Exploring justifications of “The Social Contract” between the Banking Sector, Financial Regulators, and NGOs Paul Langford A thesis submitted in partial fulfilment of the requirements of Edinburgh Napier University, for the award of Doctor of Philosophy December 2019 Declaration The accompanying thesis submitted for the degree of PhD entitled, “Exploring justifications of ‘The Social Contract’ between the Banking Sector, Financial Regulators, and NGOs” is based on work conducted by the author in The Business School, Edinburgh Napier University. All the work recorded in this thesis is original unless otherwise acknowledged in the text or by references. None of the work has been submitted for another degree in this or any other institution, albeit lists of research aims, objectives etc. have been discussed in assessments toward the award of PgCert Business Management Research Methods (2018). An overview of the current research was presented at the Qualitative Research in Finance Conference, Dundee University, 4th June 2019. Early work was presented at CSEAR Emerging Scholars Colloquium, Royal Holloway (2015). Conflict of interest statement The author declares no conflict of interest. Approximate number of words: 90,300 inclusive of direct quotes, tables, excluding abstract, contents pages, reference list and appendices. Signature 17 December 2019. Edinburgh. 1 Abstract The banking sector is important to the UK, employing 1.2% of the workforce whilst contributing 5.5% of tax receipts; indeed, the credit creation role of banks is essential in modern economies. Banks caused the financial crisis of 2007/8 and subsequently the sector was beset by scandals, leading to calls for “a new social contract” between the banks and society (Tucker, 2009). The aim of this study is to explore public justifications of “The Social Contract” by the Banking Sector, Financial Regulators, and NGOs (the latter as representatives of “civil society”). Social contracts may be represented by “public justifications”, the constructs of which are analysable using an empirical framework: “orders of worth” express a particular paradigm toward justice and the “common good”. The orders of worth or “polities” - Market, Industrial, Civic, Domestic, Inspired, Reputation, Projective, and Green, are all characterised by dimensions such as investment criteria, qualified objects, qualified subjects, and inequalities of status relations. A qualitative content analysis approach is used to analyse texts such as speeches and annual reports for the presence or absence of, and compromises between, the polities. As the first study of its type in banking and finance, the findings have implications for regulators, who should be aware of the newly identified “instrumental” compromise constructed by banks in their approach to regulation. Regulators should also be aware of the increased risk of moral hazard arising from their own market-oriented justifications of the social contract. A further contribution to the banking and finance literature is to problematise the limited use of ecological justifications in banks’ and regulators’ constructs of the social contract. Banks often focus on shareholders in their public justifications, demonstrating a gap between theory and practice in the pragmatic sociology literature: the normative exclusion of investors as qualified subjects is problematic given the important position shareholders hold in banks’ construction of their roles and responsibilities. Further, development of the market polity is proposed to better cater for banks’ “credence services” and long-term client relationships. 2 Dedication This thesis is dedicated to my family, Julie, Bethany & Christopher, without whom this project would have remained incomplete: thank you for your support and for absorbing the impact of time spent on this project. I will make it up to you! Acknowledgements There have been many supportive comments, reviews, and corridor conversations over such an extended period. Thanks due in particular to my supervisors Prof. Jill Stavert, Dr Brian Windram (until August 2019), and Dr Holly Patrick. Thanks for advice and support: Dr David White (above and beyond the call of duty), Dr Janice McMillan (independent panel chair), Dr. Fawad Khaleel, Dr Patrick Harte, Prof. Paul Lynch, Mr Malcolm Pettigrew, Dr Claire Lindsay, Dr. Kathryn Rezai, Dr. Mathew Bonnett, Dr. Sarah Sholl, Dr Gerri Matthews-Smith, Dr. Gráinne Barkess, Dr. Lois Farquharson, Prof. Emeritus Helen Francis, Prof. Maura Sheehan, Dr. Nathalia Tjandra, Dr. Sarah Snell, Dr. Mabel Victoria, and Dr. J. Zhang. From CSEAR: Dr. Matthias Laine and Prof. Giovanna Michelon for feedback at the Emerging Scholars Colloquium, Royal Holloway (2015), Dr. Colin Dey, Prof. John Ferguson, and Prof. Markus Milne. 3 Overview Table of Contents 1 Introduction ............................................................................................ 12 2 Context of the research ......................................................................... 22 3 Public Justification ................................................................................. 44 4 Research Methodology.......................................................................... 88 5 Findings ............................................................................................... 144 6 Discussion ........................................................................................... 237 7 Conclusion: Objectives, Contribution and Future Research ................ 274 8 Reference List ..................................................................................... 304 Appendix A – List of Banks ..................................................................... cccxlii Appendix B – Analysis of Jagd (2011) – selection of prior research into OOW .................................................................................................... cccxlviii Appendix C – Repertoires of qualified objects and subjects in texts ........ ccclv Appendix D – Overview of Boltanski’s (2011) paradigm of “Critique” . ccclxxviii 4 Detailed Table of Contents 1 Introduction ........................................................................................... 12 1.1 Title of the study ............................................................................. 12 1.2 Introduction .................................................................................... 12 1.3 Approach ........................................................................................ 13 1.4 Aims and Objectives ...................................................................... 15 1.5 Motivation for the study .................................................................. 16 1.6 Intended Contribution ..................................................................... 17 1.6.1 Contribution to Literature ......................................................... 17 1.6.2 Methodological Contribution .................................................... 18 1.6.3 Contribution to Policy and Practice .......................................... 18 1.7 Structure of the Thesis ................................................................... 19 1.8 Summary ........................................................................................ 21 2 Context of the research ........................................................................ 22 2.1 Introduction .................................................................................... 22 2.2 Banking and Financial Regulation .................................................. 22 2.2.1 Banks and the Economy .......................................................... 22 2.2.2 Regulation of Financial Services.............................................. 25 2.3 The Social Contract ........................................................................ 29 2.3.1 Development of the Social Contract from Rousseau ............... 29 2.3.2 Contemporary perspectives on the “social contract” ................ 30 2.3.3 Critique of “the social contract” positions ................................. 31 2.4 “The Social Contract” and UK Banks ............................................. 34 2.5 Summary ........................................................................................ 43 3 Public Justification ................................................................................ 44 3.1 Introduction .................................................................................... 44 3.1.1 Contribution ............................................................................. 44 5 3.2 Pragmatic Sociology of Critique or “Orders of Worth” .................... 44 3.2.1 Inspirational Polity.................................................................... 54 3.2.2 Domestic Polity ........................................................................ 55 3.2.3 Reputational Polity or “Fame” .................................................. 55 3.2.4 Civic Polity ............................................................................... 56 3.2.5 Industrial Polity ........................................................................ 57 3.2.6 Commercial or Market Polity .................................................... 57 3.2.7 Green Polity ............................................................................. 59 3.2.8 Project Oriented Polity ............................................................. 59 3.3 Public Justifications as social contracts.........................................