When things started going wrong for Handelsbanken in the
60s – manifested in a combination of falling profitability and
misselling scandals – a desire to change the business model
was widely recognised, says the bank’s CEO Anders Bouvin.
Bouvin says the bank ran into problems because it had got
too big and had not implanted the necessary discipline required.
In a bold move, it turned to former academic Jan Wallander –
who had successfully developed a devolved leadership model
at a smaller Swedish bank, Sundsvallsbanken – to return
Handelsbanken to profit, making him CEO in 1970.
Wallander’s leadership model differed from other banks’;
it didn’t contain bonus structures. This meant Handelsbanken
could operate a more honest approach to customer service,
says Bouvin. “Without bonus schemes, we were able to gain
customers’ confidence because they knew we would only sell
them products that they wanted and needed,” he adds.
“Even if we were really good at not mixing up our own
incentives with what’s best for the customer, I think just the
mere suspicion that that could be the case is enough for us not
to want to do it. This approach helps us attract customers and
be perceived as a trustworthy banking partner,” he adds.
The approach has paid off in spades. Handelsbanken has
consistently beaten rivals on an important metric – return on
equity – since Wallander’s model was put in place 47 years ago.
It’s also consistently ranked by ratings agencies and other bodies
as one of the world’s strongest banks.
When rivals were being hammered by first the Swedish
banking crisis in the early 90s, and then the GFC in 2008,
Handelsbanken stood firm. Not only that, it was also able to lend
money and expand the number of branches in Scandinavia and
the UK during the crisis.
“It was business as usual while some of our competitors were
in intensive care. Other banks did not have the possibility to lend
more money – even withdrawing credit lines to survive – whereas
we could move forward during the banking crisis because
opportunities were there,” says Bouvin.
India’s Tata Group is another example of a company that
has an emphasis on good corporate culture at the heart of its
ethos. It has developed the Tata Code of Conduct, which has
been adopted by all 100 companies across the group, says
Dr Mukund Rajan, Chief Ethics Officer and Chairman –
Tata Global Sustainability Council of Tata Sons, the holding
company of the group.
“Every Tata company also has to go through the Tata Business
Excellence Model (TBEM), which entails a holistic appraisal or
audit of a company, its leadership, its strategy, its operations,
HR practices, customer-centric practices, and results,” he adds.
The result is that the Tata brand is consistently voted India’s
most valuable. “It is our commitment to strive for value creation
for all our stakeholders and not just our shareholders that has
earned us the trust of the nation,” says Rajan.
RAISING THE BAR
In the UK, Sir Win Bischoff, Chairman of the
Financial Reporting Council (FRC), is leading a
push to improve corporate culture in companies
and financial institutions, to mitigate risk and
develop long-term resilient performance.
It’s a project he has personally taken on. As
one of the best-known leaders in the financial
services industry, Bischoff has held chairman
and chief executive roles at some of the biggest
banks, including Citigroup, Schroders and
Lloyds Banking Group.
“There needs to be a concerted effort
to improve trust in the motivations and integrity
of business. Rules and regulations will not
on their own deliver productive behaviours
over the long term,” says Bischoff, who is
currently also Chairman of JP Morgan Securities,
the European arm of the one big investment
bank that managed to avoid the worst of the
financial crisis.
Since it was formally launched in 2016,
the culture project developed by the FRC has
gained plenty of traction from companies.
“This work has stimulated debate on culture
in boardrooms and beyond, and highlighted
the importance of companies entering into
effective dialogue with their workforces and
wider stakeholders,” says Bischoff.
South Africa’s Professor Mervyn King, who
has been a long-time champion of strong
corporate governance, says good culture is vital
for corporate success because “tomorrow’s
companies will be expected to create value
in responsible and sustainable ways”.
King, who was a contemporary of Nelson
Mandela in his early legal career and was
inspired by him to promote positive corporate
values, says: “It will no longer be appropriate for
businesses to concern themselves solely with
maximising profits at the expense of our natural
environment, workers’ rights and protection,
care for suppliers, health and safety, and
concerns for other species as well as ourselves.”
King suggests US economist Milton
Friedman’s statement that the “sole purpose of a
corporation is to make profit without deception
or fraud” is invalid. He adds: “We used to ask
how much money does the company make?
Today the critical question is: How has the
company made its money?”theceomagazine.com | 157Governance | INVEST