A REPORT from Ecclesiastical Investment Management states that
companies in the UK and the United States have paid up to £150
billion in fines for misconduct over the past five years.
But the author of the report, Neville White, the head of policy
and research at Ecclesiastical, said this week that, although the
problem was vast, Christians were an important part of the
"There's a clear role for the Church in supporting responsible
capitalism. The Church is doing this incredibly powerfully, led by
the Archbishop of Canterbury," he said.
While banks attract attention for their misdeeds, Mr White's
research suggests that malpractice has been common across many
The report says: "Poor practices, and in particular
consumer-facing mis-selling, have become endemic, if not systemic."
The report identifies car manufacturers, pharmaceutical companies,
the technology industry, and energy firms as among those who have
received large fines for bad behaviour in recent years.
The scale of money lost to regulators through fines was vast, Mr
White found. The money paid out in compensation to victims of
Payment Protection Insurance (PPI) mis-selling now topped £22
billion - enough to pay for two London Olympics, or the entire UK
transport budget for a year.
The lowest estimate of total fines paid amounts to some 12 per
cent of UK public spending. As many as 6000 bankers are said to
have been suspended or sacked for suspected fraud since the start
of the financial crisis.
While the causes of this were complex, Mr White said that it was
clear that huge multinational companies were struggling to enforce
ethical conduct from corporate HQs. Besides globalisation, poor
training, commission-based pay, and inadequate regulation are all
named in the report as possible causes for an explosion in
malpractice by businesses.
Mr White argued that investors and consumers should be
concerned. "The serious point is that money [taken in fines] cannot
be used to reinvest or to pay it back to shareholders. The last
five years,we have gone through a global economic meltdown where
the public sector is being cut back. It seems egregious that, while
that goes on, the private sector gets away with this."
Another report by the think tank ResPublica on "virtuous
banking" last week proposed that bankers should take an oath,
binding them to act morally. The director of ResPublica, Phillip
Blond, said: "Britain's bankers lack a sense of ethos, and the
institutions they work for lack a clearly defined social purpose.
An oath would finally place bankers on the road to absolution."
Mr White said that he liked this idea, but that long-term
cultural change could also be enforced on companies from the
outside, by investors and consumers. "During boom times, business
ethics becomes a nice thing to do; but it's absolutely fundamental
when economies go into recession. Customers will vote with their
feet, and are looking to put their money and trust in business
which go along with their values.
"The Churches together have £13 to £15 billion in assets under
management [in Britain]. This is a large amount of money that can
bring to bear across the markets. They are doing a fantastic role
in engaging for change and higher standards across equity markets
here and in Europe."
Mr White said that the Church Commissioners, who earlier this
year reported the best results for their fund for eight years (News, 30
May), were not only getting large amounts of profit out of
their investment, but also helping firms to behave responsibly.
"This is a real challenge to investors," he said. "Rather than
disinvesting and saying: 'We think those companies are beyond the
pale,' we are trying to use our influence to protest to these
companies. But at what point do you say certain companies'
behaviour is so bad it comes unethical?"
The C of E's ethical investment guidelines do not prohibit
investment in specific types of activity, but place limits on what
percentage of a firm's turnover can come from prohibited fields.
For instance, a company that derives more than three per cent of
its revenues from pornography, or 25 per cent from tobacco,
gambling, or high-interest lending is deemed unsuitable for
It was this last guideline that was breached by the
Commissioners' investment in the private equity firm that owns the
payday lender Wonga (News, 26
July 2013). The Commissioners have now sold their stake in
Wonga, however, which was worth less than £100,000 (News, 11