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Gaping Gaps in CSR at Banks:
An inquiry into the CSR practice, what it can and cannot achieve.
Essay for the Research Master in Philosophy at
The University of Amsterdam
First Reader: Ewald Engelen
Second Reader: Huub Dijstelbloem
Etienne Coerwinkel
Stnr: 0488623
April 17, 2009

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Contents
Synopsis………………………………………………………………………………………………………………………………... p. 4
Acknowledgments…………………………………………………………………………………………………………………. p. 5
Introduction………………………………………………………………………………………………………………………….. p. 6
Part I: Banks and Corporate Responsibility: the double gap…………………………………………………… p. 14
1. The double Gap…………………………………………………………………………………………………………. p. 14
a. Banks are depositories of our trust…………………………………………………………………….. p. 15
The indirect responsibility of banks………………………………………………………………. p. 18
Yet banks are not meeting NGOs expectations…………………………………………….. p. 19
b. What banks cannot deliver…………………………………………………………………………………. p. 20
Matters of facts and matters of concern………………………………………………………. p. 21
Matters of facts……………………………………………………………………………………………. p. 22
Matters of concern………………………………………………………………………………………. p. 23
c. What banks are not requested to deliver……………………………………………………………. p. 24
The US Subprime crisis: a responsibility of banks?............................................ p. 25
d. How we will address the questions raised by the double gap……………………………… p. 27
2. Definitions and theoretical questions……………………………………………………………………….. p. 28
a. The notion of responsibility………………………………………………………………………………… p. 29
What is ethically correct?.................................................................................. p. 30
The issue of many hands………………………………………………………………………………. p. 30
b. Corporate responsibility……………………………………………………………………………………… p. 31
What is socially responsible?………………………………………………………………………… p. 32
c. The globalization of the banking sector………………………………………………………………. p. 34
The liberal view…………………………………………………………………………………… p. 34
Ownership of the firm: shareholder theory versus communitarian
stakeholder view………………………………………………………………………………………….. p.35
Global business…………………………………………………………………………………………….. p. 36
d. Corporate Social responsibility: a First reformulation………………………………………… p. 37
Part II: The current practice of Corporate Responsibility: a critical review…………………………….. p. 38
1. Corporate Responsibility: a historical perspective…………………………………………………….. p. 38
1960-1976: the world order contended............................................................ p. 38
1998 and after: Global business becomes Global business............................... p. 40
NGOs are now institutionalized parties………………………………………………………… p. 41
2. Reviewing the current Corporate Responsibility practice………………………………………….. p. 42
a. The GRI Guidelines……………………………………………………………………………………………… p. 43
b. The empirical review…………………………………………………………………………………………… p. 45
How do Corporate |Responsibility reports address the externalities
identified by NGOs……………………………………………………………………………………….. p. 45
Governance…………………………………………………………………………………………………... p. 48
Do the Corporate Responsibility reports address the externalities linked to
the core activities of the bank and particularly the notion of financial
stability…………………………………………………………………………………………………………. p. 49
Corporate responsibility and the notion of financial stability………………………… p. 49
3. External critique of the practice of Corporate Responsibility……………………………………… p. 50
a. The critique formulated by Banktrack…………………………………………………………………. p. 51
Human Rights……………………………………………………………………………………………….. p. 52
Climate change……………………………………………………………………………………………… p. 53

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Matters of fact and matters of concern (2)……………………………………………………. p. 55
Matters of concern are in need of political articulation…………………………………. p. 56
b. Critique of Corporate Responsibility practice in literature…………………………………… p. 58
Corporate Responsibility and the level playing field………………………………………. p. 58
Will Corporate Responsibility create a new economy……………………………………. p. 59
Veto or engagement……………………………………………………………………………………… p. 60
4. CSR practice within the bank……………………………………………………………………………………… p. 61
The defensive nature of the Corporate Responsibility practice of banks……….. p. 62
How do banks position themselves in the shareholder-stakeholder debate….. p. 62
Corporate responsibility and corporate governance……………………………………… p. 63
Deal by deal: the working floor perspective………………………………………………… p. 65
5. The need for a reflexive redefinition of the bank’s social responsibility……………………. p. 67
Part III: searching for a new definition of Corporate Responsibility for banks………………………… p. 69
1. Corporate Responsibility redefined…………………………………………………………………………… p. 69
a. From moral choice to political issue……………………………………………………………………. p. 69
The notion of the public………………………………………………………………………………… p. 69
Building a democratic consensus…………………………………………………………………… p. 70
The notion of politics…………………………………………………………………………………….. p. 71
b. What is the corporate responsibility of banks?....................................................... p. 72
2. Banks and the Basel 2 agreements: global regulation of banking activities……………….. p. 73
a. Basel 2………………………………………………………………………………………………………………… p. 73
Basel 2: a mixed form of regulation and self-regulation………………………………… p. 74
The weakest link……………………………………………………………………………………………. p. 75
b. The political character of the Basel 2 regulation………………………………………………….. p. 76
Where is the Public in the Basel 2 discussion? ……............................................ p. 77
c. Financial stability is a corporate responsibility of the banks………………………………… p. 78
Mark to Market…………………………………………………………………………………………….. p. 79
Interdependency of the Financial actors……………………………………………………….. p. 80
Interdependency of financial flows and the power of exporting countries……. p. 81
Bonus schemes affect the risk taking appetite………………………………………………. p. 82
3. The issue of governance in a deliberative Corporate Responsibility model………………… p. 83
a. The issue of individual responsibility…………………………………………………………………… p. 83
b. The democratic deliberative process…………………………………………………………………… p. 84
A need for a democratic process…………………………………………………………………… p. 84
Fight for one’s interest………………………………………………………………………………….. p. 85
Conclusion……………………………………………………………………………………………………………………………… p. 87
Bibliography…………………………………………………………………………………………………………………………… p. 89

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Synopsis:
De verantwoordelijkheid van bedrijven, en die van banken in het bijzonder, is een complex begrip.
Deze complexiteit komt slecht naar voren in de recente ontwikkelingen rondom Corporate Social
Responsibility (“CSR”) omdat deze ontwikkelingen plaats hebben gevonden in een gegeven historisch
context, waarin antwoord moest worden geboden aan de druk die NGOs (Non Governmental
Organizations) op bedrijven uitoefenden. Echter, als we de praktijk van CSR onderzoeken, zien we
dat banken op minstens twee fronten falen: banken kunnen enerzijds niet voldoen aan de
hooggespannen verwachtingen van NGOs, omdat deze verwachtingen iets aan de banken vragen die
ze niet kunnen leveren namelijk, een democratisch besluit over hardnekkige sociale problemen.
Anderzijds hebben banken tot dusver niet het concept van verantwoordelijkheid reflexief op zichzelf
toegepast waardoor ze cruciale verantwoordelijkheden weigeren te zien. Stabiliteit van het
financiële stelsel zou daar een voorbeeld van kunnen zijn, een voorbeeld dat ons nu in een diepe
crisis heeft getrokken waar banken deels verantwoordelijkheid voor dragen.
Banken hebben in een dialoog met NGOs hun sociale verantwoordelijkheid ontwikkelen ontwikkeld.
Dit heeft de hele discussie een wending gegeven die mede bepaald wordt door de agenda’s van deze
NGOs: milieu problematiek, werknemers bescherming en de bescherming van minderheden. In deze
ontwikkeling vragen NGOs echter van bedrijven dat ze het ontbrekende politiek debat rondom deze
complexe problemen vervangen door een unilaterale actie vanuit hun bedrijfsvoering. Dit is niet
mogelijk en ook niet wenselijk. Zo zet Latour uiteen dat politieke discussies die nog geen consensus
hebben weten te bereiken, zogenaamde matters of concern, aan een democratisch proces moeten
worden onderworpen om tot een sociaal acceptabele propositie te komen.
Wat banken niet hebben ondernomen is een reflexief denkproces over hun daadwerkelijke
verantwoordelijkheid naar de maatschappij. Hadden ze dat wel gedaan, dan waren ze tot de
conclusie gekomen dat ze mede verantwoordelijk zijn voor de financiële stabiliteit van het stelsel van
banken en financiële instellingen en dat deze verantwoordelijkheid opgenomen zou moeten worden
in de CSR rapporten die ze publiceren. Een empirisch onderzoek toont dat dat niet het geval is. De
praktijk van de afgelopen jaren toont het wellicht nog beter en het huidige debat rondom de rol die
de banken hebben gespeeld in de huidige economische ontwikkelingen maakt deze discussie zeer
acuut. Hoe zouden banken deze probleem kunnen –moeten- aanpakken. Bijvoorbeeld door te
herkennen dat de Basel discussie de notie van sociale verantwoordelijkheid met zich mee brengt,
evenals discussies rondom de “mark to market” boekhouding en variabele salariëring (lees
bonussen).
Banken staan nog aan het begin van een vanuit zichzelf gerichte analyse van hun maatschappelijke
verantwoordelijkheid. Zonder een dergelijke analyse zullen CSR rapporten een defensieve reactie
blijven aan druk afkomstig van buiten de bank. Daarbij kan het ontwikkelen van CSR een politieke
platform worden voor maatschappelijke politieke besluitvorming.

