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Who's in Charge?

Towards a Leadership of Service

Author(s): Harry Bohan

ISBN13: 9781847302168

ISBN10: 1847302165

Publisher: Veritas

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  • The question of leadership has to be one of the most critical facing us as a society right now. The twentieth century was about institutions; they shaped us.

    There is now a distrust of the institutions that were central to our lives, and people are calling into question the way leadership has been exercised. We are aware of the need to change, but what kind of leadership will bring about that change? It is clear that a lot of organisations will have to return to first beginnings. What are banks for? What is the Church for? How does business and community connect? Is politics about parties or people? To whom do young people turn for ideals, for a sense of meaning and purpose? What kind of community/local leadership is needed?

    These are fundamental questions for our time and for the systems that serve us. There is no scarcity of analysis. There is no shortage of ideas. The papers from the 2009 Céifin Conference aim to address the kind of vision, values and leadership required for recovery.

    Contributors include Rachael English, Ray Kinsella and Michael Drumm.

  • Harry Bohan

    Fr Harry Bohan has been a priest in the diocese of Killaloe for over fifty years. A qualified sociologist, he is a pioneer in the areas of rural housing and community development. He established the Céifin Centre in 1998, a think tank for values-led change. One of Ireland’s leading social commentators, he has written substantially about Christianity, spirituality and economic development. A hurling enthusiast, he is also former manager of the Clare hurling team.

  • Be the first to review this product

    The papers of successive Céifin Conferences have aimed to be thoughtful, constructive examinations of current problems, rather than a reaching out for headline grabbing sound bytes. The 2009 papers address the sensitive and very relevant topic of leadership: what style of leadership is called for and will be effective in our present travails. Is it a leadership that is satisfied with conformity, or is it to be a leadership that inspires us to give what we can for the good of the community? As the Céifin website says, the aim is to point us towards values-led change rather than tinkering with the structures.


    Within the constraints of this short review it is not possible to highlight the many thought-provoking points made by the various contributors. But to mention a few of them: Philip Lowe is very helpful in explaining why a collapse in confidence in the banking system led to general recession. It is in the interest of banks to accept a measure of responsibility for the general well being of society, and therefore for the preservation of trustworthiness and personal responsibility.


    Jim Powers assessment of the economic legacy of Bertie Aherns time as Taoiseach is quite devastating. One such disaster in the history of a nation is quite enough: there is a great need of effective regulation.


    In the joint contribution of Ray Kinsella and Maurice Kinsella it is surprising to find in contemporary Ireland an analysis of our present situation which is overtly religious, courageous in being prepared to speak openly of Christ and of his command to serve and consider others. The destruction of the ideal of trust and sharing, of community, is at the root of our woes.


    In `The Culture Challenge Paula Downey warns that we need to change the institutions that shape our choices and decisions: its later than we think. Fr. Michael Drumm tells us that a truly Christian-minded person can be a leader: sensitive to the message that comes from his/her own heart and from the factors that build up their life: we should drink from our own well first.


    Is anyone listening? As I write, the banking crisis is still the principal preoccupation of the government and of the media. Its like concentrating on curing an ulcer while ignoring the fact that the patients entire health structure has broken down.


    It may seem churlish to point out that there are a few annoying misprints. Christianity, and Islam, have tenets, not tenants: And Poloniuss advice on borrowing and lending was not addressed to Hamlet. But the more people read the papers presented in this book the better: we need a new vision.


     - Robert Arthure, The Furrow, Nov 2010


    The Ceifin Centre for Values-led Change was founded in 1998 and one of its main activities has been organising conferences in which academics, churchmen and others come together to debate social issues of importance. This book records the proceedings of the 2009 conference when clergy, academics and journalists came together in the wake of the financial collapse and the loss of confidence in our political leaders. The aim of the discussion was to devise a new form of leadership that was more responsible and responsive to peoples needs and which would foster a more inclusive society. The speakers examined the values that prevailed during the good years, the types of community action that are now needed, and the broader issues of leadership among politicians, bankers and businessmen with a view to ensuring that we get out of the current mess and do not make the same mistakes again.

    - Books Ireland, September 2010


    Philip Lowe, Director General for Competition, European Commission

    In Maslows well-known hierarchy of needs, the means to survive are fundamental: the capacity to breathe, to eat, to sleep, but also to be safe both from natural dangers to life and health and from human aggression, domination or exploitation. If your very means of survival are under threat , of physical violence, of losing income and employment, of losing the roof over your head , then seeking ways to eliminate or mitigate those threats is a natural human instinct.

