bananaskinleadership
A blog which analyses operational leadership perspectives, priorities and issues within the context of recent cases which have been the subject of focused media attention.
Tuesday, February 19, 2013
bananaskinleadership: HSBC - Let's Get Real About the Laundry
bananaskinleadership: HSBC - Let's Get Real About the Laundry: Whilst it is fast becoming yesterday’s news, as further financial scandals hit the headlines on an almost daily basis, the recent debacle ...
bananaskinleadership: Lawsky's Law
bananaskinleadership: Lawsky's Law: Continuing on from my previous blog on HSBC and laundry, there can be no greater banana skin for a leader than a Young Turk, astute, s...
bananaskinleadership: Leaders, Leaders, Wherefore Art Thou?
bananaskinleadership: Leaders, Leaders, Wherefore Art Thou?: Leaders, Leaders – Wherefore Art Thou There are many theories on the key priorities and attributes of effective leadership. For m...
bananaskinleadership: Is Integrity Truly Pre-eminent in Delivering Effec...
bananaskinleadership: Is Integrity Truly Pre-eminent in Delivering Effec...: I was interested to recently read an article written by Sir Peter Ellwood, Chairman of Rexam, previously chairman of ICI and group chie...
bananaskinleadership: Anti-Corruption in Business– What About a Global C...
bananaskinleadership: Anti-Corruption in Business– What About a Global C...: I was recently asked to speak at a conference on the subject of “The Tenth Principle of the UN Global Compact on Anti-Corruption in...
Monday, December 17, 2012
Anti-Corruption in Business– What About a Global Compact Organised by the UN?
I was
recently asked to speak at a conference on the subject of “The Tenth Principle
of the UN Global Compact on Anti-Corruption in Business”. My initial response
was, what Tenth Principle on ------------- etc etc? Whilst I declined to speak
on this subject, since I was totally unaware of such a Compact, I did read up
on the subject and found that this is a massive initiative originating in 2004 which
has the backing of the UN movement and there are many very informative
documents identifying various kinds of corruption and how to prevent or rid
business organisations of such tendencies from a practical and operational
rather than from a theoretical and unrealistic perspective. There are case studies,
speeches, training aids, the whole nine yards. At a time when the media is
congested with news of corruption and cronyism in both the developed and
developing economies it is most strange that no one has publicly mentioned this
initiative and indeed that analysts, media commentators, politicians, whole business
sectors, individual organisations and their leaders are not using the Compact
either to say that they are applying or will now apply the principles,
guidelines and practical aids offered by this Compact if only to give
themselves credibility in the present maelstrom. I contacted a few business and
management institutes to ask if they utilised the Compact as a foundation,
guideline or aid to the development of the codes of practice which they had
developed for their members. Polite and informative bluster and confusion were
the result.
For those
readers who are interested or curious on this question may I refer you to http://www.
unglobalcompact.org website. I would also be interested to know from readers
why they think that this Compact and its support material is not utilised by
business organisations as a foundation for effective anti-corruption.
Wednesday, September 19, 2012
Is Integrity Truly Pre-eminent in Delivering Effective, Long Term Organisational Leadership?
I was
interested to recently read an article written by Sir Peter Ellwood, Chairman
of Rexam, previously chairman of ICI and group chief executive of Lloyds TSB
and TSB Group before that. In that article he states that “the overriding
leadership quality for manufacturers or bankers is integrity ----------
Integrity of decision-making is about doing what you know to be right, even if
it leads to adverse consequences”. It was an excellent article and Sir Peter
was arguably one of the better leaders of British banking as the sun went down
on the twentieth century (shall we say a Frank Lampard compared with the Lionel
Messi who was Brian Pitman, the previous Group CEO and subsequently chairman of
Lloyds Bank).
However,
perhaps integrity (defined in my Penguin English Dictionary as an
“uncompromising adherence to a code of moral values”) is rather in the eye of
the beholder and best viewed with hindsight and nostalgia when the details and
implications of their operational application have faded in the mists of time.
In this respect I am minded of the many generals and admirals of the two World
Wars who rightly consider that they operationally achieved, with integrity, the
objectives agreed with their political masters, whilst acknowledging the known substantial
“adverse consequences” for many on both sides and also that there will be
unknown “adverse consequences” for many in the future as a result of their
decisions. However, like so many lower rank officers and troops at the “sharp
end”, they tended to avoid voluntarily discussing
the “adverse” operational, on the ground, implications and consequences of what
was considered at the time to be decisions and actions based upon a highly
principled moral code. Perhaps Sir Peter’s piece would have achieved even
greater impact if he had briefly expanded on the practical implications of his
definition of integrity, translated into operational details and their
resultant “adverse consequences” over the short and long term in order that
readers might reflect on whether this is consistent with their own moral code
and sense of integrity.
