George Mallinckrodt, a companion of the British Institute of Management and executive chairman of Schroders, stresses the importance of self-regulation in the City.
Much has been said and written about the standards of integrity of the City in the broadest sense. It is difficult to cite snapshot comparisons spanning the longevity and survivability of the City. However, we live today in an environment of enormously enhanced public accountability, which, given the participation of a vastly greater number of individual and institutional shareholders, is not only necessary but totally correct. Nevertheless, the fact is that, to this day, business is executed based on traditions, experience, skills, professionalism, tolerance, word of mouth and the letter - and hopefully still the spirit - of the law.
Yes, it is true that some do not abide by the rules but the self-cleansing process continues to work now as in the past, and is still the most effective way to deal with the culprits. In the end it is up to each and every business to ensure that it sets its own standards and enforces them to the best of its abilities. Clearly the question of ethics and integrity is vitally important in today's business environment.
It thus must form an integral part of the training of young people as they join firms and, through the action of the firm, be a regular reminder of the standards to be upheld. It can only operate from the top down, as the younger generations will inevitably learn to repeat total honesty, high standards of integrity, and will develop a sense of responsibility by being trained that way and by accepting it as second nature. Any compromise of what is or is not permissible trespasses all too easily on the borders of the unacceptable.
We have clearly experienced for perfectly good reasons a period of increased rules and regulations. Many will argue that the law has in many ways reduced the need for, or indeed the degree of, self-regulation. True as that conclusion may be, I do believe that the need to continue with self-regulation has in no way been diminished.
As a financial centre, London is still less regulated and less cumbersome than either New York or Tokyo. London's complexity, however, has increased immensely. The open policy of allowing an enormous number of institutions from every corner of the world to settle and operate in London has been skilfully and successfully implemented, predominantly by the Bank of England, over many years.
It is important that as new rules and regulations are formulated, every effort is made to ensure that people with responsibility are fully conversant with such rules and that senior management makes every effort to ensure that rules and codes of conduct are fully understood and accepted. One sometimes questions whether sufficient effort is being made to ensure that papers dealing with this subject are not only circulated but properly read and digested, so that in the final analysis there is no excuse to claim ignorance. It is also important from a commercial point of view that firms should act in a manner that is beyond reproach, not forgetting that "good compliance is good business".
But it is a Herculean task to try to ask everyone to conform to one common denominator. This is particularly true when you take into account the many different cultural backgrounds, the language complexities or indeed the different legal and regulatory systems involved. The bigger the market, the more international its ramifications, the greater is the need to achieve the proper balance between regulation and self-regulation. While the requirement for integrity is clearly absolute, integrity itself is not an absolute and one must never lose sight of the fact that even among honest and honourable people the perception of what is ethical varies both from generation to generation and from country to country.