The primary issue with this notion is that every community has a different understanding of fairness. Even in territories where the idea of equity is being harmonised, like the European Union, from North to South and from East to West, there remain differences in ethical standpoints. When you consider the planet, it is clear that there is no single tacit agreement about what constitutes a fair and level playing field.
After all, a society operates according to a set of rules that have effectively been made up by its constituents over a period that spans millennia. The word ‘fair’ used to mean ‘Whatever is left after the King is done with it”. Mostly, we have moved ahead from there and what this shows is that even the very definition of an equitable society is one that we continuously refine.
The role banks play in society is often viewed as being unfair, and even this varies from one community to the next. Banks earn money on interest income and there are entire nations where this practice is illegal. In most countries however, there are regulators that care for investors and that control how much can be made as a result of this practice – even if interest income is partly the cost of doing business.
Without the banking world, modern society would be a very different place. Banks provide much needed credit and distribution of wealth, cornerstones of industrial activity across the world. Yet, the idea of putting the word ‘equitable’ in the same sentence that talks about banking requires us to build a bridge, one that is based on ESG.
If we return to the introduction to this article, to the assumption that banks are so wholly pervasive, it is evident that banks and financial institutions should be the flag-bearers of socially responsible behaviours. This means that if the industry were to enforce certain standards that promote sustainable behaviours, they have the ability to bring about much needed and widespread change.
Of course, there is an initial cost to doing business well. This is where regulatory bodies come into the equation. Provided they are on board with the idea that an equitable society benefits everyone, regulators have the power to reward sound practice by providing a favourable set of conditions around these sustainable practices.
To give an example we can consider the way the ECB provides a homogeneous structure for shared thinking across Europe by using policies and regulations that apply to all banks within the Union. While governments can use laws to bring about immediate and local changes within their respective countries, EU-wide financial policies run in parallel, having a slower but significantly broader impact.
Perhaps one of the unsung benefits of capitalism is that, used well, it can bring about the change we need and do so in a way that is lasting and far-reaching. Given the right incentives, businesses can be coaxed into doing the right thing purely for financial gain.
For a long time, this was a pipedream. Regulators played catchup in a game where investors found loopholes and regulators scrambled to patch these fiscal leaks. Now, they are acting in a way that is proactive, shaping the very idea of what the financial services industry can be and bringing about change on the very boundaries of the system.
Naturally, for the financial services industry to play its role in a more equitable society one assumes that policymakers have the best interest of the community at heart. They must have an objective, a long-term and far-reaching vision of what’s best for as many individuals as possible. Policymakers must work with the legal system to bring about immediate change as well as trickle-down transformation that will, slowly and surely, bring about a more equitable place for all of us to live in.
We remain with our first question. What constitutes an equitable society? Could a shared, Europe-wide vision of fairness be the starting point? If it is, and we all play our part, it could very well be the start of systemic change that has eluded us for too long.
Business leaders have to be wary that a lack of motivation from their end will seep through to the rest ...
I recently shared a LinkedIn post about not getting obsessed with particular goals, striving to achieve them at all costs, ...
The event will be followed by a public speaking competition.
Amy Edmondson defines psychological safety as 'The belief that one will not be punished or humiliated for speaking up with ...