    Actually being able to recognise when these threats become important is a constant human challenge. History is littered with incidences where people or civilizations denied that there were threats and then were confronted with harsh realities.

    Unfortunately, the more security and sense of well-being that people accumulate over time, the less likely it is that they will be conscious of the dangers ahead. At the same time, if we all lived in constant fear of being attacked or being exploited or of everything getting worse, then life would really become, as Hobbes described it, solitary, poor, nasty, brutish and short. Thomas Hardys novels also pervaded that same sort of fatalism that, as a general rule, today will be worse than yesterday and tomorrow will be worse than today.

    One traditional way of responding to threats to survival or identity is to avoid depending on anyone else for anything. According to this precept, a person who is at the mercy of external influences and events is not truly free. The ancient greek cities strove for an independence of this kind, this autarkia. self-sufficiency limits at least the potential harm from other people and other civilizations. In Yorkshire, where I grew up, being self-sufficient was looked on fairly positively. If tha gives owt, give it tha sen, they used to say. And, of course, there is the commonly held view that if you want anything done, doing it yourself is the most reliable alternative. In Ireland, the old traditions of sinn F?®in are not so far away from this aspiration of self-sufficiency, the belief that the survival of the nation and of Irish identity could only be preserved through greater concentration and reliance on we ourselves.

    Yet, while accepting that parts of human nature can and have produced devastating bouts of belligerency and violence between people, the remarkable thing is that human beings have shown a remarkable degree of curiosity and susceptibility to be influenced by others. Their capacity to accept and often to adopt the characteristics and mores of their fellow humans has been immense and unequalled, at least in the natural world of mammals.

    Generally, outside exchange and influence has strengthened a society, but necessarily on the assumption that it does not lead to domination and exploitation. It is also interesting to observe that each time societies have decided to draw in on themselves and suppress internal diversity, be it Cromwellian England, the soviet satellite states or the Khmer rouge of Cambodia, they have not been able in the end to suppress an internal impulse to break free in some way or other.

    This should not be interpreted as some inevitable and inbuilt political tendency towards Western-style democracy , there is no evidence for that , but there is a fundamental desire of human beings to interact together and to develop their own identity and strengths on the basis of that interaction.

    Markets are one institutional form of human interaction where openness to exchange can bring benefits to buyers and sellers. Yet leaving things to the free play of markets doesnt always produce the results that society wants. Adam smith, for his part, vaunted the benefits of markets: Freedom of exchange and transaction is itself part and parcel of the basic liberties that people have reason to value. And to be fair to him, economic history supports the view that, as a general rule, markets deliver in terms of price, quality, choice and innovation.

    Public and private monopolies and central planning have never won any consumer satisfaction surveys. As Winston Churchill wrote, capitalism may be the worst economic system, except for all the others. At the same time we are all too aware that markets and private enterprise dont always deliver the best results:
    - they ignore public benefits (positive network effects) and they ignore public costs (pollution, congestion);
    - they do not automatically deliver outcomes in terms of goods and services that the public may value (reduction of health and safety risks, child labour, animal rights);
    - they ignore distributional issues (social and regional disparities).

    All these divergences between market outcomes and outcomes beneficial to society clearly call for the need for legislation to control how markets function. This legislation doesnt replace markets; it places them in a framework designed to ensure that market outcomes achieve acceptable levels of benefit for society as a whole.

    Competition law, together with specific regulation of economic sectors, aims to control the behaviour and structure of businesses and business people:
    - stopping cartels between companies that maintain prices or restrict output;
    - prosecuting abuses of market power by dominant companies (refusal to sell, tying and bundling, predatory pricing, fidelity rebates);
    - prohibiting restrictive agreements that frustrate competition on the market;
    - preventing mergers that lead firms to obtain or strengthen a dominant position on a market without their having to compete to make more sales.

    In network industries such as energy, transport or telecoms, there is a need not only for ex-ante regulation of markets, but also for regulators to control the behaviour of dominant incumbents.

    But is legislation, and its enforcement by public authorities, the only effective way of reconciling private structure and behaviours on the one hand and public values and standards on the other? clearly a lot of legislation could be avoided if the ethical standards of firms and individuals were very high. Individuals who trade illicitly or make secret agreements with their competitors have to be detected in their wrongdoing and then punished. enforcing laws against such behaviour is expensive and often ineffective as most of what goes on remains secret.

