Report on “A Right Relationship with Money”, the talk given by Professor Charles Munn, 27 June 2012.
The Business Matters Trust is very grateful to Anderson Strathern for hosting the talk and providing a buffet lunch.
Iain Archibald welcomed guests to this talk, under the umbrella theme of “Looking to the Future”. He introduced Professor Munn, the retired Chief Executive of the Chartered Institute of Bankers in Scotland and Chair of the recent Church of Scotland Special Commission on the Purposes of Economic Activity.
To hear a 21 minute recording of Professor Munn’s talk, use the link at the foot of the page. Alternatively, below is a summary of how one person heard the talk.
Professor Munn made reference to a book which he wrote some time ago entitled “Ethics for Bankers”, saying that there had been a significant amount of negative change in the financial and business worlds not only over the last two to three years but indeed over the last thirty years. In the 1980s he had chaired a Commission on Ethics in Investment Banking and people raised significant concerns even then as to the forces already driving many businesses, financial institutions and professional bodies and the direction in which their strategies were taking them.
In response to the recent turmoil in the financial world, the Church of Scotland felt compelled to comment but, rather than doing this quickly, it decided to step back, take time for mature reflection, and then make its views known. It instigated the Commission on the Purposes of Economic Activity to look at 5 key questions one of which was: find new ways of addressing economic need in our society. This troubled Professor Munn, because he thought that rather than looking at new ways of addressing issues, there needed to be a return to some sound old ways, notably thrift and sensible financial management. The Commission took evidence from politicians, poverty campaigners, business people and also representatives of professional bodies such as ICAS. Professor Munn remarked that he came into contact with a number of professional bodies during this time and that a factor common to them all was their seeking to reassert their ethical principles for the public good, i.e. to serve the public interest.
As to whether the efforts of these professional bodies will prove successful, our speaker described himself as a “hopeful sceptic”. He finds altogether admirable the current emphasis among these bodies on members showing their first loyalty to their professional body, not to their employer. The ethos of “professionalism”, where one’s first loyalty is to one’s profession rather than company, has been challenged and eroded in recent years by “managerialism”, whereby “the organisation comes first”. On top of that trend, a further worry is that all manner of organisations are now generally competing so much with one another that no-one / no group is looking out for the good of the their industry / service / profession as a whole.
Professor Munn went on to recall a book written in Harvard called “Teaching Business Ethics”. This claimed that you cannot teach people to be ethical as they will in fact always follow their own instincts. What a challenging claim. Here is a further complicating factor in banking of late: in and since the 1990s a lot of training and sense of professionalism has been thrown out; bright young people in their 20s have been getting major promotions; but, intellectually capable though they are, they lack the life and career experience to resist the powerful sales culture around them; they are subordinating ethical concerns to that sales culture, resulting in their neglecting ethics.
Professor Munn mentioned a meeting he had attended where everyone other than himself agreed that you could have a separate set of ethics for personal life on the one hand and for business life on the other. His view is that there is no such thing as “business ethics” but rather just ethics, spanning private, public and business life. May this thought challenge all of us.
Recently the FSA has recognised that a business’s culture is an important element in its risk profile. The FSA has also identified that the reward systems in business are too often skewed, with short term performance the key determining factor and with no thought beyond the end of the current financial year. This was also noted during the Church of Scotland Commission’s discussions. There are challenges for anyone working in a business if you disagree with its policies. Professor Munn said that for “old guys” like himself retiring or resigning was an option but that for younger people there is much pressure to conform, because they have onerous financial and family commitments.
Professor Munn highlighted what he believed our own ethics should be based on – loving our neighbour and eschewing the unhealthy love of money. He recommended the report from the Commission on the Church of Scotland website.
