Not A Lot Of It About

The images on my blog posts are random, taken wandering around London. This is from a mural in Shadwell, commemorating the 1936 Cable Street Riot.

There is much to mull over in my reading material over the past few days. I don’t understand how most people’s blogs (well, the ones I read) can be as well thought through and crafted as they are. So many thoughts are dancing around in my head that it is hard to know where to start.

Paul Moore And The Treasury Select Committee

I will begin with the item that has most grabbed my attention, the ex-head of Group Regulatory Risk, HBOS plc’s submission to the Treasury Select Committee. The text here is from the BBC website.

“Even non-bankers with no ‘credit risk management’ expertise, if asked (and I have asked a few myself), would have known that there must have been a very high risk if you lend money to people who have no jobs, no provable income and no assets.

If you lend that money to buy an asset which is worth the same or even less than the amount of the loan and secure that loan on the value of that asset purchased and, then, assume that asset will always to rise in value, you must be pretty much close to delusional?

You simply don’t need to be an economic rocket scientist or mathematical financial risk management specialist to know this. You just need common sense.”

Fish Rot From The Head Down

Mr Moore goes on to suggest that fear of being labelled a troublemaker prevented many from speaking up. I realise that there are different versions of events. Having said that, I am persuaded by Mr Moore’s. He was dismissed from his position as Head of Group Regulatory Risk at HBOS and reports that “my team and I experienced threatening behaviours by executives when carrying out its legitimate role, in overseeing their compliance with FSA regulations.”

Based on my reading of this text, several familiar issues in organisational dynamics and strategic operations emerge: the challenge of achieving effective governance in practice, the need to navigate dual objectives (aggressive sales driven culture and cautious regulatory compliance), abuse of personal and positional power, issues of competence and capabilities of people in key positions, the associated corrosive influence of nepotism,  and the crucial influence of organisational culture. In Mr Moore’s words, there was at HBOS a “cultural indisposition to challenge”.

Common Sense Goes Out The Window

The sort of toxic behaviour and business processes outlined in Mr Moore’s submission is not unique to banking, not by a long chalk. I have seen it in other sectors. Senior executives, wherever they are, have a solemn duty to model the sort of behaviours they want to see in their businesses.

Mr Moore repeatedly mentions fear of the personal consequences, and consequences for career prospects, in speaking up. How can businesses thrive under such circumstances? As we have have seen with the banks, this sort of behaviour and way of doing business is not sustainable in the long run.

It is time to strengthen external bodies, not just in financial regulation, to rein in toxic behaviour by senior people wherever it is found. Ethical behaviour is good for business; those who will not behave ethically need to be, ahem, encouraged.