There’s been a loud silence these years since the economic downturn of 2008 — the space where leaders of the financial industry might have weighed in on the human and moral reckoning of that turning. But it’s true, too, that the stark language of victims versus villains of recent years has not invited some of the very voices we need into robust civic reflection. A frank public conversation with leaders in finance — on ethics in the present and future of their industry.
What insights, what hard earned wisdom might you offer as food for thought of a for a kind of a reframed more robust, more inclusive, cultural imagination about the intersection of finance, ethics, values, virtue?
Mr. Diamond: Well, first of all I think — I think this panel, this idea is very timely. And I think there is a lot of truths which are fairly self evident. And I think we are on a journey trying to figure out where we're going. So as an example, whether it's in finance or government or teaching, there's very few people I've met in my life who aren't clearly ethical or non-ethical or have integrity or don't have integrity and I think most people know whether they do or not. It's not — it's not something that we have to test or ask a lot of questions about. But I think what society expects of its businesses is a more complex question and I think we're going through an evolution. So certainly when I was working post-graduate school, the theory of shareholder value was pretty clear. It was pretty popular, you know, what you were driving and what the measures were. There's very few people today that would say that that's OK or acceptable as a measure as an only measure.
Ms. Tippett: As a sole measure.
Mr. Diamond: So I think we're trying to find ways to balance the score card for businesses and for government. And by the way, it's not just finance it's business and it's not just business it's government as well.
Ms. Tippett: Right.
Mr. Diamond: So I think we're really trying to balance that score card. I think I actually mentioned this last year, when I introduced Larry Summers, but it was a very, very poignant time for me in finance, when right after the complete collapse at the end of 2008, when Dodd-Frank was the legislation being proposed. Um, I was on a shuttle back and forth to Washington, on Capitol Hill and the White Houses, many of us were trying to figure out where is this legislation going and kind of how can we be helpful. Perception was, it was how can we lobby I understand that. But some of us were really trying to get us to the right place.
But I was in a meeting with Larry Summers and his team. Uh, and as the meeting wound up, um, he asked me a question as I was walking out with my team and he was sitting there with his team. And he said, "Bob, can banks be good citizens?" And it really struck me, because I was giving it some thought. And I was winding up for the answer of course we can and doing all that. And he kind of looked at me and stared me down and he said, "Before you answer, no one is going to believe that you can be." And I think that is a — that is a very, very important question is can financial institutions be successful and be citizens?
And we gave a lot of thought to that at Barclays over the last couple years as legislation came in in terms of thinking much more from the point of view of what's in the best interest of our customers and clients, thinking much more from the perspective of, um, what are we doing to create jobs and create economic growth, um, thinking through decisions that have positive impacts in the communities that we live and work in. And these were things that weren't really, to be perfectly frank, They weren't the things we were considering five years before, ten years before.
So I think there is a real — a real evolution in this and I think it's extremely healthy.
Ms. Tippett: Mm-hmm. Jeff, you were nodding?
Jeff Walker: There's, uh, and I remember — I was vice chair at JP Morgan and remember was sitting in the exec committee discussing research, Meredith, so, um, we had research at the time in with corporate finance. And I was in private equity business and so corporate finance would trot out their research guys saying, we guarantee you're going to get a great opinion and a recommendation on this company if you use us to go public. And at the time that was the way it worked and so we had this discussion saying, you know, should that be the way we do it at JP Morgan and everybody kind of said, everybody else does it.
And so the government came in and basically said, No, you're not going to do it that way anymore. And I agree with it — I agreed with it. It's easy to agree now. Um, but it changed so now today, what's clearly unethical 20 years ago was the way you did business. And so it's more obvious now, so we're going to go deep and I think the second thing is that — that one is there's shades of gray. Two you can't teach ethics. It needs to be embedded in everything you do. And so who you are as an individual.
