Barclays scandal: ethical lessons for business

A week is a long time in politics. One might say the same of so-called “casino banking”, and these last few weeks must have felt very long for Barclays Bank.

The financial giant has gone from being toasted for not having to take taxpayer bail-out money to roasted, chewed and spat out for its role in the Libor-fixing scandal. Originally, Bob Diamond tried to blame others and drew the wrath of the Treasury Select Committee. He eventually left his post as chief executive, but didn’t exactly fall on his sword voluntarily; instead having been given a shove. He is clearly a remarkable individual (note I haven’t qualified whether he is remarkably good or bad) and he will be a hard act to follow.

Running a tight ship

The case of Diamond and Barclays poses a wider question for other employers: if you don’t know what’s going on in your organisation, does it mean that you’re not running a tight ship?

Diamond argued that he didn’t know about the Libor wrongdoing. Most of us found that as hard to believe as fairies at the bottom of the garden. One of the MPs on the Treasury Select Committee, John Mann, clearly did not believe Diamond and summed up the options as follows: “Either you were complicit in what was going on, or you were grossly negligent, or you were incompetent.”

I tend to agree. Senior company officers are paid to ensure that, among other things, their organisations are fully compliant. Part of that is ensuring that there are processes and checks in place to ensure that would-be rogue employees are kept in check and quickly spotted and dealt with if they do go off-piste. Ignorance is not a defence.

Paid to get things right

In recent years, we have seen some very highly paid people preside over very serious problems. While they may not have personally executed the wrongful or incompetent acts, they were paid to get things right. Take the case of Sharon Shoesmith, former director of childrens’ services at Haringey Council. Not only did she refuse to accept ultimate responsibility for the death of Peter Connolly, otherwise known as Baby P, she also made a claim for unfair dismissal. She was, of course, unfairly dismissed (Ed Balls, children’s secretary at the time, effectively sacked her during a news conference) but you might be forgiven for thinking that some sense of shame and personal accountability would hold her back. Not so.

Doing the decent thing

Since CEOs and managing directors seem to be unwilling to do the decent thing in these circumstances, organisations have to take steps to manage them. Senior management are not, and should not, be immune to discipline. The suggestion by Diamond that he should give up his bonus is not especially helpful. Given that he earned about £18 million last year, no one would consider that he would feel the pinch without it. In some cases, as with Barclays and Haringey Council, the organisations are accountable to the public in a broader way.

Where employees fail to carry out their duties correctly or responsibly, or where they “go rogue”, and the consequences to individuals or the public at large are as serious as those cited in these cases, it is quite reasonable to expect the senior officers to face discipline. Organisations should make it clear that senior people are accountable for the actions and errors of their employees and if they do end up presiding over a disaster, their conduct or performance will be explored formally and if the organisation is not satisfied, it will be grounds for dismissal. However, as employees, they do have rights and should be taken through the correct procedure.

Ethical leadership

Ethical leadership and culture is consistent with good business, and we try to work with honourable and decent people in a way that consistently demonstrates high levels of integrity.

We find it makes very good business sense. On a number of occasions, we have jettisoned clients that behave badly towards their employees. You might think that profligate in today’s climate, but it has always paid dividends. Long ago I decided never to work with people I don’t like, respect or trust – that includes suppliers, clients and staff. It has been a successful standard for me.

Ethical tone of a workplace

How do companies go about achieving an ethical approach to leadership? The ethical tone of a workplace starts with the senior managers taking responsibility for building it. Managers must decide what their standards are and adhere to them by setting the right example. They must communicate clear messages about ethical conduct and the integrity expected of staff and manage those employees who breach the code. There’s no point in looking the other way until the bad (sometimes criminal) behaviour is discovered. Demonstrating commitment to the values and goals of the organisation is essential. Sometimes that means that leaders – such as Diamond and Shoesmith -who have presided over gross breaches of standards should accept that what happens in the organisation flows from the senior management and resign.

Taking responsibility

Ensure that managers actively take responsibility for the team and its standards. Bring in the right people, whose values reflect the organisation’s own. If you bring in the right people, you’ll find they are self-managing and work flows like a dream. Have effective processes and ensure they are checked for compliance. Processes should enable the early detection of problems and facilitate the continuous improvement of the organisation.

Good and ethical business leaders make for good, ethical and highly successful businesses.

Kate Russell is managing director at Russell HR Consulting

Comments are closed.