    Many professions, such as estate agents, vaunt their adherence to strict codes of professional standards. sometimes that self-regulation avoids legislation and increases enforcement of the best standards. sometimes it is a device to stall pressure for legislation.

    Another form of self-regulation is compliance programmes within companies, which aim to increase enforcement of the law and/or of codes of conduct. They are particularly effective if the company itself applies sanctions on individuals for lack of compliance, whether by asking for resignation or blocking bonuses, promotions or other career moves.

    but to what extent, even with regulation and self regulation, can society rely on the working of markets to produce outcomes that converge private objectives with public values in an effective way? There are arguably a number of issues related to quality of life, well-being and to morality itself, which defy regulation or regulators.

    I come back here, for example, to the relationship between what is euphemistically referred to as a service provider. If you have a bank account, does someone in the bank need to know you (your profile, your needs, etc.) or is it sufficient for the bank to know your account and not you? We can ask that question in a pointed way in relation to the availability of mortgages online without references. Is it, therefore, sufficient for private service providers to market attractive credit offers, but not to assess whether the individuals concerned have a realistic possibility of reimbursing the sums they contracted to owe? And does regulation , obliging a call centre employee to tell you the limits of the liability of the provider , really help anyone except the provider itself?

    From this perspective, I want simply to put forward the proposal that the sustainability of any society depends on some consensus among all its members that private rights, even if contained by legislation, have to be exercised in a way that recognises a degree of civic responsibility.

    To a significant extent, modern society seems to have allowed individuals and institutions to buy into their rights, but in general to disengage from active recognition of responsibility, unless it is enforced by law. As a general rule, this means that we place a huge premium on what happens in the short term, in terms of our legal rights and obligations, while ignoring what is happening in the longer term. everyone, for example, is afraid of climate change and melting icebergs, but very few support the idea of stricter road pricing or taxation on aviation fuels.

    In the banking sector in particular, we can see a breathtaking confrontation of insistence on private enterprise and the right to make profits and receive bonuses, while at the same time a presumption that if a bank or banks are in difficulty, they are either too big or too systemic to fail. so private benefits are privatised and private losses are socialised. Is traditional market regulation alone capable of containing this imbalance? Or should we not be insisting on some form of social contract between a private company and society, a contract that will provide some guidance on what conducts will be tolerated and whatnot? Admittedly, in the end, this may all come down to some form of regulation. However, if it is not possible to instil into market players some form of civic responsibility on an individual basis, perhaps some form of social contracting is now necessary.

    Before reaching more general conclusions on this issue, I would like to come back for a moment to the recent financial crisis, its causes and the lessons we should draw from it.

    Money is key to the functioning of the economy and society. Its major functions are as a medium of exchange and as a store of value. Most people regard money as a form of protection. A character in one of Martin Amis books declares aptly, I must put more money round me, more money soon. I must be safe. At the same time money liberates. It allows us to do things: to buy things we want, to invest in things we feel are good. As a means of payment, it allows people to trade in goods and services throughout the economy without the need for the bartering of equivalently valued goods. crucially, too, money markets, like other markets, reduce the need for buyers and sellers to know each other very well. providing the money exchanged retains its value, getting money in return for a good or service is sufficient even if the person you are dealing with is a complete stranger. In a very thought provoking book called The Company of Strangers, Paul Seabright examines the extent to which money and markets allow for substantial trade and interconnectedness between people and societies without the need for more than distant relationships between those at either end of a transaction. The trust and confidence that is required for transactions to be successful is displaced from the relationship between people to money and markets.

    Of course, money also allows us to trade something now against something in the future. Polonius advice to Hamlet was to be neither a lender nor a borrower, but without lending and borrowing a lot of things would not happen which could happen. Through the supply of credit, businesses can grow, prosperity and jobs can be created. The quality of our lives can be improved by new schools, roads and infrastructures of all kinds. Mortgages allow people to spend most of their lives in houses which they can call their own , or at least feel that way! Through loans for education and training, people can invest in themselves, reap the benefits and repay the loans without difficulty.

    However, it is in the supply of credit where trust and confidence in money and markets is most crucial. After all, the whole starting point for successful banking is to use short-term funds as a basis for long-term lending. generally speaking, depositors do not have to use their money all the time , and all of them do not need it at precisely the same time. so banks can lend long to large multiples of deposit volumes, providing they have enough funds available at any time to satisfy the small proportion of cash that depositors need immediately and pay interest on the funds invested with them. There can only be a run on a bank when it is clear that people have lost confidence in its ability to meet its normal liquidity requirements.