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Acknowledgements
I have written most of this essay during a sabbatical period. It is only just that I should thank those
who have made this sabbatical possible, my employer and particularly Leo van Stijn. I must thank the
UvA and the students of the Philosophy research Master (Eeva, Jan Willem, Johan, Robert and Thijs)
to have tolerated an old student like me in their philosophy classes, and my mentor Ewald Engelen
for his trust, patience and valuable comments and advice. Huub Dijstelbloem was at the beginning
and the end of this project and opened a field of reflection foreign to me before following his
lessons. I wouldn’t have undertaken this journey without the inspiring support of my intellectual
mentor Marc Raidelet. Sophie Denave, Hotze Lont: thanks for the stimulating discussions. Wim
Vandekerckhove and the other members of EBEN (European Business Ethics Network) have been
helpful in filling my literature gaps and testing ideas developed here. And of course, Maurice, thanks
for being yourself.

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INTRODUCTION
I feel uneasy when reading the Corporate Responsibility statements elaborated by the most
prominent banks. These statements are dissonant when I try to accord them with my perception of
the environmental and social reality. It is as if, "acting" in some reality-show, banks were playing
their own role and yet making us believe they are not playing. Slazov Zizek1
reminds us of this joke
running in the communist DDR: a German worker finds a job in Siberia: knowing that his letters will
be read and censured, he agrees with his friends that he will write in blue to tell the truth and in red
if he lies. The first letter arrives and it is written in blue: “Everything is perfect here, shops are well in
stock, plenty of food, housing is spacious and well heated, the movie theatres are playing western
movies, there are many girls and they are very accommodating: the only thing missing here is red
ink". Is it as if the only thing missing in the bank's Corporate Responsibility statements was
something to tell us that they have been written under pressure from outside the bank, under some
threat or censure. Where is the dissonance? First of all, while banks are so insistent in demonstrating
how they are preserving our environment, we know that we are only starting to realize how much
must be done to produce sustainably. Second, banks are demonstrating for almost two years now
how fragile the whole financial system is and how weak their regulatory regime is. Yet, nothing in
their Corporate Responsibility statements hints at their responsibility towards society regarding the
stability of the financial system. How are we to believe banks when they say that they do recognize
the interests of their many stakeholders when the analysis of the very source of the current financial
crisis reflects a short term view and defence of their shareholders' interests? These Corporate
Responsibility statements are the product of a number of historical developments where the activism
of NGOs has forced banks to come with this defensive response. Banks have not, or only partially,
endorsed the view that they should answer for anything else than shareholder value. Now, the
particular views of the banks' management on issues such as the ownership of the firm or
stakeholder considerations and what they are, as banks, actually responsible for are never written in
blue ink. Instead, an interpretative analysis of their practices can help us understand what are the
forces at play that lead to Corporate Responsibility statements. This is what this essay will try to do.
This essay will develop a fairly radical critique of the social responsibility practice of banks. Not
because I have a particular liking for radical critique but because a critique of social responsibility
that takes its objective seriously has to set the current practice against the very notions of what is
socially responsible and inevitably comes to the understanding that the current practice can at best
be taken for a hasty filling of some sort of vacuum, under pressure from forces that have emerged in
1
Zizek, S, 2002 : Welcome to the Desert of the Real, Verso.

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the landscape of Corporate activity. This practice, and this will be our first thesis, cannot meet the
demands that have been laid upon it. What are these demands? That banks, because they are in
charge of financing investments in the economy, steer these investments towards sustainable
production. Yet, what it exactly means to produce sustainably, how this sustainable economy will
come about and how we are to migrate to it is something we just don’t know. And it is likely that
difficult choices will need to be made on our way to it. Banks are not in a situation to steer alone the
economic activity towards a sustainable mode of production. As much as Non Governmental
Organizations (“NGOs”) and some other stakeholders would like us to believe otherwise, the very
notion of sustainability is not something that can be defined single handedly and simply
implemented, and certainly not by banks alone: “replace the fossil burning sources of energy by
renewable energy, apply fair trade practices, respect workers, minorities and threatened species and
you will have a sustainable economy”. Each of these issues and the many other that form part of a
path towards what these actors have gathered under the name of sustainability are actually as many
situations where compromises will be required, where arbitrages need to be rendered, where
priorities will force us to suspend other developments. This first gap, as we will develop hereafter,
could be seen as an attempt to measure the distance between the status of certain facts relating to
sustainability to the more problematic status of concerns, or as Bruno Latour would put it, the
distance between positive matters of facts and socially structured matters of concern. Banks cannot
decide alone to make compromises, arbitrage between different options and decide what the
priorities are. We will try to show how these issues call for a political debate that should be held in
front of the public and ultimately sanctioned by the public, not by the banks alone -nor by the NGOs
alone, for that matter-.
And then, when we have identified this first gap and created this first movement from positive
sustainable propositions to complex political issues, we will not be finished with the Corporate Social
Responsibility of banks. For I believe CSR could not be reduced for its greatest part to sustainability. If
Corporate Social Responsibility is to mean anything, then it should certainly assess how banks affect
our economic and social conditions in many other ways. Short of being at leisure to develop each and
every of these social dimensions of banking activities I will focus on one that is at the very core of
their activity: the stability of the financial system. While my first proposition consists in
problematizing a responsibility that a number of stakeholders would like to see us as taken for
granted, here I am actually bringing to the notion of Corporate Social Responsibility something that
has simply not been there at all. In all the Corporate Responsibility Reports from banks I have been
able to lay my hands on, the very notion of financial stability as a social responsibility is simply not
endorsed, not developed, not acknowledged. Yet, the financial crisis that is unfolding as I write these

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words, is puttting hundreds of thousands of people homeless and deeply indebted, to cost millions of
jobs and affect the savings of people and economic development all over the planet. How not to see
that this is a social responsibility indeed, and one that must at least be in part put on the shoulders of
the banks themselves. So why do they not identify this in their social reports? Why do the same
NGOs that are so eager to convert banks to responsible behavior not chase them for more prudent
financial conduct? Now this proposition is certainly not simple and it has complex implications: how
can banks that are essentially competing with each other and managing primarily their own financial
condition be held responsible for the sector as a whole? But then, how could they not be held
responsible when they have pushed for several decades towards a self-regulated regime where the
interference of regulators was considered less desirable and a constraint to market driven
adjustments? Banks are not just another sector of our liberal economies. They are the depositors of
people’s trust in their money and this very function of “trustees” comes with particular obligations
that should be understood and endorsed collectively by the banking sector.
Now, if financial stability is a social responsibility of banks, then, just as for the notion of
sustainability, it becomes a responsibility towards the public and also requires to be debated publicly
and decided democratically. Sustainability and financial stability are indeed matters of concern,
matters in need of a political debate where the public participates in deciding what is best for all.
The dichotomy between facts and values is sterile, says Latour. Facts are not just “out there” for us
to act upon them, and the choice is not simply to be moral or not. Now we will largely refer to Bruno
Latour to make this backward conversion from facts to matters of concern. We will follow his actor-
network theory to show how different stakeholders (different actors) are to be called into a process
where matters of concern are identified, hierarchized and then institutionalized. Yet, we will also
deliver a critique of this process, reflecting on what this political debate is really about. It is about
“who gets what, when and where”. It is about creating a consensus in the Polis to achieve a “greater
good”, It does not dissolve itself in a singular process but keeps figuring opposing interests,
conflicting situations and power relations. Using the Basel 2 discussions as an illustration of how a
political debate is robbed from the public, we will question its democratic legitimacy. Grabbed by
technicians, monopolized by the financial community, the realization of financial stability has never
reached the public as an issue where it would have a say. The very fact that this issue is not
presented as a social debate and a social responsibility is a testimony to the fact that historically
dominant actors are generally not willing to share their current prerogatives into a public forum.
Institutionalization is required, for sure, but it will not happen without a fight. Enlarging the social
responsibility of banks to financial stability is therefore a strong political proposition. To counter
Latour in this sense: actors will not simply be “invited” to participate in this process; they will have to

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force many doors to the negotiation table and count only on themselves to be represented
adequately.
This is our fourth and final proposition: corporate responsibility could well constitute a completely
new political arena. Literature abounds in references to the globalization of economic actors and the
progressive weakening of national state control. The transnational regulation that is progressively
substituting itself to the nation-state is not coping with the swift development of the global
economy. In an effort to meet the concerns of the public, often intermediated by the NGOs,
corporates have developed this form of self-regulation that we use to call their social responsibility.
Yet, they have so far kept this development to themselves and not bothered much with democratic
legitimacy. This is why I believe corporate responsibility needs to be made a political activity: one
that involves the public in choices that affect us all. But this means that we have to re-visit our
representation of what a company is: is it the property of its shareholders? What sort of claims can
the other stakeholders put on the company and its activity? How to build a democratic process
around something that is seen by some to be first supposed to respond to the interests of its owners
and how can one define the notion of ownership? Again, surprising as it may seem, corporate
responsibility statements have so far not responded to these questions. While the notion of
stakeholders is largely used in social reports, it is not clearly articulated with the more traditional
notion of ownership and the latter’s control over the management of the firm remains largely
unabated.
Why is this critique so important? Because, against cynical comments about the insincerity of CSR as
much as against the optimism of some pointing to what CSR has achieved, we want to take the very
phenomenon of corporate responsibility seriously. Not in a naïve way, not simply by hoping that all
these publicized good intentions will somehow produce the results one may expect from them, but
rather because there is such thing as a responsibility of corporates towards the social and economic
world and that it is better to start defining this than speculating about the good will of the men who
are in a position to steer these processes. This essay explains why the current CSR role assigned to
banks cannot keep its promises. And it attempts to sketch a reformulation of CSR that would include
the core of the activities of banks, which is to take savings and lend to the economy and at the same
time safeguard the trust people have in the money and the banks themselves, both at the heart of
this intermediation.
Such a journey into CSR is one that does not make much progress if one does not allow different
theories to speak their voice and shed a different light upon the issue. I have chosen to submit them
as we move along different subjects without letting myself support any of them beyond their

