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For the City, it has come as a jolt even in an autumn of nasty shocks. The seven most senior Goldman Sachs executives, including chief Lloyd Blankfein, are waiving their bonuses this year. At Barclays, four bosses, among them John Varley, the CEO, and Bob Diamond, head of Barclays Capital, are doing the same. At UBS, the chairman and the entire board are also giving up their payouts.
Of course, none of the individuals ceding their end-of-year awards is poor. They won't be taking their children out of fee-paying schools, selling their third or fourth homes and returning the yacht just because they didn't hit the jackpot in 2008.
It's also possible to dismiss their generosity as a cynical PR stunt. They've written off tens of millions of dollars, they're laying off staff everywhere and they've had to go cap in hand to governments or outside investors. Now is not the time for them to be seen to be pocketing generous handouts.
However, it's impossible to over-estimate the trauma they have induced across the financial community. Suddenly, every banker of any seniority is taking a hard look in the mirror. The chiefs have created a trend: excess is out, thrift is in. They reflect a growing mood in the City - one increasingly preoccupied with "moral capitalism". For a decade, we luxuriated in materialism, in spending and borrowing like there was no tomorrow, in thinking of ourselves and not others. Nowhere was this selfishness more pronounced than at capitalism's epicentre.
Extravagant meals washed down with bottles of the finest vintage wines, lavish parties, junkets galore - these were the order of the day in a Square Mile that knew no bounds in terms of expenditure or behaviour. Occasionally, knuckles were rapped. But usually that was because the perpetrators were exposed and their employer publicly named - not because they consumed so much.
In City watering holes, the rest of society was treated with contempt. There was a definite "them and us" feel, as highly-paid City workers sneered at the less well-off. They still do, but to nowhere near the same extent.
The past few months have seen the City humbled. The sight of fellow Masters of the Universe - and make no mistake, that is how the City boys see themselves - begging for external assistance, some of it from politicians and government officials (species they view with disdain) and being torn to shreds in front of US congressional committees has been terrifying. Worse still was the termination of the once-mighty Lehman. As a symbol of where the new power now resides, the refusal of the authorities to step in and save the holed investment bank was stark.
Hit by accusations of greed and hubris, and with new, very different shareholders to respect, the bankers have been forced to confront themselves. It's not only bankers. This age of austerity, as it has been trailed, extends beyond the beleaguered financial quarter. Those who were previously celebrated - strutting oligarchs and the conspicuous super-rich - are now demonised. When news of Lord Mandelson and George Osborne's sojourn with Oleg Deripaska in Corfu broke, it wasn't the detail of what was discussed that did most real harm but the evidence of their hobnobbing with one who had become incredibly wealthy very fast.
Similarly, Jonathan Ross. While his prank call to Andrew Sachs with Russell Brand caused widespread opprobrium, what provoked anger inside and outside the BBC was his previous, carelessly-made remark that the £6 million a year star was "worth 1,000 BBC journalists".
Capitalism's opponents have been quick to pronounce its demise, relishing its torment - so Karl Marx and Das Kapital are in vogue again. Books on philosophy and self-help are best-sellers. Nassim Nicholas Taleb's The Black Swan: The Impact of the Highly Improbable has been devoured by those seeking an explanation for the disaster that has befallen them.
Frippery has been abandoned. Companies are asking serious questions about their purpose and how they relate to others. Nobody believes capitalism is dead but it has changed.
In 1991, Pope John Paul II presented his vision of the world since the fall of the Eastern bloc. Communism was over but in its place, he suggested, was not naked capitalism. He denounced the "consumer society" which tries to prove it "can achieve a greater satisfaction of material human needs than communism while excluding spiritual values" and championed the idea of a "moral" capitalism.
Something like that is occurring today - with the "greed is good" era being replaced by an altogether more concerned and benevolent, but still capitalist, face.
Moral capitalism is not new. It can be traced back to St Paul: "The love of money is the root of all evil." Adam Smith, the icon of free marketeers, wrote The Theory of Moral Sentiments, an overlooked work in which he dwelt on our need to help others less fortunate than ourselves, 17 years before his better-known Wealth of Nations.
In the US, the Caux Round Table, a network of business leaders working to promote moral capitalism, has existed for some time. In 2003, its executive director, Stephen Young, published Moral Capitalism: Reconciling Private Interests with the Public Good.
This week, the John Templeton Foundation, created by Sir John Templeton, the fund manager and philanthropist, issued a pamphlet: "Does the free market corrode moral character?" Thirteen business academics, philosophers and authors gave their answer.
Such soul-searching is taking place right across the City. If they are to survive and flourish in this altered environment, corporate titans are realising they have to adapt. That will translate into a new, caring focus. Companies are more likely to embrace charity, to lend their employees for pro bono work, to give more readily to arts, science and educational projects - and should do so. They will think more rigorously about how they come across and who they associate with.
They've seen reputations crushed and they don't want it to happen to them. One word that will be repeated often is "legacy" (it already is in the context of the Olympics but expect it to be used more widely). Anything temporary, here-today-gone-tomorrow is also for the scrap heap.
Capitalism is far from finished but "immoral capitalism" just may be - and for that, despite the pain of the past few months, we must be grateful.
Reader views (4)
In reply to Tony of Romford. This is no cheap shot, " if the performance is bad and they need bailouts, there should be no bonuses"
Well the Performance was bad, and they needed the taxpayer to bail them out in a big way. The Taxpayer has paid for this already, in lost jobs, houses etc. And the taxpayer will continue to pay for it for a long time to come. This is clearly unacceptable. And more accountability, more Policies and regulation to cope with any future excesses/errors of judgement are urgently needed to follow hard on the heels of this bail out.
Job losses from within the Financial Services are of course equally regretable, but would have been much worse without Government intervention.
- Mike, France, 24/11/2008 09:07
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an example of an Oxymoron: Moral + Capitalism
- W Joseph, London, UK, 24/11/2008 07:12
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Chris, its a cheap shot to blame the investment bankers for the current problems. Traders are paid on performance and clearly if the performance is bad and they need bailouts there should be no bonuses. If you need a scapegoat for this current problem you should look at Alan Greenspan of the Federal Reserve who kept interest rates too low for too long encouraging excessive borrowing and leverage
- Tony, Romford, England, 21/11/2008 17:05
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Perhaps these new moral capitalists could decide that it is a public duty to pay their fair share of Tax on their grotesque incomes. The very rich currently feel that they have a duty to avoid paying anything but a minimal amount. Shutting down the Offshore Tax Havens should be adopte as an International objective ASAP.
- Herbert Hoover, Acton England, 21/11/2008 11:01
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