Um, I retired end of '07 and went and taught Harvard business school — Kennedy school and, um, the largest group is a social entrepreneurship club, the kids want to give back. They want to participate. One of the most popular classes is authentic leadership where you look at yourself, so that you are not at Enron and 35 years old making the wrong decision. You still might, but at least you've thought about it for a number of years ahead of time with others and you know that there are others out there that understand that there's these issues to look at and to think about.
So that's good it gives me heart, but what about you know 58 year old guys, um, how are they doing? And so, uh, to me, uh, working with others and using them as models — I was in a panel, um, we, we're talking about hedge fund guy, um, Paul Tudor Jones, who does amazing work at Robin Hood Foundation and others and the audience basically scoffed. Hedge fund guy bad guy, right, banker bad guy. Um, Wall Street terrible people. And you start going they're — they're pretty good. I think they're pretty cool, but they're individuals.
And so how do you get it to the point where we start looking and treating people as the individuals they are and saying each is different, different passions, different connections? And we start talking about Julian Robertson being involved in the Clean Air Act initiative, which he was, and he was one of the key reasons people say it got passed, he says, "That transaction was as fun to do as a yen trade." When he gets that kind of passion, saying, "I'm going to give back as much as I'm going to really do a great return on the business side and I can balance both of those, I think those are the great examples we'll need to continue to have.
Mr. Diamond: There's a whole bunch of gray area is what we're talking about and I think again, on an individual basis — I guess there was two things I wanted to say and this is part of the debate, because I haven't got a conclusion. But I remember when I went to work in 1979 — I'm aging myself now — for Morgan Stanley. It was a couple hundred people and about 20 million in capital a private firm and I remember being told about the rules. It wasn’t in a matchbook, it wasn’t a long list, there wasn’t a client presentation, it was very simple — at Morgan Stanley we do a first class business in a first class way, wasn't complicated to figure out how to execute on that and how to implement that.
And then on the other hand, there's a whole bunch of gray areas and I think what changed in finance, part of what changed, is the interest got misaligned, which I think is what you were saying. And so incentives changed and compensation to some extent changed but there's — post crisis there was such a push to say that better align people's rewards with the shareholders and that will solve all the problems and yet when I look back at the crisis, the two firms that had the most employee ownership in shares, so the two financial institutions that had the highest percentage of the ownership of their shares in the hands of the employees were Barristers and Lehman Brothers.
And I think what it shows is that rules don’t work as much as the culture and the ethos in how you behave because in fact, a lot of people were trying to say without the facts that the right way to align interest is that the employees all have a share of the company. And in fact, the two companies that had the highest percentage of shares were the two that had the worst risk management behavior and put the shareholders at the most risk. So rules — in some ways I want to say rules stink. It's about culture, it's about how you behave and it's about, you know, the thing that we always try to do is to try and figure out how people are behaving when they're not being told what to do because that's when you really find out about individuals.
Ms. Tippett: I feel like a lot of this circles around to what seems to have been one of the startling realizations after 2008 that the market was much more captive to the human condition than we had convinced ourselves. I mean, you're really, you know, that's what you're talking about it coming down to, that rules do matter but it's still — it's how people behave. I mean, was this surprise? You know, economics is changing because of this realization. It seems so basic.
Mr. Walker: But go back, to relationships, I mean, Bob, you talked about firm ownership but in the old days before they went public, right, Goldman Sachs and Morgan Stanley minced partnerships, trusting relationships with clients and that kind of went away a bit it seemed to me. Everybody talks a relationship game, but it's not really, right. But who's the person over 25 years, you've always been there, they've always been there, you know who they are, the walls are down. I mean, our best deals always came from those people that you could just call and they'll tell you the truth. You knew that and so it was your network you built, right, and I think that kind of fell apart a bit.
I mean, and I still remember the old senior credit officers wandering around the bank, you know, would sit down with you because, Oh, we're going to keep 5 percent of this deal because we're going to make sure it's really a good deal. And then I'm just throwing over the days the investment bankers came in and said, Oh, we can always sell it. We don’t care. And so you sit there going, No. We should keep some. And that lost that culture of it's ours too. Right. That's the way the old firms worked.
