[In] the near future…The financial landscape is deeply shaken by a series of crises and scandals. Financial power continues its mutation, and a coalition of international institutions, governments and social actors propose a global mechanism to regulate and tax financial transactions. The explicit political rationale for the measure is to contribute to the alleviation of poverty and to help the transition toward sustainability. It turns out that the newly elected U.S. Government is favorable to the regulation. The executive committee of a Big Bank convenes to discuss the new rules, and three senior executives propose different strategies to react to the situation. The first wants to aggressively fight the politics and work on public opinion in order to avoid regulation. The second would like to wait and see what happens while communicating the business’ good intentions to the public. And finally, the third seeks to align with the political effort and turn it into an opportunity to meet stakeholders’ ethical expectations and reinvent the Big Bank.

The CEO of the Big Bank has to decide about the strategy but, during the committee meeting, the Big Bank becomes the subject of an international grassroots campaign launched by activists who claim to fight financial injustice and promote increased accessibility to financial services by the poor. To complicate things further, the highly sophisticated campaign is led by a former executive of the Big Bank, who was officially laid off for ethical reasons, but is convinced that she was a scapegoat. She proposes an ultimatum to the CEO: Either he cooperates or he will be personally targeted in the campaign. Media and financial analysts are already asking for the Big Bank’s reaction.

So What Should the CEO Do?

In early 2008, I was invited by a “Big Bank” from the United States to design, write and teach this interactive case study about strategic ethical decision-making. It would be used as part of a three-day senior leadership program. I kicked things off with a theoretical session about the role of values and ethics in business. Participants were then asked to prepare detailed operations and communication strategies, including an appropriate reaction to the activists’ campaign, to align the Bank with the new regulations. In essence, the participants had to assume the role of the Big Bank’s CEO and explain how they would accommodate several competing interests with these new strategies.

This case contains a diverse range of issues, common in our age of global financial capitalism: Corporate responsi-bility, values-based consumerism, international regulations, political influence and public opinion (which includes the media). All integral aspects of the relationship between business and society, these issues are also prominent factors in contemporary business decisions. However, aligning critical societal issues with business values, such as financial profit, is clearly not easy.

Prima facie, embracing the political effort to fight poverty and promote sustainability by accepting taxation and regulation is not an obvious profit-winning strategy. On the other hand, fighting against political initiatives raises the ethical issue of disregarding a social effort supported by a large range of stakeholders, least of all the democratically elected government.

Implementation also raises some ethical issues. This leads us to ask two very important questions: What is the role and responsibility of business in society? And, in this specific case, what function do leading financial institutions serve in shaping the regulation of international markets?

WHAT IS THE ROLE AND RESPONSIBILITY OF BUSINESS IN SOCIETY? WHAT FUNCTION DO LEADING FINANCIAL INSTITUTIONS SERVE IN SHAPING THE REGULATION OF
INTERNATIONAL MARKETS?

It is my experience that in practice, senior business leaders continuously face the problem of aligning: 1) their own values about what is important and meaningful; 2) the values of the company as explicitly stated in its communications and implicit in its culture and ways of doing business; and 3) the values of society as upheld by the multiple stakeholders. For many business leaders, the ultimate dream of their professional life is to be true to their own values while working at their full potential for a company that shares these values and strives to serve society.

When working with these participants, I was astonished at how much analytical reasoning took place about ethical issues in their business. This type of thinking is paramount in order to balance values and competing interests, and needs to be complemented with emotional intelligence.

In this particular case, we discovered two major psychological issues that were obstacles to proposing powerful strategies that align values at the individual, company and societal levels:

• While regulation is generally perceived positively by individuals and the global community, it is looked at less favorably within organizations. Even when some program participants identified proactive business strategies that aligned with regulation, they found it difficult to accept the imposition of such regulation by the government. In a context where “no government intervention” is a pervasive attitude, it seems easier to cooperate with competitors against society, anti-trust activity, bribery, etc., than to cooperate with the government and risk challenging the position of industry coalitions.
• Activists are often perceived negatively, even when the substance of their message is analyzed positively from a personal and societal point of view. In particular, the Big Bank participants cited activists’ method of putting pressure on the company as aggressive, and this aroused negative feelings. As a result, though most Big Bank participants proposed strategies in line with the activists’ intentions, they made it clear they would not cooperate with the activists. This strategy, however, renders social credibility and trust building nearly impossible to achieve (or at least much more costly).

In summary, the senior executives’ perception of governments and civil society actors proved to be major determinants of the company’s ability to proactively implement ethical strategies.

As an academic, writing and teaching this case was a great opportunity. By going to the field and interacting with senior leaders of the banking industry, I experienced once again how much the role of business is changing and how concerned senior executives are about values. Working with such a large bank, I became convinced that we will not be able to avoid questioning the role of ethics and values in the business world, and the finance industry in particular. As individuals, our relationship with money is deeply ambiguous and a fascinating theme of personal development. But at the company level, work on our relationship with money is an absolute necessity; it makes less and less sense to design strategies and make decisions with the sole objective being financial performance as stakeholders increasingly demand that businesses play a role in addressing major societal and environmental challenges. Inside companies, the challenge is faced and innovation brought about by those business leaders looking to express their personal values and become agents of change, thereby creating the business world they envision.

Marc Le Menestrel is Associate Professor of Business at University Pompeu Fabra (Barcelona, Spain) and Visiting Professor of Ethics at INSEAD (Fontainebleau, France). The case “A Day at the Big Bank,” coauthored with Julian Rode in March 2008, is freely available upon request to the authors.