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respective contribution to the debate. The issue, at the level we have decided to raise it, is too
complex and multifaceted to fit into any attempt to support one holistic theory against another and
simply chose sides. I believe this undertaking requires a multi-theoretical analysis, one that breeds on
the contributions of many authors, while believing none has provided an all encompassing solution.
But as much as outlaying theoretical background, our essay is looking into the current practice of CSR
at banks. Being a practitioner myself, it would be unthinkable to me not to write out of the
perspective of my actual working experience. The practical anchoring of this critique has been
substantiated by the review of three CSR reports from banks. Three only because it is difficult to
draw meaningful conclusions from reports that are largely qualitative and free format in spite of all
the work that has been done to get them into a normalized format. Statistical studies will make more
sense once more quantitative information will be provided, which is hardly the case today. Which
banks to select, though? I have decided they should be representative of the three areas where CSR
is most advanced: the U.S., U.K. and Continental Europe. Then it had to concern banks that are
scoring well on their CSR responsibility so that I couldn’t be accused of choosing easy victims. My
selection therefore ended with Citibank, the leading US Bank, Royal Bank of Scotland, a prominent
U.K. bank and Deutsche Bank, an institution within the German banking sector. The CSR reports
available at the time of my survey were those of 2006. This review of practical work actually did
reinforce my earlier intuition that the CSR banks have been practicing so far has been very much
geared towards a very specific sort of external constraint: the voice of NGOs. Now, pressure in itself
is not necessarily bad: most changes have taken place under some pressure or other. My thesis will
show that the very pressure exercised by NGOs was actually much needed when it emerged and is
still very much needed today. NGOs have been able to fill a gap when transnational companies were
not confronted with their social responsibility because they were not tied to national authorities
anymore. NGOs have picked-up issues such as sustainability long before our traditional politicians
had taken this turn. Yet NGOs are not as present on all fronts where the responsibility of banks is at
stake and they are not necessarily representative of all the interests of all the public. Hence the
pressure of NGOs alone cannot dictate what CSR should develop.
Finally, a word on the literature used. As mentioned earlier, the multi-perspective approach has led
me to cite theoretical works from very different backgrounds. Considering the scope of this essay, I
will mostly develop these aspects of the respective theories that I believe are useful to my research.
This theoretical anchoring is much needed as we would otherwise drift away in a sort of
compounded journalism that would only stand for the time that events are unfolding. Key theoretical
references will cover concepts such as what constitutes the public (Dewey 1927), matters of concern
(Latour 2004), and the notion of responsibility (Boven 1998). A second tier of literature covers

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specific aspects we need to address, such as the ownership of the firm and stakeholders theories
(Capaldi, Engelen 2002, Fontroda and Sison 2006, Hemmati 2001, Stiglitz 2003, Freeman 1984).
Finally, the very notion of CSR is a source of prolific literature that needed to be covered. We refer to
our bibliography for these articles. But this essay has to deal also with a history in the making,
particularly so when there is a financial crisis raging out there that has everything to do with the
notion of financial stability I develop here. The practice orientation of this paper has thus allowed me
to include a number of recent press articles and opinion columns that are a good indication of how
the community reacts to this crisis and how the different propositions I develop are actually in touch
with a very pressing reality. All this makes for a paper that will be difficult to classify in the usual
academic exercises, mixing up literature review, with the analysis of bank documents and press
coverage, including an empirical approach and theoretical considerations and finally asserting a
number of new propositions for which there is little reference material to be provided. The very large
scope and ambitious program of this thesis means also that a large number of propositions are not
fully developed and remain disputable. It is in this respect a work in progress that will hopefully call
for many comments and questions on its whole as much as on its parts. Having set the stage in this
essay, we will need to substantiate each of these propositions in more detailed research. Yet, in a
first instance, they need to be exposed in conjunction.
The practice orientation of this essay has made it vulnerable to the developments observed in this
very practice. Now, the developments on most of the issues I will be exposing here are currently
taken into a completely new perspective than when we started writing this essay. I first started
thinking about Corporate Responsibility in 2006 and most of the intuitions developed here were
emerging then. The essay produced today was developed between September 2007 and October
2008. Now the crisis that was rampant in the beginning burst out with the fall of Bear Stearns March
16, 2008 and got into an accelerated mode with the fall of Lehman Brothers on September 15, 2008.
The reader of this essay will need to remember now and in the future that it was written in this
context. I often refer to this crisis without detailing its course of events nor specifying its many
developments. It is somehow present, though, in every line I have been writing, simply because the
issues that we are discussing here are all so much at the forefront of this very crisis: systemic risk, the
failing regulation, the greedy bank management and top employees, the limitations of markets. The
crisis is at its peak now and the most radical views are becoming mainstream: the wildest scenarios
are being advanced, including some where the whole banking sector may become a nationalized
utility. While I felt pretty much alone and radical myself at the beginning of this essay in saying for
example that banks are responsible for financial stability, I know feel the urge to moderate the
“bankers bashing” and reaffirm the need to keep the overall prudent banking activity insulated from

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government driven interference at its core: the collecting of deposits and granting of loans. Let me
simply stress here that my writing could not possibly be sheltered from these events and that the
reader must put these events back in his mind when reading these pages.
Here is the sequence I have adopted to submit my propositions: the first part of my essay is detailing
what I have called the double gap: the CSR of banks is not delivering a sustainable economy (first
gap) while it does also not address what could be its main responsibility which is to protect people’s
trust in their financial system (second gap). While the first part of this chapter is essentially a
deconstruction of the current CSR practice, we review in the second part of it a number of concepts
that are required to establish new exigencies for the sort of CSR that will meet a more robust notion
of responsibility. This chapters ends on a review of the banking sector in the recent period and
engages into the discussion of who owns the firm. In the second chapter I undertake a critique of the
current practice of CSR at three different levels: historical, empirical and in specialized literature. The
historical development of CSR leads me to conclude that it has essentially originated in a vacuum
created by the internationalization of the companies and their escaping national regulators: CSR as
business pursued by other means. This section explains the role taken by NGOs in forcing corporates
to formulate CSR policies. The empirical review of the CSR reports of Citibank, Royal Bank of Scotland
and Deutsche Bank confirms the focus on sustainability and the absence of financial stability, the two
gaps I have identified in the first part of the essay. Looking into the critique formulated by BankTrack,
an NGO specialized in banks, we see develop the confusion between facts and matters of concern. A
review of the literature on the subject of CSR allows me to confirm that the very practice of CSR is
still very much pray to theoretical debates, in the absence of a consensus on issues such as
ownership of the firm, how to manage collective responsibility, what to expect of CSR and who
should be leading this process. Finally, we sketch some of the considerations that are actually
considered within the bank itself, when it comes to Corporate Responsibility: how does an account
manager take CSR into account in a lending decision? The third chapter is trying to think forward into
a new form of CSR, one that would make the formulation of responsibility the outcome of a political
decision process. Going through the mechanisms of the Basel 2 discussion that is geared towards a
new form of regulation for banks, this chapter reviews a number of recent discussions that have
emerged in the financial crisis. The difficulty that is being exposed is that banks are on one side
competing with one another while at the same time taking ownership of the regulation that is
supposed to protect the sector as a whole. Are banks able to follow the logic of competitive
performance while at the same time taking all the measures to protect themselves and their peers
from systemic risk? Have these discussions been addressed in the Basel 2 effort? Have the right
people been involved in its elaboration? How does the notion of CSR tie into the different models for

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corporate governance? This discussion builds on the critical review of the notion of CSR as developed
in this essay to come to a new formulation of what the social responsibility of corporates could really
mean.