He then got onto the key message of his talk. During the Commission’s proceedings they met at an early stage with people from the West of Scotland who were involved with the Poverty Truth Commission. In discussion with them, it became clear that one significant factor which causes real problems is the price of consumer credit, in particular “payday loans”. Many of the payday loan companies were asked to give evidence to the Commission but only one did so. This company emphasised the transparency of their product offering, but acknowledged that APR rates of up to 4000% were being charged. They sought to justify this on the basis that no-one paid 4000% since the loans were very short term. Professor Munn remarked that this particular company’s TV advertising makes no mention of their APR and nor indeed does the football strip they sponsor which is worn by members of a leading Scottish Premier League team. This form of consumer credit is causing a lot of hurt, as Professor Munn put it, and he said there is a significant job for individuals, professional bodies and indeed organisations such as business matters to do in raising awareness and concerns about this. We should cause a fuss! A political response is needed perhaps involving legislating on charges and interest rates, though our speaker acknowledged that this could cause distortions in the market place.
On a positive note, he said that the Commission had identified the role of Credit Unions as key and that the Church, and indeed society at large, should be working to encourage these. He recalled that Henry Duncan, a Church minister, had been the founding father of the Savings Bank movement but noted that Scotland has lost all of its Savings Banks in recent years except for the Airdrie Savings Bank.
Professor Munn then opened the floor for questions and answers. A 13 minute recording of this session is available using the link at the foot of the page. Below are some of the key points.
In response to a question about the role of pawnbrokers, Professor Munn stated that they have their place but that he would be keen on tighter regulation for some who operate elaborate schemes of interest rates.
He was then asked what his advice would be to people wishing to adopt personal principles as regards money. Professor Munn noted that the Bible has more to say about the topic of money than much else, but that it is not preached about, perhaps because those preaching do not feel they have the requisite knowledge. He cited the example of a group of ministers from the Southern States of America who, in their discussions with the Commission, had stated exactly this. In answer to the personal principles aspect of the question, Professor Munn noted the biblical exhortation to avoid the love of money, as this is the source of many kinds of evil. But he also noted that economic growth is necessary for the good of society and individuals in it. He seemed to suggest that much growth has been misdirected in the last 30 years, e.g. individuals in some cases have merely indulged their own consumerism. Contrast this, he said, with the example of many businessmen from past centuries who had a less self-serving attitude. They adopted different norms as to the earning-spending / saving-giving split of their money than many people today do, evidenced in these predecessors spending e.g. only 30% of their income and
their giving away much of the rest.
This led to a question about the ethics of offering loans for people to take holidays. (Or should that have been: the ethics of applying for loans to take holidays?) Professor Munn averred that such loans, for “conspicuous consumption” as he called it, are something he does not go along with. Take out a loan to buy a house? Yes. Take out a loan to go on holiday? No, for that is something you can and should save up for. He stressed the need to educate the young people of today through the school system about money, tax, and financial services. He commended in particular the work of the Financial Education Partnership whose programmes are so good that they are being rolled out across Europe.
Finally, there was a question regarding ethics breaking through into business. Professor Munn again highlighted the important role that professional bodies can and must play. They need to uphold ethical standards and practices. Citizens are looking for guidance, these days not from the Church but rather from the likes of professional bodies whose raison d’être must surely be to promote the public interest. He noted that many opinion formers of the past were sceptical about the role of such organisations, for example Margaret Thatcher, George Bernard Shaw and even Adam Smith. However, there is most definitely a place for these professional bodies today. But it is by no means all down to them. Said Professor Munn again, “It is up to us to make a fuss” – so that politicians recognise the need for change in business practice and in society as a whole, and follow through. Successive governments have avoided taking responsibility and acting in this domain and it has been left to back-bench MPs, such as the Labour member for Walthamstow, Dr Stella Creasey, to make the running.
Iain Archibald thanked Professor Munn for what was a most interesting and challenging session. In closing, Iain picked up on the public interest theme, quoting Andy Brookes, a Christian working in the City of London who addressed the Scottish National Prayer Breakfast a couple of years ago: “The purpose of all economic life, including the PLC, is to love our neighbour.” Then informal discussion continued for some time over coffee.
Consultant to business matters