Previously posted on Forbes.
Nearly 80% of Americans have a negative perception of big business. High-profile scandals, stagnant wages, harmful products, and poor working conditions are all to blame. That’s why the Business Roundtable made waves in August when it published a revised mission statement, signed by 181 prominent CEOs.
According to the new statement of purpose endorsed by financial firms including JPMorgan Chase & Co., BlackRock, Inc., and Vanguard Group, companies have a duty that goes beyond delivering profits to shareholders. They also have a responsibility to invest in their employees, deliver value to customers, deal fairly with suppliers, and support their communities.
Jamie Dimon, CEO of JPMorgan Chase and chairman of Business Roundtable, expressed his support by saying, “The American dream is alive, but fraying. Major employers are investing in their workers and communities because they know it is the only way to be successful over the long term.”
Some critics argue that, barring government intervention, corporations will never prioritize social good over profits, while others have pointed out that corporate law precludes the Roundtable from redefining anything. Each corporation is managed by a board of directors, whose only accountability is to the corporation and its stockholders.
But even if the revised mission statement is purely symbolic, it shows that these corporations are increasingly sensitive to consumers’ — and even shareholders’ — demands for greater social responsibility. Financial institutions, in particular, could benefit from taking a more altruistic approach and rebuilding consumer trust. But to do so, they must take action that demonstrates a real commitment to employees, customers, and the communities they serve.
That’s something that matters to small businesses as well, which heavily rely on the success of the communities they operate in. Here’s how both types of businesses can deliver:
1. Reframe Employee Opportunities
Financial institutions are no longer just competing with other banks for the most promising recruits; they’re competing with the tech industry and the lure of entrepreneurship. Millennials want to find innovative solutions to the world’s most pressing problems. As an industry experiencing dramatic upheaval, finance is a great place to start.
“I don’t think we get to the fundamental value of what the financial industry does in the economy globally,” says one director who participated in EY’s bank leadership convention. “Young people want to make change and improve the world, and you can absolutely do that in our industry.”
Unfortunately, finance has a reputation for being stodgy, bureaucratic, and slow to evolve. To fix that perception, institutions need to change the way they treat employees. Rather than hand down orders, they need to restructure their workforces into agile teams that have more freedom and autonomy.
To manage a workforce of impassioned innovators, businesses need leaders who can effectively handle the core business while developing a vision for the future. Tomorrow’s leaders must be able to turn their visions into actionable initiatives and galvanize the people they manage. They need to explain how tasks fit into the big picture, lead with conviction, and communicate to employees how their roles help the customer.
2. Advise the Whole Human
Perhaps no one in the banking industry has a greater duty to deliver value to customers than financial planners. But wealth management is about more than analyzing market trends. There’s a human element that’s often lost at firms where brokers are responsible for hundreds of portfolios.
Money is emotional for clients — especially when they’re seeking help during traumatic life events such as illness, retirement, or the death of a loved one. Even clients worth millions experience financial anxiety, so some wealth managers are introducing psychology into their financial advisory practice.
“Behavioral Wealth Management rests on the principle that people lead their lives one choice at a time and that the only one who knows what’s best for each person is that person,” observes David Geller, CEO of behavioral wealth management firm JOYN [Editor’s Note: JOYN merged with Wealth Enhancement Group on May 1, 2020]. When clients are facing life’s critical junctures, the job of a financial advisor is to set them up to make the best possible financial choices at each point.
To make this shift, customer-facing companies must be adept at helping clients feel capable — not helpless — in the face of change. This starts by reminding clients of what they can and can’t control and then asking questions to help guide them toward smarter decisions.
3. Focus on the Community
In the wake of the 2007-2008 financial crisis, many banks tried to repair their tattered reputations by donating money to charity. Consumers saw right through this PR Band-Aid because banks’ motives weren’t aligned.
To recover their humanity, financial institutions need to reconnect with their communities and, in the words of JPMorgan’s Dimon, “push for an economy that serves all Americans.” One bank that has excelled at this in South America is Caja Rural Los Andes, a Peruvian bank that provides loans to rural Andean communities.
According to chairperson Rosanna Ramos-Velita, the bank’s purpose is to “eradicate poverty.” This vision became clear for her when she met a woman selling tacos outside a branch of a Mexican financial institution run by Citibank. An $800 loan from the bank had allowed this woman to grow her business and dramatically improve her family’s life. While not every business can focus exclusively on working capital loans in rural communities, any company can strive to improve its economic participation in its community.
In order for financial institutions to fulfill the promises set forth in the Roundtable’s mission statement, executives need to understand how their decisions impact the people they serve — including employees, customers, and communities. All of these stakeholders are interconnected for all businesses, not just those in the finance sector. And if leaders of companies both big and small can wholeheartedly commit to the challenge, they’ll learn the true meaning of “doing well by doing good.”
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.