I am sure
that the enhanced cost efficiency, rationalisation and subsequent “merger” of
TSB Group with Lloyds Bank was indeed logical and “right” within the context of
the opportunities available as a result of the financial liberalisation of the
time and was wholly consistent with the code of moral values, perspectives,
priorities and practices of British commercial banks at the time. There may be
some objection to my contention that TSB Group was viewed by organisational,
sectoral and political leaders at the time as a slumbering giant from which
vast profits could be made through significantly enhanced cross-sales to its substantial
and loyal base of relatively financially unsophisticated customers, marketed
through an extensive national branch network, with a staff who had a loyalty,
allegiance and dedication to the organisation probably unmatched within any of
the commercial banks. The opportunity was therefore envisaged to leverage these
key success factors to ramp up profits by serious multiples for the benefit of
key stakeholder groups. However, this could only be achieved through making
redundant some 6-7000 staff, out of a total of approximately 29,000. I should
say that whilst I worked within TSB Group at this time I was not one of these
6-7,000 individuals; nor was I one of those unfortunates who, with their
families, within a 2-3 year period, had to move first from Manchester to
London, then to Birmingham, then to Glasgow, as business units were moved to
low cost sites in the drive for cost efficiency. Some might respond to this
interpretation of the motivations of converting TSB Group from a mutual to a
public limited company as blinkered, preferring to focus upon issues of
competitiveness, corporate governance and the absence of the required capital
adequacy for survival, as justification for de-mutualisation, but I will
address this alternative perspective later.
The reality
of business leadership is that there frequently are adverse circumstances for
some stakeholders in taking decisions with the objective of achieving optimal
business performance. Ultimately, therefore, we may only assess whether the
dominant coalition within an organisation applied integrity in decision making
through an assessment in absolute terms of both the positive and adverse
consequences to the business and its key stakeholder groups of those decisions
Staff in
TSB Group were demoralised and de-motivated, wondering when rather than if the
axe was going to fall. The result was that customers, from seeing smiling,
enthusiastic staff who were, with them, members of the TSB community, now saw
hollow cheeked individuals, desperately trying to sell them life policies,
credit cards and payment protection insurance, when they only wanted to deposit
£20. Cross-sales did creep up but at what cost to the organisation over the
long term; the cost/income ratio is meaningless compared with the cost of a
unique long term relationship with customers which did not exist within any of
the commercial banks with whom I have subsequently and previously been employed
or which I have researched. Leadership individuals came and went, seeking to
embed their own dominant logic, leaving staff and customers bemused, bewildered
and confused. Was this the big picture and vision to which Sir Peter referred
in his article?
This is certainly
not a personal attack on the leadership of TSB Group of the time, since pretty
much all of the leadership of mutual institutions in the UK (predominantly
titled building societies) caught the bug spread by financial liberalisation
and these institutions, the mutual financial services sector, with its broad
stakeholder perspectives, are, with few exceptions, now no longer of this world
in the UK. Lloyds TSB is now 40+% owned by the British Government and has
recently sold 600+ branches to Cooperative Bank, which follows a more stakeholder
community based set of values, principles and priorities, one geared to
ensuring that the sun comes up every morning and the moon every night, rather
than preferring to appear to financial analysts and commentators as shooting
stars.
The leaders
of Co-operative Bank, Nationwide Building Society in UK, also RaboBank in the
Netherlands considered long and hard on the opportunities available as a result
of financial liberalisation but unlike mutual organisations such as Bradford
and Bingley, Northern Rock, Halifax and TSB Group in the UK did not rush
headlong into universal banking, casting aside a collaborative and cohesive
dominant logic and culture which had sustained them for over a century. They
rather moved more slowly to take advantage of the developing opportunities, at
a pace which maintained the cohesion and allegiance of all stakeholder
groups. These institutions have
weathered the prevailing storm within the financial services sector much better
than commercial banks, including those who converted from mutual to public
limited company status during the 1990s, requiring no bailouts or
nationalisation. This was achieved on the basis of differences in long term
vision, principles, perspectives and priorities, reflected in business
strategies and, equally importantly, operational leadership decisions and issue
resolution which reflected the nature of the dominant moral code and
“integrity” within these organisations.
