Ethical banking

March 7 2018

The banning of the Reverend Flowers – see here – is no surprise, though the reasons perhaps are.   His total unfitness for his role should perhaps have been as much of a consideration as his questionable moral compass and extra-curricular hobbies.  Still, it is a reminder that due diligence – real due diligence not the cursory box-ticking which it too often is – is essential before any hire.  A lesson the FCA might also have learned given its own less than glorious role in the sorry affair – see here.  Another inquiry into the Co-operative Bank is now on its way.  Will it tell us much more than the 2014 Kelly Review which concluded that “There was a pervasive lack of realism about the underlying strength of the business, partly arising out of a belief that as an ethical bank it was doing the right things…..”?  Paradoxically, a belief that you are a good person or good organisation can lead to a dangerous complacency.  It’s not what you call yourself that matters; it’s what you do.

And one of the most important things you can do is to hire the right people into an organisation.   As Warren Buffet put it – “You look for three qualities: integrity, intelligence and energy.  And if you don’t have the first, the other two will kill you.”

Scandals galore…..

February 16 2018

Oxfam is only the latest institution to find that good intentions are not enough to make it immune from disgraceful behaviour or a culture which sees such behaviour as the norm or something which cannot be challenged.

On Radio 4’s The World at One on 13 February an interviewee said this about the aid sector:  “There is a pack mentality….. The majority don’t want to encourage this sort of behaviour but do nothing because they are afraid of being seen as not being part of that male society, they don’t want to be ostracised.  It’s not about grassing on your mate.  It is about upholding the law”.

It could have been said about finance, Hollywood, Parliament, football or churches.

It is all too common in scandals – wherever they occur – to find that:-

  1. There were warning signs about an individual which were ignored.
  2. Due diligence was ineffective, cursory or non-existent when hiring decisions were made.  See here.
  3. Concerns that others had were ignored or rationalised away
  4. People were dazzled by by a person’s reputation and/or money-making skills (sometimes more apparent than real)
  5. Whistleblowers were ignored or felt unsupported or were told that this was how things were
  6. Whatever initial investigation was carried out was too limited and nothing much was done as a result
  7. Leadership was inadequate
  8. When matters become public a response is given, usually focusing on procedures, which is wholly inadequate to how the allegations are perceived by key stakeholders.
  9. The entity becomes defensive and lashes out at its critics.  Click here for an example.

A combination of some or all these factors combine to make a serious situation much worse than it need be.  The embattled entity no longer dictates the narrative but becomes its subject.

There are many lessons to be learned.  But one above all: thorough timely investigations matter.


Click here for the full article.






January 19 2018

“The Financial Conduct Authority (FCA) has prosecuted eight cases of  insider trading in the past five years and secured 12 convictions.”

It is all the more important for firms to establish and reinforce – continuously – the right culture themselves rather than rely on wrongdoers being caught by others.  Markets and market participants we can trust are key to the reputation of the financial sector.

Read full article here