    There have been bank runs for centuries, but with a few exceptions, they have not resulted in a general financial crisis in the countries concerned. Traditional banking methods contributed to this. The caricature of the prudent and sceptical bank manager reflected the perceived need by banks to know the profiles of the people and the companies who wanted to borrow from them. In the last two decades, this traditional model was called into question in a number of countries. Markets, and particularly property markets, were sufficiently buoyant so the profiles of borrowers became a secondary importance. The maximum amounts which people were able to borrow against their income increased substantially. so did the levels of debt which firms were able to raise in relation to their equity base.

    In addition, banks realised that basing their lending only on deposits was limiting their profitability. They could make even more money by funding loans from borrowings on wholesale money markets. And they could be even more profitable if they insured themselves with others against the risk of default by borrowers and traders, rather than having to make provisions on their own balance sheet. As a result, new markets were opened up for a range of asset-backed securities, credit default swaps and other derivatives. For the most part, banks succeeded in keeping these activities off their balance sheets. In addition, they were able to move the loans related to these new products off their balance sheets. This in turn allowed them to increase lending within the loan to deposit ratios allowed under banking regulations. At the same time, many banks made predictions as to the likely returns on financial products using mathematical models that assumed previous rates of growth and expansion.

    What were the consequences of these developments? First, high levels of leverage, which made firms and banks vulnerable to any significant economic downturn. second, a large volume of interbank trading in financial products where few market players had any clear idea of the risks associated with the portfolio of products that they were holding. As a result, when the subprime crisis in the United states undermined market confidence in the valuation of property and derived financial assets, there was a disproportionate fall in market valuations and a major credit squeeze due to a fundamental lack of trust on the ability to honour commitments, not only between banks and those who borrowed from them, but also between banks themselves. Towards the end of 2008, this led to the absurd situation in which major volumes of funds were being extended by central banks in order to provide liquidity to banks, while at the same time these same banks were depositing funds back with the central banks because they were not prepared to lend to firms or ordinary people, or even to lend to each other, for fear of being faced with major losses.

    These developments proved in dramatic fashion to what extent the relationship between banks is systemic. In other words, the difficulties of one bank can rapidly reduce confidence in the whole banking system unless its problems can in some way be ring-fenced. You only have to compare the reaction of competitors to companies in difficulty with those of banks in difficulty. The CEOs of competitors to companies in difficulty usually have smiling faces because they know they are about to pick up some business from their failing rivals. However, the faces of competitors to banks in difficulty usually look quite glum, because they know that the failure of the bank means they will normally be involved in some losses, due to the substantial amount of lending between banks.

    In addition, any banking system will face difficulties to the extent that the risks underlying the assets held by banks are not clearly identified and the potential associated losses anticipated. This is why finance ministers of the G20 countries, and in particular EU finance ministers, have put considerable effort in the last twelve months into putting in place new financial regulations, which will ensure greater transparency in financial markets and stricter disciplines on banks to prevent the repetition of recent crisis conditions. Ultimately, these changes in regulation aim to restore trust and confidence between banks and within financial markets as a whole.

    One can nevertheless ask the more searching question as to whether the underlying reason for the crisis has not been a lack of recognition of the systemic relationship between banks and the real economy. The trend towards a more distanced relationship between banks and their clients, together with the obfuscation of underlying asset values in complex financial products, has arguably undermined the basic requirements of an effectively functioning market economy: openness, trust and confidence between people who trade between each other and who use financial transactions as a means to trade. The value of financial products, whether in the form of cash or bonds or shares or derivatives, is after all a reflection of the value of assets, goods and services that can be bought and sold with them. Financial products are ultimately not in themselves a generator of wealth. so there is a fundamental interconnection between what banks and other financial institutions do on the one hand, and what happens in the rest of the economy and society.

    This brings me back to the main theme of what I would propose to you today: that private companies and banks should on their own, as well as the general interest, respect some public values and accept some civic responsibilities, going beyond compliance with regulation. Our societies and our economies comprise complex relationships of interdependence and interconnection, whether in markets or more widely in social networks. And these relationships depend for their effectiveness on trust and confidence between all those involved. Isnt it time then to look beyond regulation to some form of contractualisation of the relationship between banks and the rest of society? Shouldnt there be commitments to codes of best practice on lending to individuals and to firms? Shouldnt there be some commitments to support growth and employment in the communities where banks are located? Shouldnt there, in the end, be a recognition by the financial sector of some civic responsibilities that go along with the freedom they have to create value for their shareholders?
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