So I think they're going back a bit, but also the firms are starting to look at my experience and they're bringing lots of people in to start thinking about this is how do they relate to each other? What human programs do you have? You know, are we going to learn from Google and what they're doing and actually use it in Wall Street, use it in the finance world? How do you get teams into flow states so that they actually work well together, right? How do you get performance over long periods of time that's consistently good and built on relationships and clients you actually keep over multiple years, right, and it's not a transactional business.
Ms. Tippett: Right. So that's interesting. So the world won't go back to the way it was. These companies won't go back to the size they were, but you're saying that the industry is finding new ways to create structures that put that human core back in the business.
Mr. Walker: And I find guys taking 20 percent of their life and spending a lot of time doing other things that start building those trusting relationships, right. Head of a firm I'm partnering with runs Apex Partners, he's leading prevention (inaudible) transmission of AIDS project with the UN, right, Allen Backen[sp?] is at Eden Park and he's, uh, chairs the master general's board. And so all of a sudden people are going there's something more here than just the banker or the deal person. You know, they've got something beyond themselves that I want to work with and that opens up and starts dropping the walls. I think that's an ethical relationship. It requires you to be more straight and human with another person.
Mr. Diamond: Is it going fast enough? Is it being communicated?
Ms. Tippett: No. I mean, do people know that the industry within itself, that leaders are talking this way that these kinds of new structures are being created? I mean, there's a lot of cultural dialogue about what laws are being passed and regulation, right, and then there's the 1 percent and 99 percent, but this is a real substantive discussion about substantive, incremental change and insight.
Mr. Walker: If the industry kept saying, Oh, look how great we are. We figured it out. We're better leaders now, everybody's going to go, Yeah, right. And so what I've seen is some hope, is it ain't the politicians that are going to fix things, right. It's not the tenured professors. It's not the one banker who stands up and says, OK. I'm going to really fix things. It doesn’t work like that anymore, right. And so, you know, this collaborative process I think starts to say, How do we fix things? How do we work on the right financial act and the right financial laws that actually have input from the community, that actually do have input from research but also have real involvement of the teams and the firms themselves?
And without that, you know, we can rail and lobby, you know, that these are guys that are awful, but where's the middle way? You know, where is the way that we're actually going to bring things together? So how does Jamie Diamond sit down with secretary of treasury along with, you know, consumer finance agencies and actually truly have an open discussion about what are we going to do now and how are we going to do this?
Mr. Walker: So I have a book that just came out called, The Generosity Network, and it's all about how do you create these walls-down relationship between donors and doers, people that actually — they're the same person, right. And so to my mind, when you start finding those opportunities to work on something bigger than yourself, you know, you create that opportunity to link with other people, it's joyous.
The guy that invented leverage buyouts, right, Ray Chambers, I work with equally in global health — he's says he's never had more fun until he retired after 46. He says, I had a blast, and he's done amazing things, right. And so there's a whole series of those people who sit here going I have a balanced life. They don’t have to give it up, but I have a way to give back that I can actually increase the meaningfulness of my life and to my mind, each person looking at that, figuring out what their own generosity network is or how do they connect, that's worth thinking about.
Ms. Tippett: So the question in the cultural mix would be what's your generosity network?
Mr. Diamond: There is a philosophy that I believe strongly in and I constantly say to myself why aren’t I better at executing on this and why doesn’t every business follow this rule and it's something I've always referred to as the No Jerk Rule. It sounds silly, but I have an opportunity now not to be leading an organization of 141,000, but we're building a small business and it's much easier in a small business, but it applies to big businesses and it just has a very simple assumption. We all know who jerks are. We all know people that don't have ethics and do have ethics.
I've never had a problem figuring out who are the jerks and who are the good people, so why do we allow jerks in our organization? Why don't we fire them? Why don’t we set the rules very, very clearly that if you're not acting in the best interest of the team, you have to leave? And it's a rule I've been better at executing and worse at executing, but one thing I know for sure is every time I took the easy way out, it came back and bit me in the butt. So there's my thought.