful definition of organisational culture. It fails in ways that some very old-fashioned conceptual analysis could have prevented. Continue reading

Creation of value in finance?

H/T Leiterreports: an interesting piece in The New York Times on what’s worrying about too many students going into finance, with links to papers about the social value of finance, or lack thereof.