Many might indeed
argue that the mutual sector in the UK was disassembled on the basis of:-
·
Perceptions
that it was an outdated concept
·
Concerns
regarding corporate governance and accountability
this in addition to the opportunities available
through financial liberalisation. However, as we have noted in these recent
years of crisis within the financial services sector, perhaps concerns of
corporate governance and accountability in practice apply equally, if not more,
to commercial banks, resulting in a collapse of credibility and trust. In
contrast, co-operative banks and surviving mutual institutions have enhanced
their credibility, retail banking market share, remaining as pillars of
stability and reliability in a sector battered out of recognition.
In closing
I would conclude that hindsight is indeed a wonderful thing and in general leaders
tend to and indeed are compelled to go along with the big wave which offers the
appearance of substantial market opportunities. However, the above indicates
that integrity is of value only to the self-esteem of the individual who thinks
that he has it, this unless it is linked to an appropriate viable and holistic vision
and, more importantly, appropriate values, principles, perspectives and
priorities geared to the sustained survival and growth of the organisation,
also for the benefit of all key stakeholder groups and the society within which
it operates and of which it is a part. The leadership of the majority of mutual
institutions in UK in 1990s confused integrity with the lesser traits of benevolence
and generally meaning well, lacking the appropriate experience, insight and
judgment within a financial services context increasingly dominated by
“traders”, losing sight of the fundamental values, principles and priorities
which had brought them into being, which merely required to be adapted, rather
than binned. The result has been substantial “adverse consequences” for a wide
range of stakeholders inconsistent with a moral code which fosters long term
survival, stability and long term optimal performance.
TSB Group
is no more, Lloyds TSB Group is partly nationalised, with their shares
struggling to hold a value of 30 pence when 15 years ago they were worth around
£8+. Co-operative Bank has just bought 600+ branches along with their deposits
from Lloyds Bank Group. The mutual sector in the UK is defunct, whilst acting
as a force for financial stability in many European societies. Perhaps the
overriding leadership quality is not integrity, which appears in fact to be a meaningless
term in relation to leadership qualities, but rather the definition and
consistent application of values, principles and priorities which resonate with
all stakeholders in respect of operational decisions and issue resolution and
are consistent with optimal long term performance for the organisation and the
society of which it is a part. Only then
can any “adverse consequences” be justified with hand on heart in the minds of
those individuals who profess to take a leadership approach based upon integrity.
Monday, August 27, 2012
Leaders, Leaders, Wherefore Art Thou?
Leaders, Leaders – Wherefore
Art Thou
There are
many theories on the key priorities and attributes of effective leadership. For
me, when you boil it down, to be any kind of leader you have to have followers,
more specifically, willing followers. This following tends to but should never
be regarded as a given. The priority for consistently effective leadership is
therefore about understanding people, their motivations, reactions,
requirements, aspirations and expectations in order to achieve operational
effectiveness and optimal long term performance. Key, indeed primary leadership
characteristics and attributes are therefore about communicating, persuading,
listening, coaxing, clarifying, and coordinating. Sure, you have to be dynamic,
decisive, and analytical, see the big and small picture, long and short term,
and practise organisational ambidexterity, exhibit technical insight to be
credible and all sorts of other wonderful, exciting things.
However, it
is when the chips are down, when the organisation has hit a bump in the road
and you have marshalled your capital, you have revamped your technology,
products, costs, clarified policies and objectives, communicated a new vision
and you say OK, follow me, that you look around and realise that there is no
one there, physically and/or mentally, that you realise that there may be
something missing in your leadership tool bag to fill in or bridge the black
hole which represents sub-optimal organisational performance or impending
collapse and failure. That critical tool is understanding that organisational
success is based upon acknowledging, understanding and taking day to day
decisions on the basis of the importance, the centrality of people rather than
products, processes, profits, projects in order to resolve issues and optimise
performance. This is recognised as logical to some of those who have
responsibility for achieving organisational goals; to others it is soft headed
and a nice to have, since only a primary focus on the priority of policy,
product, price, project, process and procedure will consistently achieve these
goals.