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PART I: BANKS AND CORPORATE RESPONSIBILITY: THE DOUBLE GAP
I will hereunder give the claims I have made in the introduction more ground. First I will establish
why banks are not just companies like any other but the depositaries of our trust and thus subjected
to our scrutiny. Then, developing the concepts of matters of fact and matters of concern, I will
establish more firmly how NGOs have asked banks to deliver environmental related change they
simply cannot decide upon alone. Finally, I will show how banks do have a social role to play in
keeping the financial system whole and how they fail to acknowledge this task. These two
propositions, these two gaps will be our guiding observation throughout this essay and will constitute
the backbone of our critique of CSR as it is practiced today. At the end of the chapter, we will review
a number of concepts that need to be evoked if one wants to make any progress on the notion of
CSR: responsibility, collective responsibility and social responsibility in the frame of a global liberal
economy.
1. The double gap
If we had forgotten how much our economies are based on trust, the US Subprime crisis and
subsequent credit crunch -itself leading to a deep and threatening financial crisis- have provided us
with an expensive reminder of it. This trust is symbolically crystallized in the very currency we
exchange as a token of underlying physical goods. What I want to highlight in this first section is that
our banks and financial institutions, together with the central banks and regulators are the holders
and guardians of this trust society has put in its money as much as they are the intermediaries of the
transactions whereby we decide to spend, invest or save our money, projecting ourselves into an
always uncertain future. Strikingly as it may seem, we will establish hereafter that this social
responsibility of the financial sector which could be called the safeguarding of trust is hardly at all
exposed in the corporate responsibility statements that have flourished in the recent decades among
major financial institutions. Instead, these codes of conduct and social responsibility statements are
addressing a number of issues that are generally covered by the notion of sustainability, with a
particular focus on environmental issues, issues relating to human rights and working conditions.
Banks are targeted specifically by NGOs as they are considered to be driving the economic
development by allocating resources to the economy, thereby somewhat neglecting the fact that this
activity of distribution of credit is primarily based on investment programs that are submitted to
them by the corporate world. It seems thus that banks are in a difficult position and cannot but fail

15. 15
on both accounts: while they are being held to account for the sustainable orientation of our
economies which they do not directly control, they seem not to put such a high degree of social
responsibility on this other task of theirs which is to maintain the stability of the financial system as a
whole. This is what we refer to as the double gap: gap between expectations of the sponsors of a
sustainable economy and how much banks can achieve in this domain and gap between what banks
have acknowledged to be their social responsibility and this other one they don’t acknowledge:
financial stability.
a. Banks are depositaries of our trust
Why focus on banks? In its special edition of finance, the economic review Alternatives Economiques2
is hammering out this trust issue when, looking back at the origins of the banking activity, it
underlines how, starting with the different techniques of discount of trade bills, banks have been
able to basically create a new form of currency that would allow for a development of our
economies: credit. Banks create money when they extend credits to their customers. Central banks
became the regulators of the system as much as they guaranteed the good end of operations. From
this moment on, money had definitely cut its link to any “natural” basis: it became a matter of
finance. And indeed, banks have always assumed this role and accepted that they do have a very
specific status in the financial system. As a counterparty of this very specific task, they are submitted
to particular scrutiny. A popular translation of this situation is that banks are “lending other people’s
money” which is only half of the story: they are not only intermediating between people desiring to
save money for later needs and people who have investment needs, they do actually hold the reins
of the very availability of money to finance the economy, irrespective of there being any deposit to
lend this money from. Banks are not lending other people’s money: they are actually lending other
people’s trust. Credit, the decision of lending money to an investor in need of funds, is the very act
by which (scriptural) money is being created. Ultimately, the central banks are the counterparty of
last resort and in control of the interest tool to influence the price of credit, not directly its quantity3
.
So, banks are indeed very specific actors in our economies and examining how banks address the
issue of Corporate (social) Responsibility should be extremely useful to both the functioning of banks
and the very notion of Corporate Responsibility.
2
Aglietta M. (et al). 2008: « La Finance », in Alternatives Economiques, Hors Série number 75, 1st Quarter 2008.
3
Ibid above, p 15: “Le tournant se situe en 1694 avec la création de la Banque d’’ Angleterre. Depuis cette date,
elles incarnent l’intersection entre l’économique et le politique. Banques, elles émettent des billets ; centrales
elles assurent la bonne fin des opérations. En contrepartie de quoi elles organisent et contrôlent les systèmes
bancaires (ensemble des banques) ». (translation : The turning point can be situated in 1694 with the creation
of the Bank of England. From this moment, [Central Banks] represent the intersection between the economic
and the political. Banks, they issue bank notes; Central [Banks] they guarantee the good end of operations. In
exchange for this, they organize and control the banking systems (including all banks)).

16. 16
This essay cannot pretend to lay out all the theoretical background of this notion of banks as actual
source of money supply and how money supply can be associated with financial (in)stability. Instead I
will refer to one study that is particularly relevant in the context of financial stability I will develop
further here. Barry Eichengreen and Kris Mitchener4
wrote this paper back in 2003, at a moment
where the first signs of the current financial crisis were showing yet had not turned into a systemic
crisis. The paper was presented in the context of the Bank for International Settlement (“BIS”) to
which I will refer largely in the third chapter of this essay. Now, the thesis developed by the authors
is that the current crisis, which they had already largely identified then, is very much resembling the
big crisis of 1929, in the fact that the financial sector has played in both an equally determining role.
The current financial crisis which has now spilled over into an economic recession is the direct
consequence of the credit crunch which started in 2007. But this credit crunch itself is the
consequence of a credit boom, much as the 1929 crisis was. It is this credit boom that the authors
analyze in the period from the early twenties to 1929 and they draw a number of similarities
between the condition of the financial sector then and now. Going back as far as the 1990ties, the
authors identify a period of booming credit where the regulatory authorities had little reason to
tighten the credit supply as inflation threats were low. In this period, banks and non bank financial
institutions have been competing fiercely to provide credit to different sectors of the economy. The
“benign” financial environment5
were making the cost of credit very low and financial institutions
were looking for higher risk activities that were susceptible to pay higher returns.
This period actually lasted undisturbed until the dotcom bubble of 2001. Symptomatic of this period
was the legend that dot.com entrepreneurs, most of them in their early twenties, could receive
4
B. Eichengreen and K. Mitchener, 2003: “The Great Depression as a credit boom gone wrong”, BIS Working
paper, Monetary and Economic Department, www.bis.org
5
Tustain, P, 2008: “Subprime Mortgage Collapse: Why Bear Stearns is just the Start”, published on the web on
September 5, 2008, www.moneyweek.com

17. 17
abundant financing on a project plan no longer than a one A4 treasury forecast. Banks and financial
institutions were stumbling over one another to lend their money and the startup funds and
incubator funds were plethora. Until this abundance of money created an unjustified valuation of all
these companies which led to the dotcom bubble and its subsequent burst. Instead of bringing back
some sanity in the system, this first bubble quickly got transferred into the real estate bubble we are
now seeing bursting with the dramatic consequences it has over the financial system as a whole.
What characterizes the financial sector now, as much as the financial sector in the 1929 crisis,
according to the authors, is the non-intervention of central banks combined with lower credit
standards at the financial institutions themselves. While the central banks have limited themselves to
an anti-inflationary policy, without any regard to the effect of the extension of credit on the (over)
valuation of assets, the latter have let their risk culture drift away in a frenzy of piling up high risk
assets. We all have in memory the crazy years just before 1929 where private persons were granted
loans from financial institutions to buy stock and how this flow of money had pushed prices on the
stock exchange to dazzling heights, before crashing on this famous Friday of October 1929. “In
search of yield, investors dabble increasingly in risky investments. Their appetite for risk is stronger [..]
Eventually, [..] the financial bubble is pricked and, as asset prices decline, the economy is left with an
overhang of ill-designed, non-viable investment projects, distressed banks, and heavily indebted
households and firms, aggravating the subsequent downturn”.6
Much like now, the crisis of 1929
cumulated several bubbles: real estate (1925), Wall Street (1929) and consumer durable goods
during the whole second half of the 1920ies. Which reminds us that one bubble is still to come in the
current crisis, which is the consumer credit bubble that has pulled the industrial production growth
over the last decade. The presentation of this paper in 2003 at the highest international regulatory
instance indicates that the current crisis was already largely anticipated. But somehow, both
regulators and financial actors have been deaf to the warnings extended to them. We will come back
to this aspect of how financial institutions lower their lending criteria in search for higher returns in
the section relating to responsibility in this chapter. There we try to understand how the practice of
banking can lead a whole sector to slowly put aside the rules of caution usually key in lending
decisions. Let us simply draw this preliminary conclusion that there is a direct relation between the
activity of extending credit and the potential overvaluation of assets that lead to the formation of
bubbles and cycles. And hence there is a direct responsibility for banks and their regulators in
managing these bubbles and cycles.
6
Ibi above, p 2.

