There has been a lot of concern lately about how "tone deaf" the financial institutions on Wall Street have been. Citi had to be pressured by the government to give up plans for a new $50M corporate jet; John Thain at Merrill continued to act like the company was rich; bonuses were equal to 2004 levels; etc.
Why are these things happening? Is it bad PR? I'm not really sure that PR is the problem of the answer. The answer lies somewhere in the culture and values of these firms and what has become the norm (status) in the financial sector.
It became normal for 24-year olds to become multi-millionaires; for the industry to push the envelope and create sub-prime mortgages and derivatives; for Bernie Madoff (just the largest but not the only thief) to create a Ponzi scheme that would never have collapsed had the market not caused a run to sell; etc.
The banks were pushed by Hank Paulson to take money from the government. They did and now they are operating with OUR money. There's an old saying for public companies. Everything that may be okay when you're private is not okay when you start operating with the shareholder's money. Conrad Black found that out. He thought that he was owed special privileges by the shareholders because he build his company. This, according to him, gave him the right to use shareholder money for personal uses. Sorry, that's not the way it works. He has time now from jail to consider who was right and who was wrong. I doubt he is convinced that he really did anything wrong--lousy shareholder rights system is to blame!
Every industry has a status of how it operates, the types of people who are drawn to the industry, the types who flourish, and what is considered proper. I learned this first-hand when I was at DuPont and we bought Conoco. We found out that the norms of behavior in the staid chemical industry were different from those in the oil industry. Similarly, when Nortel bought Bay Networks, we were introduced to a culture that was very different from our own.
Cultural misfit is one of the major reasons that mergers fail. If that is the case, we can see that culture and status within the industry or niche players within a larger industry, can determine an awful lot of how people behave and believe it is appropriate to behave.
The public sense of what the norms should be has shifted and the sands beneath the banks is shifting. The smart ones (Goldman Sachs and Bank of America) were quick to note the shift and adopt. The others likely looked at the early changers as "lackies" or those who wanted to placate those who didn't understand the industry.
Just this past week, the Wall Street Journal wrote extensively on why "greed is good" and that plans to curtail bonuses or executive pay will damage the industry. I don't like government being involved in the boardroom. I would rather have the market forces prevail. However, we are all involved in the boardroom by virtue of being owners of the banks. They have our money. We are the primary shareholders. We have every right to make demands on our money. In addition, banks are beginning to realize that shareholders are not the only stakeholders that matter.