The
importance of people leadership capabilities is a point increasingly and more
strenuously made over the last ten to
twenty years, as the requirements of the knowledge economy have been considered
and the age and therefore priority of the principles, perspectives and
priorities of mass production management have been found wanting in respect of
operational effectiveness and organisational performance. My experience
indicates that people focussed leaders do exist in most organisations. Regrettably
it is also my experience, with only few exceptions, that the senior echelons of
the majority of organisations, those who define business policy and
organisational culture, tend not to be populated by individuals with people
focused perspectives and attributes. I
have this belief, based upon my experience managing and leading within a range
of organisations that not only existing senior executives but the next couple
of generations consider that and indeed have been effectively inculcated in the
belief that to rise to the top in an organisation it is not considered a
requirement to be a great or even good people leader, merely to be a proficient
manager in terms of technical skills and routines important in that specific organisation,
self-confidence, with a certain cunning and astuteness for what is required at
that moment in time to satisfy key stakeholder groups.
This
perspective is admittedly a little cynical and Machiavellian but will I think resonate
with the reality as accepted by those who are long in the tooth organisational
practitioners. This may be a little confusing; it is like saying that the
captain of a ship who decides on the direction and destination is not the
leader. This is indeed the case; it is the person(s) who organises the capabilities
of the ship, particularly the people, to reach the destination, who is the
leader within that entity. Those whose role requires core perspectives and
attributes which allow them to effectively direct, motivate, coax, persuade and
coordinate a diverse range of individual characters within the daily working
environment in order to consistently achieve operational effectiveness and
achieve business deliverables and strategic objectives. Without such
individuals the captain stands on the bridge, merely monitoring the dashboard,
in control of nothing, fundamentally unable to control speed or direction.
Captains (whether of ships or industry) can take as many policy decisions and
set objectives as they wish. Unless the real leaders (of people) understand and
support them they will either not be achieved or will be sub-optimally achieved.
This is fundamentally the reason why so many annual targets and goals and long
term objectives are consistently not achieved. This is why Alexander was in
reality not so Great; he conquered but did not have the leadership perspectives
and attributes to reign; to motivate and energise, to satisfy personal
aspirations, requirements and expectations over the long term. Like so many
lauded merger and acquisition experts, once the deal was done he lacked the
leadership perspectives, insight, judgment and attributes to take the key
resources, the people, with them to optimally realise the benefits of the
transaction over the long term. Many empires, be they societal or business,
have declined and ultimately collapsed due to this leadership deficiency.
The
operational result of limited (people) leadership perspectives, priority, attributes
and capabilities within the decision making cadre is consistently debilitating
to operational effectiveness and organisational performance in respect of
decision making and issue resolution. Allow me to provide an example. Whilst
working in the Arabian Gulf I was requested to interview a number of candidates
in the Indian sub-continent for the position of Head of Islamic Banking and thereafter
provide written feedback to those who would ultimately take the recruitment
decision. Upon my return I found that the candidate selected had been the one
who undoubtedly had the technical qualifications but whom I had counselled
against recruiting because I considered that he lacked people leadership
skills, was egotistical, self-important and self-serving. To make matters
worse, it had been decided that whilst from a strategy development perspective
he would report to the Deputy Group Chief Executive, for operational day to day
reporting he would report to me. This was the ideal situation for someone who wished
to create his own empire. He smiled, nodded and agreed but out of earshot proceeded
with his personal agenda and during orientation discussions with functional
heads stated that he should in fact report to the Group Chief Executive because
of his expertise and the importance of Islamic banking to the organisation. The
result was disruption, confusion and conflict across large parts of the bank
which were involved in the coordination of Islamic Banking initiatives, as
subordinates and peers sought guidance on who was ultimately taking the
decisions. Whilst there was a realisation within a few weeks if not days that a
major blunder had been made in the recruitment process and the reporting lines,
the organisation stood still on a major business initiative for six months
until the individual’s services were dispensed with.
This is a
direct reflection of the importance of people leadership attributes in the
minds of senior executives as a key capability to be engendered throughout the
organisational leadership cadre Where individuals lack a people and
organisational community perspective, perceiving an emphasis on technical
skills as the critical factor for progression, this fosters a less principled,
indeed unethical approach to decision making and issue resolution. There are
countless other examples which I could provide of recruitment primarily based
upon technical capabilities rather than allied to embedded people leadership
capabilities and the substantially detrimental impact upon operational
effectiveness and organisational performance that such a perspective and
priority can and does have (I am sure
that many readers could also recount similar instances).