18. 18
The indirect responsibility of banks
Now, NGOs have focused on banks for a more “pragmatic” reason: in their reasoning, banks have
both a direct and indirect social responsibility: directly, banks are responsible for the management of
their own company, their own performance on matters such as their CO2 “imprint”, diversity, and
management of their relations with different stakeholders. On top of that, banks are indirectly
responsible for the activities of the companies to which they are lending their money. BankTrack, an
NGO specialized in following the banking sector and which we will be quoting regularly through these
pages for that reason, has for example calculated the CO2 imprint of the Royal Bank of Scotland
(“RBS”) on both direct and indirect ways, concluding that its CO2 imprint was very substantial
because of all its lending into the oil sector7
: “The Royal Bank of Scotland is covering up involvement
in carbon emissions greater than those of the whole country of Scotland, according to new research
published today, Monday 12 March 2007”.
This approach by the NGOs does of course have an element of truth when we observe the banking
practices: indeed, banks are often compared to the heart of the body economy, pumping money in
its financial arteries to the place where it is best used, according to their financial standards. That is,
investments are financed if they are able to create enough revenues to repay the money invested
plus interest. To illustrate this very simply, a company would probably not be able to get financing for
a bombastic head-office if the latter does not contribute to its revenues in a way that is
commensurate with the investment. The same company would successfully attract financing,
however, if it concerns a productive investment that will enhance its revenues and create the
capacity to repay the loan. More pragmatically, banks base their lending decisions on the probability
of getting the investment paid back and this risk analysis is certainly taking into account the chances
that these investment projects do respond to a demand of our economies, that it represents “money
well spent”, today and in the future (at least up to repayment of their loan). Where risks of any
nature, including long term risks of an environmental nature, are overwhelmingly outweighing the
potential profit of the investment in question, there are little chances banks would support such a
project. Coulson and Monks8
underline that environmental considerations could for example affect a
bank in case it needs to repossess a piece of land (Brownfield) that would be contaminated. The bank
could be asked (and has been asked so in a few occasions) to pay for the clean-up of these sites
7
See: “The Oil and Gas Bank. RBS and the financing of Climate Change” . Researched & written by Mika Minio-
Paluello of PLATFORM www.carbonweb.org. Published by BankTrack, Friends of the Earth - Scotland, nef (new
economics foundation), People & Planet and PLATFORM in March 2007.
8
Coulson A. and Monks V., 1999: “Corporate Environmental Performance Considerations within Bank Lending
Decisions”, in Eco-Management and Auditing, Nr 6 p 1 to 10

19. 19
under his lender’s liability. Using the example of Lloyds TSB Group, Coulson and Monks then detail
how the analysis of environmental risk has been made an integral part of the risk assessment of the
bank. So indeed, through their risk analysis, banks provide a confirmation of the soundness of the
investment decision of the company they finance. It is this confirmation that NGOs tend to identify
under the notion of indirect responsibility. The content of the analysis applied by banks to a given
investment, is then also what NGOs will challenge through their naming and shaming campaigns.
While an investment in a palm-oil exploitation in Indonesia could be financially sound, its damage to
the environment could be considered unacceptable. Do banks include such considerations in their
evaluation process? Well they certainly have done so increasingly and reputation risk, the risk of
being targeted by a NGO naming and shaming campaign, is now an integral part of the bank’s
financial analysis process. Cowton and Thompson9
argue that both reputational and prudential
motivations are combining in the bank’s credit risk assessment of environment related matters. Out
of 57 banks they have questioned in a survey, only 9 did not include environment related criteria in
credit risk assessment; of the same sample, 48 banks considered the avoidance or mitigation of
liabilities the most important reason to do so, including in pricing the transaction, while reputational
and image issues ranked only second most important. The authors underline that, while codes of
conducts’ influence on the process was hard to measure, the best illustration of the banks’ increasing
concern for environment related issues was expressed in their signing of collective agreements:
Carbon disclosure project, UNEP, Equator Principles, Collevecchio Declaration, etc..
Yet banks are not meeting NGOs expectations
If we are to believe BankTrack’s recent report on banks’ compliance with their social responsibility,
they are not scoring very high in the eyes of who makes environmental considerations prevail. The
title of the report is not lying about it: Mind the Gap10
! Nor are its conclusions: “This leads to the
conclusion that the large majority of the [..] banks need to devote significantly more attention to
developing clear sector and issue policies. There remains a clear gap between the intentions on
sustainability as expressed by many banks and the content of their credit policies”. BankTrack
essentially reviewed Banks sector policies in a number of sensitive sectors (Agriculture, Dams,
Fisheries, Forestry, Military Industries and Arms Trade, Mining and Oil and Gas) and on a number of
sensitive issues (Biodiversity, Toxics, Climate change, Human Rights, Indigenous People, Labor,
Taxation). Banks’ policies on these issues were inventoried and evaluated on a “best practice” basis,
9
Cowton C, Thompson P, 2000: “Do Codes Make a Difference? The Case of Bank Lending and the Environment”,
in Journal of Business Ethics, N 24, pp 165-178
10
See BankTrack’s report: “mind the gap” published in the internet December 21, 2007
http://www.banktrack.org

20. 20
producing scoring matrixes that allowed a comparison between them and best in class standards.
The overall conclusion was that banks, while taking significant steps and signing different agreements
on these topics, were still reluctant to let themselves be constrained to the details of their evaluation
process. So banks seem to be responding to the pressure for more engagement in social
responsibility, but at the same time they appear to be sticking to general statements and
declarations of intention which do not respond to the pressing expectations of BankTrack. It is as if,
paying lip service to the NGO community, banks are protecting their decision making process
jealously and not letting stakeholders getting too much into the details of their evaluation process.
The gap identified by NGOs could therefore be rephrased this way: banks are doing the talking but
they fail to do the walking. Banks are producing all the right declarations in their social responsibility
reports, adhering to many international treaties and conventions, as long as the latter do not impose
any hard constraints on their lending criteria. When it comes to translating these things in concrete
action such as lending policies and lending restrictions, effective exclusion of some investments, then
banks are felt by NGOs to be much more reluctant to abide to these intentions.
b. What banks cannot deliver
Several reasons can be invoked to explain the gap between banks’ willingness to address social
responsibility and the NGOs expectations. First, banks are indeed guarding their independence and
commercial strategy jealously and therefore not releasing into the public all the criteria they use to
define their lending strategy, if only for competitive reasons. Underwriting criteria belong to the core
of the bank’s commercial strategy and it does not seem a reasonable expectation that these
strategies would be made completely public and transparent. They are also protecting the
confidentiality of the operations of their clients, conforming in this to generally accepted compliance
rules embedded into banking practices. There is a reality to this point beyond the cynical view that
this secrecy would protect some less than orthodox practices of their clients: to perform their risk
analysis of the activity their clients engage into, banks often need to know details of these activities
that are really sensitive, details that would prejudice their competitive position if they were to be
disclosed to their competitors. Companies rightfully want this information to be held out of the
public domain. Next to this, however, banks want to stay in control of their own processes and not
expose themselves to discussions that would go too deep into the details of how they intend to
achieve compliance with the general standards they have endorsed. This doesn’t mean banks do not
comply, but simply that they intend to control the level of disclosure.
Yet there is another cause for this gap between the banks’ performance on social responsibility and
the NGOs demands. It has to do with the vision NGOs have of the world and how they uphold this

21. 21
vision, sometimes against any existing consensus. To illustrate this, we would like to stay within the
context of the CO2 issue. Now it is generally accepted, with some differences here and there, that we
are in a period of climate change. It is also increasingly accepted that this climate change could be
linked to the burning of fossil fuels, releasing CO2 (or so called greenhouse gases) in the atmosphere.
Consequently, most countries have accepted to implement CO2 emission reducing programs -as
expressed in the Kyoto agreements- and most companies have committed to reduce CO2 emissions
from their activities where they can –as for example in the carbon disclosure project11
-. Yet, it is still
not clear to everybody and there is certainly no consensus on how we will migrate from a fossil
burning economy to an economy that will essentially drive on renewable energy, if this ever
happens. The recent developments around nuclear power is a good demonstration of this: while it
has been commonly accepted for a long period in many countries that nuclear was an undesirable
source of energy because of the issue of nuclear waste, it appears increasingly necessary to include
some form of nuclear power in the transition to new forms of energy. The recent 180 degrees
turnaround in UK policies on this matter is a good illustration of this recent change of paradigm.
Meanwhile, NGOs are asking banks to reduce their financing of the oil and gas sector, irrespective of
what scenario has been endorsed as a general consensus on this migration issue. Quoting BankTrack
again: “It is important for every bank to establish a comprehensive climate or energy policy and
strategy that addresses issues such as climate risk, assessing and reporting on climate emissions [..],
phasing out of financing of the Oil and Gas industry and most greenhouse gas intensive energy
infrastructure and investing in renewable energy and energy efficiency programmes and projects.”12
In our view, such a recommendation is typical of the sort of deliverables banks cannot produce and
typical of the way NGOs go about a number of issues that are in need of a discussion rather than of
disengagement by banks. How to phase out of the fossil fuels is not something that our societies
have built a consensus on. How then could banks alone have a plan for this? Phasing out of the oil
and gas sector could have consequences that BankTrack apparently does not see or does not want to
take into consideration here. It is not difficult to imagine that a sudden cut in the production of fossil
fuels due to the lack of investments could lead to electricity black-outs, heating problems, security
hazard, up to the fallout of entire parts of our economies. Let alone the fact that our sourcing of
energy is indeed an equation that involves several geo-political dimensions: security of supply,
reliability and power relations with our main oil suppliers, security of the different oil transport
channels and up to acute defence issues. Besides, the reduction of energy supply will probably affect
11
“The Carbon Disclosure Project (CDP) is an independent not-for-profit organization aiming to create a lasting
relationship between shareholders and corporations regarding the implications for shareholder value and
commercial operations presented by climate change. Its goal is to facilitate a dialogue, supported by quality
information, from which a rational response to climate change will emerge. “ http://www.cdproject.net/
12
BankTrack Internet site, October 21, 2007: Banks, Climate and Energy. http://www.banktrack.org/

