Financial industry firms should define their larger purpose, suggests a discussion paper from the U.K.’s Financial Conduct Authority (FCA).
The regulator has published a series of essays that examine the role of purpose as an ingredient of sustainable corporate culture in the financial industry. The FCA said the essays include the views of industry leaders, professional bodies and culture experts.
“Putting a clear, meaningful, purpose, at the centre of a firm’s business model, strategy and culture is an important part of adopting a healthy culture,” the FCA said.
“When aligned to positive outcomes for shareholders, employees and customers, purpose can benefit firms and play a fundamental role in reducing potential harm to consumers and markets,” it said.
The regulator’s goal isn’t to develop new rules. Instead, the release of the paper is intended to prompt a larger industry conversation about creating healthy cultures.
“We are not prescribing what firms’ purpose should be. This is for each firm to define. But, we do want firms to realize the benefits of a purposeful culture,” it said.
Those benefits include more engaged, motivated employees.
“Purpose is a key reason people come to work. While financial reward clearly plays a role, people also work to achieve individual fulfilment and a sense of personal satisfaction,” the paper noted.
Shareholders that are sensitive to reputational and regulatory risk may also favour firms with healthy, sustainable cultures, it said.
The paper also noted that society is increasingly expecting firms to have a larger purpose.
“There are ever more insistent calls for firms and their leaders to step forward on climate change, on diversity and inclusion, on ESG (ethical, social and governance issues), on ethical use of data, on acting in the best interests of customers and not just to act so as to optimise profitability,” the paper said.
These shifting societal expectations could lead to policy that demands firms have a purpose beyond simply making money, it suggested.
Clarity around firms’ strategies and ethics could also increasingly become a requirement for client trust.
“Consumers who experience firms acting purely and selfishly for profit lose trust and may vote with their feet – and while trust arrives on foot, it leaves on horseback at a gallop,” the paper said.