Banks and Their Corporate Social Responsibility. (AIBF AGM and Annual Dinner-Perth)
This is an edited version of a speech given by Frank Cicutto Faibf to the AIBF Perth function on 15 October 2002.
Banks face a range of undesirable financial outcomes if they do not realise their responsibility to the community, says National Australia Bank chief executive and AIBF president Frank Cicutto.
While the banking and financial services sector is frequently the subject of debate and criticism we can also be proud of the contribution we have made to economic growth and stability and the social benefits that are the natural results.
Some of the debate and criticism of banks results from the strong profit track record and the attendant return on equity of the industry as a whole.
This should be balanced against the leverage required to make these profits. There are so many examples around the world that show a weakened banking system creates a chronically weak economy. Japan has struggled for years to restart its economy without the assistance of a healthy banking sector.
A profitable financial services sector is the engine of the economy. It is often overlooked that lending creates the opportunity for enterprise development and sustained economic growth.
The financing of business both small and large is vital to the creation of employment and therefore consumer demand.
Exporters rely on our financing and other market services to develop important offshore markets for commodities, primary produce and services.
Home ownership in Australia is among the highest in the world and the banking industry has been the major source of the funding for this great social benefit.
Many valuable infrastructure projects were made possible through the careful development of specialised skills to structure financing as government funding reduced.
Just as we have to do everything possible to protect the fabric of democracy in the face of terrorism we must defend and promote the integrity of our corporations.
Confidence and trust
Confidence and trust in the financial system is central to the continued prosperity of our nation.
Good corporate governance and proper corporate social responsibility will, in tomorrow's world, be seen as a key strategic imperative--just as significant as the right people, marketing and technology.
Not just a ticket to the game but a characteristic that differentiates one corporation from the field.
The community is demanding that corporations lift their standards in this crucial area.
I firmly believe that unless we get our industry into better shape regarding corporate citizenship there is the potential for a range of unattractive financial outcomes. Reregulation and the frustration of genuine innovation due to lack of trust within the community, politicians and regulators is a real danger.
Unless we address this issue we risk damaging a significant part of our economy.
The financial services sector is the third largest component of the Australian economy and contributes more than 7 per cent of Gross Domestic Product.
That is more than twice that of agriculture and one and a half times that of the mining sector.
One of the hallmarks of the current commercial era is going to be the move by corporations to redefine their role in society.
Sixty per cent of chief executives internationally surveyed by PriceWaterhouse Coopers said even the slowing global economy would not lower the priority of corporate social responsibility.
The number one driver for such a priority was the feedback from customers. The second highest ranking influence identified by chief executives was their board.
It would be a brave, and probably short-lived, chief executive who ignored either of these stakeholder groups.
The slowing world economic outlook will make it a greater challenge to balance the interests of shareholders and other stakeholders. …