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Toning From Top ? Not At Credit Suisse; UK Shows Broader Perspective

Posted on May 25, 2014 at 5:00 PM

It is almost beyond belief.


Last week Credit Suisse, an integrated global bank, pleaded guilty to an “extensive and wide-ranging conspiracy” to help American citizens evade taxes, and agreed to pay a $2.6bn fine to US authorities, finally drawing a line under a three-year dispute. 


Let's just look at those numbers again - resolving this matter took three years, and the bank pays $2.6bn. It is the first large global bank for two decades to admit to criminal charges. So where is the responsibility, where does it lie ?


Clearly it does not lie at the top of the organisation. Step aside to make mega room for hubris. 


As Reuters reports, "Credit Suisse's Chief Executive Brady Dougan told a Swiss Sunday newspaper he has no plans to step down and his bank would not need a capital increase despite a $2.5 billion deal with U.S. authorities over a tax dispute."


Mr Dougan is not exactly setting a fine example to all those new recruits at Credit Suisse...and then the banks wonder why this has been going on and on since the financial crisis first cast a spotlight on the financial services industry that has been unrelenting.


The latest shenanigans at Barclays are also worth noting. One could be forgiven for asking if anyone has learnt anything at all from the financial crisis, or if anyone cares - as long as share prices keep going up. 


They should. Because the litigation costs for all this mis-selling and redress to customers amounts to a huge amount of money, for a start. 


And there is another crucial consideration in poor corporate governance which has been largely ignored to date, but seems determined to raise its head - in the UK, at least. Every time there is a fraud committed, there is a victim or indeed, multiple (blameless) victims. Now it seems as if the UK is starting to look at all this from more than one perspective.


The Sentencing Council For England & Wales is setting out proposals that allow judges for the first time to weigh the harm done to the victim, rather than purely the financial amount defrauded

 

British companies that bribe foreign officials to win contracts, commit fraud, or launder money, face fines of up to 400 per cent of their illicit profits, under its new penalty guidelines.


According to the Financial Times quoting legal experts, "in the most serious cases companies will pay fines comparable with those meted out in the US, where penalties can be as high as hundreds of millions of dollars."


The change of perspective is a huge development, with implications for corporate governance in the UK.


For there is a lot of talk about 'tone at the top' but less about 'the everyday victim' of fraud. Put the two together, and you have a potent combination for change - and most importantly, for buy-in among future investors.


 


Categories: Investors, Behaviour, Leadership