My solution
to this critical issue of acknowledging and understanding the requirement to
engender true leadership perspectives, priorities and practices?
- Laud less those who “conquer” or undertake mergers/acquisitions and more those who have led an organisation to sustained optimal performance over an extended period.
- When making policy decisions such as merger, acquisition, market penetration or significant change in organisational direction the primary senior executive focus should be less on the numbers (enhanced cost efficiency, capital strength, ROI, market share, revenue enhancement), processes and projects to complete the transaction and more on evidence of the people leadership capabilities to effectively deliver on initial changes in perspectives and structures but most of all to achieve the benefits of the transaction over the long term.
- Senior decision makers must be selected less for their technical skills and more for their people leadership perspectives, attributes and capabilities.
- If this is not possible/acceptable then senior decision makers must accept that in operational terms they are not the leaders within the organisation and delegate responsibility and authority accordingly, putting aside issues in relation to ego.
- It is the role of the dominant coalition within the business organisation to develop a culture which encourages and facilitates the development of people leadership skills equally if not more than technical capability since this is what delivers consistent operational effectiveness and long term performance. Once this cultural transformation is largely in place leadership should be left to those with the required perspectives, priorities and attributes in those roles within the organisation where they are required to optimise organisational performance through an ability to lead people
So, look
not upwards for true leadership; look rather to those areas of the organisation
where operational coordination, motivation, energising, persuasion and
direction of a broad range of individuals with a swathe of varying requirements,
aspirations and expectations is required in order to achieve operational effectiveness
and long term organisational performance. Admittedly this is a big ask, to
change the embedded dominant organisational logic, the inculcated principles,
perspectives, priorities and practices amongst the present and future senior
executive and leadership cadres. In this respect perhaps the prevailing
economic and financial services sector crisis is an ideal stimulus to spur the
required change in logic. One merely needs to compare the dominant logic and
priorities of the dominant coalition of many of the financial services
organisations which failed with those which survived comparatively unscathed to
understand the primacy of (people) leadership for performance and long term
survival and the benefit of a dominant logic which continued to motivate and
energise and engender confidence and loyalty amongst stakeholders. Long term
operational effectiveness and performance is based upon senior executives
creating an environment and culture which allows the real leaders within the
organisation to persuade, motivate and energise those key resources which
deliver, people. This is the hard-headed, pragmatic but soft hearted leadership
perspective for long term “success” in the twenty first century
Sunday, August 12, 2012
Lawsky's Law
Continuing
on from my previous blog on HSBC and laundry, there can be no greater banana
skin for a leader than a Young Turk, astute, self serving, politically aware and
predatory, who has no regard or recognition for the consequences of their
actions. Such dangerous, ravenous beasts appear out from the long grass when
you least expect, both internal and external to the organisation, spurred into
action by perceptions of an easy kill. It will be an interesting battle, Lawsky
vs Sands (chief executive of Standard Chartered). There can be little doubt now
in the minds of those with a bit of knowse that there is heavy duty political
momentum at the most senior levels from the eastern seaboard of USA to knock
the City off its perch and get some business back to Wall Street, lost during
the collapse of its banking sector. Whether the Wall Street sheriff is a
maverick or has been cajoled forward by those who prefer to work from the
shadows remains to be seen. Unlike HSBC,
Barclays, Lloyds Banking Group and Royal Bank of Scotland, whose leadership
decided to say mea culpa, admit to more than they think they are culpable, cough
up and get on with sorting out more urgent and survival threatening problems, Standard Chartered would be wounded
seriously but not mortally by losing its banking licence to transact in New
York. Standard Chartered is therefore a strange choice for the sheriff since it
has provided the City with an institution for the City and its political and other
friends to rally around. By all accounts the USA regulators intend, by the time
they have finished, to hammer banks in many of the competing global financial centres,
London, Frankfurt, Zurich amongst others, whilst merely slapping the wrists of
banks such as Wachovia and Goldman Sachs & Co., who arguably have
perpetrated much more serious infringements of the type of which non-American
banks are accused. Benjamin may well be a stalking horse sent forward by the
men in grey to assess the likely response to their plans to level the playing
field, in favour of the American financial sector. As with organisations, so
with empires, power is transient and historically has diminished and evaporated
in the face of ad hoc coalitions of blocs who feel threatened by those who
consider themselves invincible.