22. 22
countries in different ways, impacting less adaptive poor countries more than rich countries thereby
increasing the wealth gap between developed and emerging countries. Likewise, within a given
country, the economic consequences of a contraction of the economy caused by shrinking natural
resources availability will most probably impact on people differently: the higher the cost of energy
in one’s spending, the higher the impact. Again, poor households will probably suffer most. All these
aspects need consideration. And quite obviously, the solutions devised to solve the issue will have
political consequences that need to be anchored in a political legitimate decision process. We will
have the opportunity to develop into more details what we mean when we talk about legitimate
political decisions below. Let us draw the simple conclusion here that banks are not the sort of social
actor that are in a position to decide what the energy policy of a community, a country or even, in
the context of globalization, of the whole planet should be. The issue is simply too big for them.
Matters of fact and matters of concern
On this issue as on many others, NGOs may have given us the impression that there is a consensus,
that they were talking for the public at large, where there is not even a fully articulated democratic
discussion taking place. To use the vocabulary developed by Bruno Latour in its Actor-Network
theory13
, while global warming could to some extent be called a matter of fact, the migration to a
new form of economy that would consume less energy is definitely a matter of concern. Matters of
concern are issues that are in need of a political articulation where all the stakeholders to a given
problem are invited to participate in a discussion and where the right institutional platform is created
to support these discussions, establish a consensus and monitor its implementation. Banks are not -
nor are NGOs- the right sort of entities to go (alone) about matters of concern.
Matters of facts
Yet, it is clear also that banks have been listening to NGOs and that they have taken steps wherever
the requests from NGOs seemed to meet a consensus or were simply affirming the law. We will not
go much deeper in this essay about situations that are in fact matters of compliance with the law.
Workers rights, protection of minorities, respect of environmental regulations, in countries where
the existing legal system is sufficiently developed on these matters, these issues are sometimes
presented as social responsibility issues, but are simply matters of following the law: they are not
subject to discretionary powers of the parties involved. Matters that have reached a strong
consensus but are not legally formalized are most of the times, the sort of issues banks cover in their
13
Latour B, 2004: Politics of Nature: How to bring the Sciences into Democracy. Translated by Catherine Porter,
London, Harvard University Press

23. 23
social responsibility reports: environmental issues, issues relating to human rights in countries where
these rights are insufficiently protected in the law, positive discrimination, representation of
minorities within the firm, etc.. Those we would call: matters of fact. Latour uses the term matter of
fact rather than simply facts to underline that these matters have in their time potentially
constituted issues and that they do require an “ordering” of data to constitute facts. While the idea
that the world is round can now be considered a fact, it has required a considerable theoretical
development to be admitted as a fact. Latour therefore calls it a matter of fact. Yet at the same time,
this matter of fact has now been accepted and it would be vain to discuss it all over again. It has
become uncontroversial and an integral part of the order of things, an element of the realm of
reality.
Matters of concern
Matters of concern are propositions that are in need of a more elaborate investigation. While the
classical opposition between facts and values tends to call in echo this other opposition between
objectivity and subjectivity, between positive science and ethical consideration, this opposition tends
to give to facts a sort of superior ranking. In this movement, we may well overlook how treacherous
some so-called facts really are. Positive science will have a tendency to draw into the area of facts a
number of things that are actually in need of a social discussion. Take the example of children labour
to stay close to the sort of issues debated in CSR discussions. The proposition: child labour is not
desirable, sounds very much as a matter of fact. Yet, does the refusal to be involved in children work
lead to a better situation for children in emerging countries? Not necessarily. David Vogel in The
Market for Virtue14
cites a number of examples where children are actually worse off when
international exporting companies decide to exclude them from their staff: these children are then
generally left to work with domestic companies where working conditions are much worse, wages
are lower and security less of a priority. Or they are left with no other choice than stepping into
prostitution. Finally, the reduction in income is often putting their families in worse situations than
before, with no hope for education and social promotion. Behind the fact: “children should not be
put to work” hide a number of matters of concern that are too complex to be solved through binary
decisions “to do” or “not to do” something. Already there, the excessive simplification of what is to
be achieved has negative effects on what is originally a good intention. We will hereafter investigate
how banks are to deal with matters of concern and how these issues cannot simply be put at rest in
Corporate Responsibility engagements. Let us produce here the “golden rules” of Latour’s theory.
Creating a suspicion around the notion of fact (“Thou shall not simplify the number of propositions to
14
Vogel, P, 2005: The Market for Virtue, The Potential and Limits of Corporate Social Responsibility, Washington,
Brookings Institution Press, p 98.

24. 24
be taken into account in the discussion”)15
Bruno Latour nevertheless accepts that some propositions
are instituted as matters of fact (“Once propositions have been instituted, thou shalt no longer debate
their legitimate presence within collective life”)16
. Regarding matters of concern, a debate needs to
be installed (“Thou shall ensure that the number of voices that participate in the articulation of
propositions has not been arbitrarily short-circuited”)17
which takes into account existing
propositions: (“Thou shalt discuss the compatibility of the new propositions with those which are
already instituted, in such a way as to maintain them all in the same common world that will give
them their legitimate rank”)18
.
While banks can be asked to act in accordance with what we have accepted to be matters of fact,
they are not in a position to act alone on matters of concern, unless they are able to show they have
indeed done so after having engaged all the necessary actors to reflect on the issue and come to a
consensus. We hope this development has sufficiently created the sort of anxiety, of concern Latour
wants us to feel about things people would like us to take as positive facts. We will have a chance to
come back to it in the second chapter when we will look in detail into the critique provided by
BankTrack on the CSR reports of the various banks we have made part of our empirical research.
c. What banks are not requested to deliver
The first gap we identified is one between what NGOs expect from banks and what we believe they
can and cannot produce. Accused of “talking the talk but not walking the walk” banks could well have
been charged with the impossible task to move alone matters of concern into the realm of matters of
fact. Now, let’s move on to the second gap we have identified: banks do not seem to see financial
stability as one of their social responsibilities, nor do NGOs and other parties pressing for social
responsibility. That is not to say that banks are not concerned about this issue: they are. Banks spend
a lot of time and attention to the risks associated with the regulatory framework, systemic risks,
speculative bubble bursts, countries being in default, etc. If only because all these risks have an effect
on the assets held by the bank itself, on counterparty risk (risk taken by the bank on other financial
institutions), on the safety of payments and the settlement of transactions, country risk, etc. Yet they
have not recognized this risk as one where stakeholders may have a say on how they should go about
these risks. Banks discuss internally, with the regulators and with their peers about these issues, but
not with the public at large. While being one of the core activities of the bank, managing systemic
15
Latour B, 2004: Politics of Nature: How to bring the Sciences into Democracy. Translated by Catherine Porter,
London, Harvard University Press
16
Ibid above
17
Ibid above
18
Ibid above

25. 25
risk in the broadest possible sense (including increased chances of bubble formation and subsequent
bursting, recession, of a financial meltdown, of countries going into default, of assets being impaired
abruptly), is not something that appears in the Corporate Responsibility reports. Yet, time after time,
the analysis of financial crisis show that banks have a direct role in how these crises came about. This
is not a simple matter: banks are first and foremost competing with one another. From that
perspective, they are not inclined to think about the robustness of their peers as being their own
problem and would not mind to see them get weaker and eventually stumble. Yet at the same time
they do realize how much their balance sheets are intertwined with other financial institutions and
how much they are at risk if any of their peers were to default. In this respect, the role of Central
Banks as neutral sector supervisors comes naturally to mind, were it not that their role is increasingly
difficult to fulfil in the context of globalization and the push to self-regulation.
The US Subprime crisis: a responsibility of banks?
The recent US Subprime crisis is certainly in part attributable to the sloppy underwriting of mortgage
loans from US and other banks. These financings, offered to people who had a high probability of
defaulting on their loans, were apparently distributed with the conviction that the associated
collateral (the financed house) would keep their value and offer sufficient coverage in case of
payment defaults. After a long period of “incubation”, under the double conjunction of increasing
defaults (due to interest rate rises and the specific nature of these loans that postponed some of the
initial payments) and house prices falling in the market, the bubble exploded and a stiff correction on
market prices had to take place. While initially the problem could have been limited to that market,
the sheer size of the correction and the fact that risks have spread among all banks worldwide (due
to the financial packaging of the original deals into securitized assets) then caused a general credit
crunch among banks that distrusted one another on how much they were exposed to the crisis. Now
the situation of overheating in the sector was a known problem for a number of months amongst
most banks. The banking sector as a whole and the central regulators had to a certain extent seen
the credit boom unfolding and were aware of the risks involved. Referring back to the survey of B.
Eichengreen and K. Mitchener19
we have evoked above, this paper showing the dangers of a credit
boom in analogy with the financial crisis of 1929 was discussed among the Monetary and Economic
Department of the Bank of International Settlement, the organ coordinating the regulatory oversight
across countries back in 2003, long before the extent of the current financial crisis were visible and in
part before the excesses of lending in the US real estate sector knew the heights they have
developed since. Yet, no collective action was taken that could have diffused the bomb as banks
19
B. Eichengreen and K. Mitchener, 2003: “The Great Depression as a credit boom gone wrong”, BIS Working
paper, Monetary and Economic Department, www.bis.org

