Some commentators are saying that here in the United Kingdom, Margaret Thatcher’s policies and the 20 year-old deregulation of the markets have finally unravelled. It is not policies or rules that cause catastrophes – it is people. In this case it is the ineptitude of those running the banks and building societies.
Guess what? Apart from the four sacrificial lambs that were offered up a couple of weeks ago, the same senior executives are still running the banks – or should I say should be running the banks.That is, if they weren’t hiding behind the sofa with their hands over their ears.
Here’s a good Mastermind question: Who was the last bank CEO or Chairman to give a TV interview?
We have been regaled by the rather fatuous argument that the executives who are still in place are the ones who understand how the business works and if we trashed them then we would be in even more trouble.
That is nonsense.
I have worked for a Building Society, several large insurance companies and a large (the largest) American bank. The root cause of what has been happening in the last year-or-two is the total lack of senior technical and managerial talent within the industry. It is not a new phenomenon.
In the good old days, the lending of money to an individual was never a profession – it was more of a “trade” because it was simple. Consequently, the money-lending business (nowadays it is called “banking”) was run by ordinary honest folk who could gradually work their way to the top of their organisation – usually through a combination of hard graft and company loyalty.
The directors would make sure that they kept the bank or building society well within the liquidity rules, they would vary interest rates when instructed to do so by the Bank of England and they NEVER went bust because it was nigh on impossible to go bust. I recall just one occasion many years ago when the Chelsea Building Society was forced to revalue its assets but otherwise – no problems.
There were no executive bonuses because the word “profit” was not in their dictionary – but they would strive to make a small surplus. Likewise, there were no golf days, coventions or any other executive freebies.
Then laws were changed and the “suits” came.
Directors of lending institutions used to be a crustily venerable lot of old duffers who tended to be unqualified businessmen who strangely enough, were more entrepreneurial than the MBAs that are running the show these days. Typically, they were senior partners in accountancy companies, estate agencies or solicitors. They were men in their 50s and 60s who were REAL businessmen and who had created their own wealth.
That is where the seeds of destruction were planted – in the panelled boardrooms of provincial England. The Old met the New and were dazzled by the following: (perm any two from six) MBA, Oxford, Cambridge, Harvard, Degree and Insead.
The rheumy-eyed, pipe-smoking unqualified old directors were dazzled and seduced by the shiny new boys with MBAs and incomprehensible management jive talk. They all wanted one!
It was in 80s USA that the cult of the “corporate entrepreneur” had been born and transplanted rather uncomfortably into the gut of the UK’s financial industry.
The phrase CORPORATE ENTREPRENEUR is like “Police Intelligence”, ” Microsoft Works” and “Friendly Fire”. It is an Oxymoron.
A corporate entrepreneur is a man who has a salary, takes risks with other peoples’ money and is rewarded for his “bravery” through the medium of the exec-bonus.
A proper entrepreneur takes risks with his own hard-earned cash whereas the boys who run our banks are just overpaid bluffers with a shelf life and a permanent hard-on.
As a result of their corporate games, our Government is now forced to take a shortcut which is the reciprocal of what happened in China and the old USSR.
The Russians and Chinese flipped from state control to capitalism but we appear to be heading in the opposite direction. If the government takes on any more banks, it ought to be reported to the Competition Commission!
For the time being, the markets will bounce along, floating on occasional short-term waves of faux-euphoria.
We are whistling in the dark.
Soon we will all wake up and realise that if we are really seeking a new banking direction – it is the drivers and not the cars that have to be changed. The government is the short-term relief driver but new drivers need to be found from within the banking industry.
There are scores of very talented senior “solid citizen” gems within banking who are dependable and honest but who do not have the need to constantly spray testosterone and arrive in helicopters. We need service-driven bank managers and directors and not self-serving ego-driven scalp-hunting prima donnas with over-funded pensions.
These corporate hidden gems have all the knowledge and experience needed to reawaken the banking system from its torpor.
They are also the ones who know where some of the bodies are buried.
Methinks that it may be time to line up the current bank executives and perhaps introduce them to the concept of the exit interview.
(If you are not familiar with the phrase CORPORATE ENTREPRENEUR, please enter the phrase in Google, see the various Management Models, the smug mugshots………………and weep)