Normally August is a time when everyone
goes on holiday and the papers are full of stories about skateboarding dogs and
football transfers. This year, however, we are still in the midst of the
biggest financial crisis since the Great Depression and the papers are crammed
with details of banks reporting their half yearly figures. And what
figures they are too.
Profits of £3bn for Barclays and HSBC and losses of £4bn for
the Lloyds Group and £720mn for Northern Rock certainly don't suggest a
banking industry in crisis.
It's timely, then, that we have just got
back the results of our Concerned Consumer Index which this month is focused
on...yes, that's right: banks. Interestingly, although on the face of it the whole sector has been tarred with the
same brush of blame (
89% of UK consumers think all or most banks were
involved in the credit crisis), when looking at specific brands it is
those that have acted in a more responsible way (e.g. the mutuals and co-operatives) that emerge with the stronger reputations - goes to show that if it's trust and reputation you're after, acting responsibly is not a bad start. For many others in the sector, rebuilding reputation is going to be a longhaul process.
And this is exaclty why consumers are calling for some pretty
fundamental changes to the way big banks operate.
40% of consumers
think that some of the bigger banks should be broken up and 59% think
investment and retail banks should be run as completely separate companies.
This demand for change extends to the
excesses of the pay and bonus structures in the banking industry that, many
believe, have led to excessive risk taking and created the mess we are
currently in. And this is something that most consumers want to see corrected -
64% of us would like to see a limit set on the salaries and bonuses paid
within the banking sector. Maybe the
news that bankers
at Barclays' investment banking business are set to see their pay and bonuses
more than double to nearly £250,000 this year is not quite the news consumers
were waiting for. But let's not forget as Charlie Mayfield, Chairman of The
John Lewis Partnership, pointed out in an
article earlier in the year "
not
all bonuses are bad. Success does not have to lead to excess".
Perhaps the Food
Standards Association could pass on a few tips to the Financial Services
Authority. The FSA (food rather than financial) has announced new
Government plans
to tackle obesity by reducing the size
of certain snack foods and drinks. The FSA said it had no intention of scrapping the
existing sizes, but it wanted food and drink companies to start manufacturing
the smaller sizes, "which in time will become the standard". Perhaps
this approach could be taken to reduce salaries and bonuses in the financial
sector.
But it is when an
industry itself takes leadership on key issues that the reputational dial can really
be shifted. Just look at what some of the
world's leading footwear brands are doing to address
illegal deforestation. Brands, including Clarks, Adidas, Nike and Timberland, have
demanded an immediate moratorium on destruction of the Amazon rainforest from
their leather suppliers in Brazil. With cattle farming estimated to be the biggest
risk to the remaining Amazon rainforest and the
clearing of the forests for agriculture
estimated to produce 17% of the world's carbon emissions (which is more than
the global transport system), this stand will be a vital step in building trust
with NGOs, government and consumers.
Will the banking industry take a stand in the same
way the footwear industry have? Or will we be back to business as usual now we
are seeing the signs of a recovery? Only time will
tell, but the window for building consumer trust through change will only be
open for a short period, and those that act now may be the ones that position
themselves to take leadership in the future. Check out our article below, that appeared in The Times on Tuesday, to see what we think should happen.
If the banking industry wasn't controversial enough for you, next month the
Concerned Consumer Index will be looking at the energy sector - another sector
that has received a fair amount of attention in the last 12 months. If you
would like to see more data from this month's survey, or want to find out how
to add your own questions to the next one, please email David on david@goodbusiness.co.uk.
In the meantime, for those that are off on holiday - have a great time and don't for get to send us a postcard. For those left holding the fort, we're sticking around too, so let us know if there's anything we can help with.
Best wishes,
Most ethically minded consumers want a strict limit imposed on bank pay and
bonuses, a poll for The Times has found.
