2nd Annual Industry Leaders Summit

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2nd Annual Industry Leaders Summit 9th October
2008 Four Seasons Hotel, Dublin
2nd ANNUAL INDUSTRY LEADERS SUMMIT THE FUTURE
OF MARKET CONDUCT REGULATION AND ETHICAL BUSINESS
PRACTICES? 9th OCTOBER 2008
NIALL GALLAGHER
Maintaining Confidence in an Uncertain
Environment
2
2nd Annual Industry Leaders Summit 9th October
2008 Four Seasons Hotel, Dublin
Some Questions to Address

• Are business leaders trusted?
• Why does it matter?
• What builds trust and what undermines it ?
• Where does Corporate Social Responsibility fit?
• Does regulation help or hinder ethical business
  behaviour ?
• Does ethical behaviour pay?
• What can WE do about it?

Maintaining Confidence in an Uncertain
Environment
3
2nd Annual Industry Leaders Summit 9th October
2008 Four Seasons Hotel, Dublin
ARE BUSINESS LEADERS TRUSTED BY THE PUBLIC?
Source Ipsos MORI Survey (UK) November 2007
Maintaining Confidence in an Uncertain
Environment
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2nd Annual Industry Leaders Summit 9th October
2008 Four Seasons Hotel, Dublin
FINANCIAL SERVICES HIGH ETHICAL STANDARDS?
I have to admit that, over thirty-five years
that I have spent in international banking,
ethical standards have certainly not improved and
indeed may have worsened. How can we stem the
continuing erosion of standards? Michael J.
Kirkwood, Citicorp Country Officer UK Past Master
of the Guild of International Bankers (2007
publication)
Maintaining Confidence in an Uncertain
Environment
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Trust is like oxygen vital to human flourishing
and unnoticed until it goes missing Papering
Over the Cracks Rules, Regulation and Real
Trust Smith and Reeves, the work foundation
(2006)
2nd Annual Industry Leaders Summit 9th October
2008 Four Seasons Hotel, Dublin
WHY DOES IT MATTER?
Maintaining Confidence in an Uncertain
Environment
6
2nd Annual Industry Leaders Summit 9th October
2008 Four Seasons Hotel, Dublin
WHAT BUILDS TRUST, WHAT UNDERMINES IT, WHAT ARE
THE CONSEQUENCES?

• Builds
• Principled leadership
• Prudence
• Freedom to speak up
• Honest communication and disclosure
• Consistency
• Active management of ethical agenda
• Corporate social responsibility (CSR)

Maintaining Confidence in an Uncertain
Environment
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2nd Annual Industry Leaders Summit 9th October
2008 Four Seasons Hotel, Dublin
ETHICS FRAMEWORK IN AIB
CODE OF BUSINESS ETHICS For All Employees
LEADERSHIP CODE For All Executives
Measurement Evaluation
Communication Training
Performance Reward
Policies to support framework
Customers
Staff
CSR
Business
Community Environment Market Place
Gifts and Benefits Fraud Prevention Information
Security Etc
Anti-Money Laundering Conflicts of Interest Data
Protection Etc
Dignity at Work Equal Opportunity Speak Up Etc
Adapted to local needs and regulatory
responsibilities
Maintaining Confidence in an Uncertain
Environment
8
2nd Annual Industry Leaders Summit 9th October
2008 Four Seasons Hotel, Dublin
CORPORATE SOCIAL RESPONSIBILITY

• Stakeholder responsibility
• Enlightened self-interest
• Proxy for general trust
• Consistent with business strategy and brand

Maintaining Confidence in an Uncertain
Environment
9
2nd Annual Industry Leaders Summit 9th October
2008 Four Seasons Hotel, Dublin
WHAT BUILDS TRUST, WHAT UNDERMINES IT, WHAT ARE
THE CONSEQUENCES?

• Builds
• Principled leadership
• Prudence
• Freedom to speak up
• Honest communication and disclosure
• Consistency
• Active management of ethical agenda
• Corporate social responsibility (CSR)

Maintaining Confidence in an Uncertain
Environment
10
2nd Annual Industry Leaders Summit 9th October
2008 Four Seasons Hotel, Dublin
WHAT UNDERMINES TRUST?

• Poor business performance
• Weak governance and controls
• Short-term incentives
• Unchallenging culture
• Conflicts of interest

Maintaining Confidence in an Uncertain
Environment
11
2nd Annual Industry Leaders Summit 9th October
2008 Four Seasons Hotel, Dublin
WHAT ARE THE CONSEQUENCES?

• High costs of control
• Heavy hand of regulation
• Damaged reputation
• Lack of respect for the individual

Maintaining Confidence in an Uncertain
Environment
12
2nd Annual Industry Leaders Summit 9th October
2008 Four Seasons Hotel, Dublin
DOES ETHICAL BEHAVIOUR PAY?

• Reputation Key to the Business Case for Ethics
• Reputation critical to long term/sustainable
  performance
• Reputation is based on trust trust reduces cost
  of doing business
• Good reputation (trust) leads to superior
  performance in the long-term
• Business leaders value personal reputation
  (integrity)

Maintaining Confidence in an Uncertain
Environment
13
2nd Annual Industry Leaders Summit 9th October
2008 Four Seasons Hotel, Dublin
DOES ETHICAL BEHAVIOUR PAY?- Marvin Bower,
McKinsey

• Ethical business has three primary advantages
  over competitors with lower
• standards
• Generates greater drive and effectiveness because
  people know they can do the right thing
  decisively and with confidence
• Attracts high-calibre people more easily, thereby
  gaining a basic competitive and profit edge
• Develops better and mote profitable relations
  with customers, competitors and the general
  public because it can be counted on to do the
  right thing at all times
• The philosophy of Marvin Bower, MD/Partner
  McKinsey Co 1950 -1992, from
• All you need to know about Ethics and Finance,
  John Plender and Avinish D. Persaud,
• Longtail Publishing Limited (2007)

Maintaining Confidence in an Uncertain
Environment
14
2nd Annual Industry Leaders Summit 9th October
2008 Four Seasons Hotel, Dublin
WHAT CAN WE DO ABOUT IT?

• Personal responsibility to act with integrity
• Leadership to set the tone from the top and
  lead by example
• Board to balance stakeholder demands and
  establish appropriate governance
  (incl.incentives)
• Regulators to regulate effectively and to serve
  the public interest
• Professions to educate members and the
  gatekeepers

Maintaining Confidence in an Uncertain
Environment
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2nd Annual Industry Leaders Summit 9th October
2008 Four Seasons Hotel, Dublin
ETHICS AT THE CENTRE OF DECION-MAKING
Legal Framework
Statutory Regulation
Voluntary Codes
Corporate Governance Compliance
Ethics Values
Maintaining Confidence in an Uncertain
Environment
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2nd Annual Industry Leaders Summit 9th October
2008 Four Seasons Hotel, Dublin
2nd ANNUAL INDUSTRY LEADERS SUMMIT 9th OCTOBER
2008 THE FUTURE OF MARKET CONDUCT REGULATION AND
ETHICAL BUSINESS PRACTICES? NIALL GALLAGHER
Maintaining Confidence in an Uncertain
Environment