Leaders
within HSBC and Standard Chartered in particular have had to deal with
predators, both individuals and political groupings, over the last century or
so, particularly in the maelstroms which have been the Far and Middle East and South
America. Methinks this is a banana skin which might just be mobile and the
sheriff should periodically look down rather than keep his gaze on the stars.
Sunday, August 5, 2012
HSBC - Let's Get Real About the Laundry
Whilst it is
fast becoming yesterday’s news, as further financial scandals hit the headlines
on an almost daily basis, the recent debacle concerning the laundering of
Mexican drug and other suspect funds in the Middle East/Arabian Gulf by HSBC
Group is a prime case study exposing the realities of organisational leadership
and the conflicts between the interests of the different stakeholder groups
which have to be constantly navigated in strategic and operational decision
making within the global organisation. I should state from the outset that I
know and have in the past worked with many of the names and faces which have
come to the fore in this case; also other HSBC senior executives who are likely
to have been involved but managed to remain under the radar, so far. In my view
these individuals are amongst the most highly experienced, professional and
principled that I have worked with in a career spanning four decades, in many
organisations and societal cultures. I must therefore admit to equal measures
of disappointment and bemusement. It is a mark of the prevailing (and perhaps
historical) short termism, “smash and grab” of the Anglo-American business
culture that the values, principles and dominant logic of an organisation such
as HSBC ( developed through business, economic, political crises, civil and
global warfare spanning 150 years) appear have been substantially undermined. For
all that, HSBC must and will be fined a sum to make its stakeholders’ eyes
water, as a punishment, an act of contrition and as the chosen representative
of an industrial sector where a large number of other members have, do and will
probably continue to perpetrate similar practices, despite the potential costs
of discovery.
As one of those
cited in this case commented in 2011 in respect of the financial crisis in
Ireland, the Mexican laundering issue is less to do with corruption, greed and
short termism and more to do with leadership inexperience, incompetence and
inadequate insight, judgment, overall and detailed control within key functions
and positions on the part of the organisational leadership. Like Ireland,
Mexico has for long suffered from embedded societal, institutional and
individual greed, corruption and cronyism. HSBC had for long avoided
significant investment in Russia and Eastern Europe due to its view that the
levels of institutionalised corruption and criminality seriously impacted upon
social and economic development and therefore acceptable long term optimal
organisational performance. It is inconceivable HSBC Group leadership thought
it in the organisation’s best interests, over the long term, in terms of profit
and credibility amongst key stakeholders, to consciously and deliberately transport
and launder drug proceeds. The chief executives of HSBC in Mexico have for long
been part of the HSBC Group dominant leadership caucus and until a recent
retirement sat as two Group Managing Directors within the HSBC strategic decision
making forum. As in the case of a number of western European banks who invested
in Eastern Europe, they found that the deeply embedded corruption and cronyism
culture and the allegiances, perspectives and practices developed during the
communist era could not be easily changed, with a resultant substantial adverse
impact upon performance, profit and credibility, at some early or later
juncture. So it is in Mexico, where the tentacles of the drug cartels go deep
and wide, where the staff, management and many of the leadership had become
accustomed and familiar with certain deeply embedded primary allegiances and
practices, which many out of duty and/or fear continued to hide from statutory
and organisational authorities. This does not detract from the responsibility
of highly paid HSBC leadership and the expectations of the broad range of stakeholders.
It just makes it more understandable from the perspective of the realities of
strategic and operational leadership control and decision making. HSBC has for
long consistently succeeded on the basis of its incomparable experience,
professionalism, integrity, insight and judgment. This episode, allied to the
Household Mortgage Corporation debacle, which may be said to have initiated the
sub-prime crisis in USA, severely dents its Teflon image and credibility. My suspicion is that senior leadership within HSBC,
in both Mexico and USA, were aware of these practices, as was the Comptroller
of Currency, but the last thing that they wanted was to create another scandal
during the period of the Lehman, AIG, WaMu and plethora of other financial
crises. In many respects this was an important but less urgent matter to be
resolved once the Household crisis had been resolved on the part of HSBC Group
and the USA financial structure had been stabilised.
