The global financial crisis was caused by a lack of responsible leadership at the highest levels of some financial services companies, Joseph Iannicelli, president and CEO of The Standard Life Assurance Company of Canada said on Monday.

Speaking at the Canadian Club of Montréal, Iannicelli said that too many financial institutions around the world took on too much risk, in too many creative ways. Confidence in financial institutions has been severely damaged because firms failed to live up to their moral obligation to maintain their bond of trust with their customers and society, he said.

“We have a duty to cultivate leaders who hold strong values, who understand their responsibility to ensure that Canadians are confident in our financial system; and who are capable of balancing risk, innovation and growth,” said Iannicelli.

He said no institution should be too big to fail, and that the financial system needs to be devoutly capitalist, letting the market decide which firms will survive. Financial institutions led by leaders who understand and respond to their responsibility to the wider community will survive and flourish, according to Iannicelli.

He said every company must innovate to remain relevant, and management must provide the right mix of rules, guidance and structure to foster creativity.

“Regulation should be the baseline of governance, not a rule book for behaviour,” Iannicelli said. “The Canadian system is not broken, so let’s not be in too much of a rush to fix it, especially if fixing it leads to less innovation and ultimately, slower growth or lack of competition.”

He said he strongly believes that financial services companies can innovate responsibly without additional regulation by ensuring that the consumer is financially literate.

“Standard Life and the insurance industry are eager to work with governments to leverage our expertise and proven ability to ensure all Canadians have access to a retirement plan and the appropriate financial knowledge that will allow them to live in comfort during their retirement years,” Iannicelli said.

On the topic of executive compensation, Iannicelli recommended that leaders be compensated according to how well a corporation delivers value to its shareholders while meeting objectives that address the interests of a broad range of stakeholders.

“We need to encourage creativity and controlled and well understood risk. We need to ensure strong levels of short and long-term profitability,” he said. “That means that management teams and boards of directors need to do more to consider long-term value creation.”