Seldom is a businessperson’s leadership put in the spotlight and held up to public scrutiny. However, the banking crisis and subsequent behaviour of the banks’ senior management, is one of the occasions when it has been.
Big bonuses and let the party go on!
It would appear an air of arrogance has settled within much of the city’s banking sector. It is difficult to believe that only a short time ago, these same bankers were running to the government and raiding the public purse in order to survive. They asked for unprecedented public financial support in order to sure up organisations that they managed into financial ruin. A great deal has been spoken about which relates to the international chain of events that lead to the global financial crisis. But the blame cannot be shrugged off and at the very least it must be shared. The immediate storm appears to have passed and it is left to a generation of taxpayers to pick up the bill. So, why not let the good times return? After all, what has really changed and what lessons have been learnt?
Need for action!
There are few people who would argue that the banking sector needed to be supported in order for a much bigger crisis to be avoided (although some would say only time will tell if it has been avoided or simply postponed). The intervention that was taken was probably unavoidable, yet the lessons that should have been learnt and the people who should have known better appear to be absolving themselves of any responsibility. As the financial stimulus was required in order to right our economy so to is a comprehensive reform of the banking industry.
Can bankers self regulate?
The announcement that leading banks will go ahead with plans to pay large corporate bonuses in the face a strong public condemnation and a Government urging constraint suggests that the senior management of the banking industry has learnt very little from recent events. It is time that individuals who show such poor judgment in public and professional actions need to have reform and regulation imposed upon them from external sources.
Poor leadership could be the foundations to strategic decline
Poor leadership of senior bankers and the perception of unaccountable greed have left a sour taste in the mouth of the public. In the coming months, they will feel this taste turn into real financial pain and they will want to see action. As governments are voted in by the public (and it is the government that is forced into tough financial measures in order to pay for the bank loans), public perception will turn to political pressure if action is not taken to curve the excesses of the banks.
What could happen to the banking industry?
Perhaps the banks will be split up, meaning the commercial and domestic banks are never mixed again. This would ensure that high-risk banks could fail. Perhaps the government will impose greater direct regulations on the existing banking sector. Whatever the final solution, the banking industry is laying the foundations for a very uncomfortable bed in the future.
One final word
Much has been made of the international global economy and the overt threat by many banks that they will simply move headquarters in order to avoid regulation. However, just as the crisis was global so too will the solution and rebalancing of the ethical justice of the banking industry. It is difficult to see how banks divorced of a presence in the major financial capitals of the world would continue to enjoy such influence in the global economy, especially as in many cases if the governments that underwrote their financial stability called in the debt!