26. 26
were content with a “my own backyard” strategy. Somehow banks did not feel that they carry a
collective responsibility in the creation and subsequent burst of the speculative bubble. The results
are therefore much worse and in the end the whole sector –the whole economy- got hit and is
suffering, as we have entered into a period of global recession as a consequence of it. Not to talk
about the fact that a substantial part of the financial sector is now virtually nationalized. Millions of
people lost their house while they are still in debt with the banks for the negative equity. The
recession will for sure affect more people in their income, their social security coverage and in their
pension plans as the stock exchanges worldwide were also hit by the gloom perspective ahead of us
and lending activities have come to a complete halt. Whether or not the mortgage business was a
matter of social responsibility before the crisis, it certainly is now as nobody will stay unaffected by
the crisis we are facing. Primarily competitors of one another, taking inconsiderate risks in their
struggle for market share, banks lost sight of the collective effect of their lending activity. Without
the limiting effect of regulatory control, things simply grew to dangerous proportions.
Now if one still had any doubt about the social –and political- character of financial stability, the
recent series of government driven mergers and nationalizations of financial institutions
spectacularly removed the last possible doubts. First Northern Rock and Bear Stearns were rescued
by their respective governments, the first through a straight nationalization, the second through a
merger piloted by the federal instances. After which Fannie Mae and Freddie Mack, the two
powerhouses of mortgage lending in the US, needed to seek shelter in State ownership. Afterwards,
while Lehman Brothers, essentially an investment bank was not rescued, the insurer AIG was bailed
out, Washington Mutual entered into a merger with J.P. Morgan orchestrated by the US Federal
Deposit Insurance Corporation (“FDIC”), Merrill Lynch was forced to accept a merger with Bank of
America, Goldman Sachs was saved in extremis by the billionaire Warren Buffet while the latter and
Morgan Stanley had to seek refuge in accepting to change into a bank under FED regulatory
oversight. Morgan Stanley also got a capital injection from Japanese Mitsubishi. Strikingly, the US
investment banks, benefitting from more regulatory leeway as they did not fall under the same
supervision as the classic banks, will all have to accept the latter going forward. Finally, in Europe,
Bradford and Bingley were nationalized by the UK Government, the Irish government formally
guaranteed all the deposits of their banks, Glitnir, Landsbanki and Kaupthing banks of Iceland also
needed rescuing by the government and the Belgian and Dutch states had to nationalize Fortis Bank,
ABN-AMRO and provide support to ING Bank. This list is not complete and more developments are
still to come. What to make of this wave of government driven intervention? Simply that banks are,
as we have indicated earlier, not companies as any others. Their role in the stability of the financial
system and the trust we have in our monetary and economic system simply forbids them to get into

27. 27
default, if such a default would pose a threat to the economy as a whole. Last but not least, the USD
700 bio bailout plan voted by the US Government, which was immediately put in equivalence with
the costs incurred in the whole Iraq war, as much as the commitment from European governments
to support their ailing financial institutions offer the last proof of what we call the political dimension
of financial institutions and the sector as a whole. We will need to keep this in mind when examining
the social role of financial institutions as much as when we will reflect on the notions of ownership
and governance of financial institutions. Let us here take an advance on this issue: if (big) banks are
not allowed to fail and can say with a reasonable certainty that they will be bailed out, what then is
the actual role of the shareholders and senior debt holders? If the latter are to be bailed out anyway,
do they not get a free ride on the back of the taxpayer’s money? If banks cannot be allowed to fail,
should they not endorse this need of government backing at all times and act in accordance? These
questions have certainly never been as pressing as they now emerge in the context of the current
crisis. The very notion of competition among banks, of level playing field will never be discussed after
these series of government intervention the same way as they have been before.
d. How we will address the questions raised by the double gap
Why is this? Why is it the case that banks are willing to respond to NGOs on a number of social
responsibility matters that are of concern to them yet at the same time not giving them full
satisfaction, and why do they not undertake a reflexive self-examination by way of which their true
and extensive social responsibility would be better understood? I want to show in this essay that it
has to do with the historical development of Corporate Responsibility and the role NGOs played in
this process. This will be the thrust of the second chapter where I will undertake a critical review of
the current practice of social responsibility based on the reading of a number of CSR reports of banks
representative of the community globally and the critique formulated by BankTrack (external) to
which I will add a critique that will speak with the banks’ own logic. I will then, in a third chapter
undertake this reflexive journey into what sort of social responsibility banks also have towards the
public –financial stability- and what consequences can be attached to this care for financial stability.
But before I go into these matters, I want to highlight the limitations and ambiguities attached to a
number of concepts and theories used in setting the global picture of social responsibility, which will
need to be dealt with eventually. These discussions concern the very notion of responsibility in the
context of a firm, the notion of prescriptive philosophy in the search for ethics and how this
prescriptive philosophy should deal with some outcomes from the descriptive philosophy and
sociology and finally the notions of ownership of the firm and the shareholder-stakeholder debate.

28. 28
When undertaking their reflexive journey, banks will have to keep an eye on these different issues
and sometimes clarify their own position on these matters.
2. Definitions and theoretical questions
What is social responsibility or Corporate Responsibility or Corporate Social Responsibility? The terms
are used alternatively without there being a clear change of content or focus. Corporate
responsibility is necessarily social as it has always to be given to “a forum” in the words of Mark
Bovens20
, which in the present case can be considered to be society at large or “The Public” whether
or not structured into a number of stakeholder groups. We will submit two issues in relation with this
definition: (i) the issue of responsibility, (ii) the notion of what is ethically correct and its prescriptive
aspect. We will then, zooming in into the Banks’ world, comment on the notions of shareholders and
stakeholders to see how the ownership of the firm debate is generally perceived in the context of
financial institutions.
a. The notion of responsibility
How to go about the notion of responsibility in the situation of a complex organization such as a
major firm. This is a much debated issue in academic literature and one with considerable
consequences in terms of governance. We are not interested here in reproducing all the arguments
that are being displayed but we must at least say enough to be able to make some progress on the
notion of Corporate Responsibility and our issue of the double gap. To be responsible, says Mark
Bovens, is indeed to answer to a forum regarding the violation of a norm as an established consensus
about human conduct. We will look into these notions of norm and consensus later when we
examine the prescriptive aspects of corporate ethics. To be responsible is also an indication of a
causal link between one’s action and a given result. But in a large company, the notion of
responsibility has to deal with the issue of “many hands”. How can external judges (the forum, the
Public) really appreciate who, of the many people involved in a process, is really cause of the result?
Responsibility carries the notion of being accountable for something (passive responsibility) as well
as the idea that one has been mandated with a number of tasks (active responsibility). On top of
these dimensions, Mark Bovens raises the notion of responsibility as virtue: an individual will to do
the right thing. His pluralistic response to the problem of many hands is that responsibility can only
be considered in the context of what has taken place and often requires that both hierarchical and
20
Bovens, M: The Quest for Responsibility, Accountability and Citizenship in Complex Organizations, Cambridge
University Press, 1998

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collective dimensions of the firm and individual agency be considered. To arrive at the notion of
responsibility, Bovens actually follows the chain of causality that leads from the action to its effects.
Accountability, an ex post consideration, is the passive form of responsibility. It displays (i) a norm
transgression, (ii) a causal connection that must be established in this transgression, (iii)
blameworthiness of the person that made this transgression and (iv) a given relationship between
the one who did something and the one who mandated him to do it. Virtue, the active or ex ante
form of responsibility, is about having consideration for the consequences of one’s doing. Yet this
implies that the agent has a certain autonomy: the ability to decide on one’s own account. Besides,
the agent must be acting on the basis of a moral code and he should be taking his role seriously. It is
clear that one cannot be held responsible when one did not have any realistic alternatives to the act
in question: under too much pressure, there is little an employee can do to disobey an order he feels
is blameworthy. At the other end, the CEO of a company cannot reasonably be held responsible for
the acts of any employee of the firm, regardless: he, most of the time, will simply be unaware of the
situation at hand. While this does not take away all the blame –after all, being responsible means
that one has to be made aware of what happens within one’s field- it clearly puts some boundaries
to the simple hierarchical responsibility. Between these two extremes, it appears as if something is
lost of the collective action, as if the company itself was carrying a responsibility. Yet, the company, if
it can be judged and found guilty in court, is at the same time not an organism with a conscience and
a rationality, and punishing the firm by fines or other measures may have repercussions on
employees that have nothing to do with the act considered blameworthy. Blaming the company as
collective entity may not do justice to those, within the company, who have not participated in the
blameworthy action. Therefore, whether through hierarchical responsibility, collective responsibility
or individual responsibility, it is ultimately individuals that have to take the blame. Therefore,
companies must ensure that, while all employees have a good understanding of their duties and
responsibilities and of the company’s code of conduct, they must also have the means to disobey and
voice their concerns –to exercise their agency- when asked to do things they feel are not ethically
correct. Ultimately, if responsibility is to be considered as an individual responsibility, then the very
code the agent will adhere to must be one that he has consciously accepted. It may be impossible to
obtain a full endorsement of the collective code of conduct of a company. The least one could obtain,
though, is an explicit acceptance of this code as the result of a democratic consensus, one
comparable to accepting the law as an expression of the collective will. Now, this wouldn’t close the
philosophical debate as the law is not necessarily just and there must be a way to fight against
injustice including when the latter is legal. The same is true for the codes of conduct and other
responsibilities within a company. In last resort, the individual should be entitled to disagree with

