2. Fixing Finance: Comparative Approaches to Changing Firm Culture
Friday, 3 July 2015: 10:15 AM-11:45 AM
CLM.2.05 (Clement House)
John Conley, University of North Carolina School of Law, Chapel Hill, NC
Cynthia Williams, Osgoode Hall Law School, York University, Toronto, ON, Canada
Ascribing problems within too-big-to-fail (TBTF) banks to an excessively risk-preferring and unethical “corporate culture” has become de rigeur
in the wake of the financial crisis. This has been particularly true in light of multiple billion-dollar settlements in the United States for problems ranging from manipulation of the London Inter-Bank Offered Rate (Libor) benchmark and the foreign exchange market to securities fraud in the sales of mortgage-backed securities, energy markets manipulation, and facilitation of tax fraud, drug dealing and illegal weapons sales. Recognition that TBTF banks need to change some of their fundamental norms and behaviors has been expressed by such persons as Mark Carney, Governor of the Bank of England and Chair of the Financial Stability Board; Bill Dudley, President and CEO of the New York Federal Reserve Bank (who organized a day-long conference in October, 2014, on the topic of cultural reform); and Daniel Turillo, a Governor of the U.S. Federal Reserve Board. As stated by Mark Carney, “[f]undamental change is needed to institutional culture, to compensation arrangements, and to markets”.
How might such change come about? In the U.S. and U.K., central bankers have been “jaw-boning” to affect firm culture, while the Dutch Central Bank (DNB) has taken a more direct approach, hiring organizational psychologists to observe bank boards and executive officers, evaluating firm culture, and then providing feedback to the banks and to DNB’s supervisory authorities. Whether any of these efforts by Western Central Bankers will have a demonstrable effect on bank culture is unclear at this point. Some of the language some regulators are using, particularly Mark Carney in the U.K., seems to indicate a turning away from the neoliberal faith in markets' power to self-regulate and the primacy of efficiency as the paramount regulatory goal, adding market fairness and trust to efficiency as regulatory goals. This presentation will provide a comparative socio-linguistic study of efforts to affect firm culture in these three jurisdictions, drawing implications for the varieties of liberalism theoretical construct.