In my view the
case of the Middle East/Arabian Gulf laundering is very different in respect of
the realities of organisational leadership. Effective leadership concerns
satisfying and managing stakeholder expectations. HSBC has based its continuing
success over the last approximately 150 years on this complex and difficult
process. On the basis of the limited detail available HSBC is accused of laundering
Al Qaeda and Iranian funds in contravention of USA financial compliance
regulations. It is specifically accused of business dealings with Al Rajhi Bank
whose founder is accused of having funnelled funds to Al Qaeda. HSBC has had a substantial representation in
the Middle East and Arabian Gulf for over 100 years in respect of commercial,
corporate and institutional banking, from Persia as it then was, to Saudi
Arabia, Egypt, Jordan, Lebanon and the UAE. It has therefore developed many
embedded business relationships with governments, institutions, corporations,
individuals, local regulators and supervisors and competitors. The reality of
operational leadership is that you utilise your experience, intelligence,
professionalism, insight and judgment to apply the plethora of regulatory
requirements from a multitude of states in a manner which is consistent with
the framework of values, principles and priorities upon which the organisation
is led. The USA has in the past understood the economic, business and
particularly political implications of to the letter application of its
regulations and sanctions. There has therefore been a measure of unofficial
nodding and winking, such that certain approaches and practices were allowed
which today, as the stranglehold on Al Qaeda and Iran tightens and achieves
increasing global agreement, cooperation and integration, have become anathema.
The difficulty
about leadership is the pragmatism bit. Al Rajhi Bank is one of the largest
financial institutions in Saudi Arabia, which itself is the biggest economy in
the Arabian Gulf. To avoid transacting in some form with Al Rajhi is
unrealistic. Moreover, the majority of banks in Saudi Arabia and the Arabian
Gulf would be guilty of a similar accusation under the USA supervisory terms.
Similarly, Iranian businesses are major traders in the Arabian Gulf, where HSBC
has long standing business and institutional clients. The reality of organisational
leadership in the Arabian Gulf is that you are daily faced with customers,
clients and other key stakeholder groups, many with considerable influence
within your business context who contend that USA compliance regulations should
not be the determining factor in business decisions which adversely affect not
only individual businesses but also the economic well being of retail customers
and industrial sectors. Stakeholders in the Middle East and Arabian Gulf
frequently have a different view from those in the West on the logic of
sanctions against Iran when the nuclear capabilities of Pakistan, India, Israel
and others are addressed with less vehemence and belligerence. Whilst significant
and powerful, USA regulators are but one stakeholder to take into account when
taking operational and strategic decisions within the realities of doing business
in the Arabian Gulf. HSBC no doubt took into consideration the downsides on
non-compliance along with the interests of a wide range of stakeholder
requirements and expectations. In many respects one of the worst case scenarios
for HSBC has materialised. Time to pay up and move on with doing business.
I abhor Mexican drug dealers, the Iranian theocracy
and Al Qaeda’s wanton acts of terror and violence. My objective is to use this
laundering example to throw light on the complex decision making process of
operational business leadership and why even organisations which many would
regard as possessing high standards of integrity may oft times be found
wanting. Leadership is about optimising rather than maximising the application
of key values, principles and priorities which determine the dominant logic of
the organisation. It is about knowing that you have not totally complied with
these values and principles but knowing why on each occasion you have not done,
so but that, in so doing you have optimised the requirements of the broad
rather than narrow range of stakeholders whose interests are your prime responsibility.
This is where HSBC Group differs from the likes of Enron, who started without
any recognisable embedded leadership values or principles.
In this respect I will close with a question. Whilst
the media has been focussing on the practices of the financial services sector,
most recently on Barclays plc and HSBC Group, little attention has been given
to the $1.5 billion fine paid by the pharmaceutical company GSK (GlaxoSmithKline)
to the US authorities, after admitting to the largest healthcare fraud in
US history. GSK was accused of bribing doctors in America, between 1998-2003,
to prescribe medicines for unapproved uses, with potentially dangerous side
effects. As someone who has had my fair share of Lucozade and Ribena I trust
GSK, who have carefully built up a very credible long term reputation in the
marketplace. Yet the leadership decided that it was in the interests of its stakeholders
to promote a drug for treating depression in children, even though it was
not approved for under 18s. It also promoted a drug for weight loss, sexual
dysfunction, substance addictions and attention deficit hyperactivity disorder,
although it was approved only for treatment of major depression. Going beyond
the ethical issues, what were the pressures, perspectives, priorities in the
minds of experienced, insightful and presumably highly principled individuals of
integrity leading, a highly successful and reputable pharma company? This is
why we need to look beyond the media hype and tut tutting to better understand
the complex process and realities of operational leadership decision making. By
not doing so we merely await further scandal and the gradual erosion of values
in reputable business organisations.
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