30. 30
even democratically elaborated codes of conduct. Let us however insist foremost on the need for
these codes to be collectively endorsed.
What is ethically correct?
The judgment exercised by individuals must be based on a notion of what is ethically correct. So far,
we have been able to define it only in the largest possible sense, i.e. in conformance with a strong
public consensus. This idea of social consensus, or as I mentioned above democratic endorsement is
important here because responsibility cannot be about every individual’s own opinions and
preferences, in which case the company would be under the threat of chaos, but about things that
would meet the public’s interest, that do not cause damage to society “as a whole” or “on balance”.
This notion remains fairly obscure in the context of a firm as the individual must balance his own
notion of what is ethical and the very situation where orders may have been given to act otherwise.
The tension between one’s individual notion of what is ethical and the collective project expressed
by the firm can only be solved if there is some sort of rationalization possible of this notion of ethics
through the strong collective consensus notion. Codes of conduct, within the firm, generally support
this rationalization by making explicit how the individual employee should use his judgment to
evaluate the ethical content of what he does in a number of collective situations. To support this
idea, companies often ask their employees to be able to respond for their individual acts within the
company. The “classic” test for this would be: “do only those things that you would be able to explain
to your spouse and children”. We will come back on this issue when we discuss social responsibility.
The issue of many hands
Strikingly, one has to realize that, because the firm is a hierarchically structured group, individuals
are generally more disposed to do things they would not do in situations where their moral judgment
alone is at stake. This phenomenon is best explained through the “case of the harmless torturers”21
:
1000 persons are requested to inflict an imperceptible incremental pain to someone, the result of
these many small tortures ending up in an unbearable pain for the victim. Yet, because each of their
individual acts is in itself not reprehensible, the torturers are generally willing to do their share of the
wrongdoing and do not feel they are responsible for the torture. Now the dilution of responsibility in
the firm is what provides the employee with an endless list of excuses: “another would have done it”,
“I only did what others did”, etc. This issue calls for an even stronger notion of Corporate
Responsibility to balance a tendency of carelessness in the firm. The stakeholder needs to feel what
21
Ibid above, p 48: Bovems himself quotes here an example provided by D. Parfit: Parfit, D. 1984: Reasons and
Persons, Oxford, University Press

31. 31
his responsibility in the collective undertaking is and he needs to feel that he is empowered to take
this responsibility including against direct hierarchical orders.
b. Corporate Responsibility
How does all this relate to the notion of Corporate Responsibility? Certainly it shows that
responsibility cannot simply be defined by the management of a firm without taking into account
that this responsibility must be distributed to and endorsed by the employees. In this sense,
Corporate Responsibility must be established on the basis of something all can live by, something
that reflects a strong social consensus. In other words, Corporate Responsibility is not a discretionary
domain of management: it must be incorporating the values that are shared by all and ultimately be
in conformance with the interest of the public at large. Now, to fall back on the example that will
serve as a thread all through this exposé, it has been demonstrated that financial stability is indeed
something that is a (shared) responsibility of banks. Then we actually have no other option than
including this into the bank’s code of conduct. Virtuous employees would otherwise find themselves
in a dilemma: while their individual responsibility, their virtue, may tell them that the activities of the
bank is threatening the financial stability, nothing in the Bank’s code of conduct would explicitly
allows them to take this into account. It may sound a little abstract still, but let us consider the
following: Bank A has set ambitious objectives for the distribution of mortgage loans in the US Real
Estate sector. Employees are being set very high individual targets and are also interested in the
profit generated by this activity. The underwriting standards of the bank are overly aggressive and
employees are basically distributing loans to customers with the knowledge that there is a
considerable chance they will not be in a situation to honor these loans in a foreseeable future. Who
is to blame for the piling-up of bad loans at Bank A? Employees will have many excuses: (i) “if I didn’t
do it, my colleagues would have”, (ii) “I could be fired if I didn’t reach my objectives”, (iii) “everybody
did it”, (iv) “I tried to voice my concerns, but nobody would listen”, etc.. Now it so happens that the
practice of Bank A is actually standard for the industry and that this distribution of easy credit is
provoking a credit boom, cause of a serious overheating of the home sector. Who is to blame for
that? Could the US Sub-prime crisis be avoided and by whom? Should employees have disobeyed,
following their individual conscience at the risk of losing their jobs? Should management have
considered the risks these activities were putting on society and at which moment? These are the
sort of issues that we will need to address in the third part of this exposé. Corporate Responsibility
well understood and taken seriously, is not something optional that enhances the social profile of a
given firm. It is also not something that is there to keep NGOs happy. It is something that is at the
heart of the problem of individual and collective accountability. While it could at first sight be

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considered radical to suggest that financial stability be incorporated in the code of conduct of a bank,
we can only conclude from the above that if we are to hold employees of the bank accountable for
this financial stability, then it must be incorporated as an objective in the code of conduct of the bank
and stakeholders should be encouraged to consider it as a higher command than direct hierarchical
orders.
What is socially responsible?
We have been talking so far of a “strong consensus”, of the “public interest” to come to grip with the
notion of what is socially responsible. This notion is far from being straight forward, though, when it
comes to collective bodies such as corporations and ultimately, society at large. While an individual
will in a broad sense, “follow his conscience” and learn from his mistakes in a fairly consistent way, a
company does not necessarily obey to such a rationality. As mentioned by Mark Bovens22
, the
division of the company into different departments, the recourse in decision processes to
committees whose decisions can vary, the existence within the company of opposing interests, all
contribute to the constitution of a sort of internal logic that is not necessarily in line with the
rationality that underpins Kantian ethics. Looking for a moment at descriptive philosophy and
sociology, authors like Bourdieu23
refer to the doxa of different fields and how these doxa are
primarily the product of the dominant culture in these fields. In this sense, the working environment,
especially in large corporations, does have a strong autonomous internal logic that is the result of a
historically developed culture. The combination of this doxa and the upbringing of employees, their
habitus, generate practices that are not necessarily geared towards any sort of universal rationality.
The sort of norms generally accepted within a company cannot therefore be translated into social or
ethical norms: they are the product of a company culture, underlines Mark Bovens24
. All this to
explain why, while individual moral choice is something that has been rationalized by Kant under the
categorical imperative, this agency does simply not translate well into collective situations. This is
another way to explain why individuals who would not do certain things in other situations, suddenly
find so many excuses to legitimate their going along with “the others”: it is in the end the culture of
the company as a whole that dictates a number of the dos and don’ts without them being explicitly
laid out anywhere. And when we refer to this culture, we do not mean the brochures produced by
the communications department which are trying to convey changeable “feel good” messages across
the organization. The sort of practice Bourdieu refers to is much more a product of power relations
22
Ibid above, p 59 : “Complex organizations sometimes appear not to behave at all as if they were almost
perfectly rational, natural persons”
23
Bourdieu P. 1994 Raisons Pratiques, Paris: Seuil
24
Bovens, M: The Quest for Responsibility, Accountability and Citizenship in Complex Organizations, Cambridge
University Press, 1998, p 62-63

33. 33
and the pursuit of particular interests combined into a corporate practice. Agency, in this context, is
largely subordinated to the shared internal scale of values, the doxa of the firm.
Besides this issue of the rationality at play within a company, there is this other issue that seems
insufficiently covered in literature about Corporate Responsibility: the existence of different norms
and values according to different ontological or metaphysical worldviews, relayed by institutional
and corporate practices. Literature on the subject of Corporate Responsibility, most of the time,
simply states that companies are moral or not, according to their using a number of internal codes to
come to decisions. To take an advance on something we will develop below, it does make a
difference whether one adheres to the view that ownership of a company is to be seen as strictly
held by the shareholders (the liberal view) or whether one recognizes that employees, customers
and the public, to some extent, are also owners of the firm (a view defended a.o. by communitarian
authors). This difference is primarily one that is situated in the area of principles and ideas. Yet it
does have consequences all the way down to the governance practices that will prevail in the
company. While discussions on these subjects can clarify the different viewpoints, they will not
necessarily bring them to a conclusive end and differences of opinion, differences in worldviews, are
there to stay. How will we decide what sort of worldview a corporation should choose to adhere to?
Is it possible to somehow negotiate a middle way between diverging opinions within the company?
Ewald Engelen25
shows how it is possible to adopt a pluralistic approach to these sort of issues by
recognizing the different layers that exist between (i) rules, principles, ideals, values and rights –the
level that is closest to theoretical standpoints- (ii) the institutional and legal level, (iii) the level of
culture, practices, ethics and virtue and (iv) the level of actions and behaviors. Now all these levels
interact with one another: a change in values can induce changes in institutions and in practices as
much as changes in practices can lead someone to review his principles. It is clear that the discourse
around Corporate Responsibility is essentially a prescriptive one, one that tries to define the
conditions for a better alignment of the activities of the firm with social objectives. It is therefore
tempting to assume that there is a large consensus about these social objectives and focus on how to
align corporate conducts to these objectives. It is however a dangerous simplification of social reality.
In other words, any definition of social responsibility endorsed by a company is a reflection on a
number of standpoints taken in the sphere of ideals, values and rights. Today, these aspects are
simply not explained. They have also not been the object of a debate within the firm. They are simply
implicit in the sort of governance that is embedded in the firm and is the source of the sort of social
responsibility the corporate has developed. Making these underlying principles visible and submitting
25
Engelen, E, 2000: Economische Burgerschap in de Onderneming, Een oefening in concreet utopisme,
Amsterdam, Thela Thesis