Leaders: Time to tame immoral firms

It followed upon a highly critical report commissioned by Barclays, investigating that bank’s corporate practices in the wake of its £290 million fine over the Libor interbank lending rate rigging scandal, which found high levels of financial reward had made bankers “oblivious” to reality. Last week, too, aggrieved shareholders served a $4 billion writ on RBS and four of its former directors. Nor was the exposure of the meltdown in corporate responsibility restricted to the financial sector: also last week, the power giant SSE was punished with a fine of £10.5m – the largest ever imposed – for “prolonged and extensive” mis-selling practices since 2009. Clearly we are experiencing a crisis in standards of corporate governance whose reform is as essential a component of economic recovery as deficit reduction or welfare rationalisation.

The HBOS report was savage in its language – and no wonder. When the Bank of Scotland and Halifax, then Britain’s biggest building society, merged, the new organisation had a market capitalisation of £30bn. Those assets were dissipated by reckless and greedy banking practices so that HBOS eventually received a £20.5bn taxpayer bailout. RBS, driven on to the rocks by similarly bad piloting, cost the taxpayer £45bn. In the case of HBOS what seems most to have angered members of the commission was the refusal of senior executives to accept responsibility. The report said: “Lord Stevenson [former HBOS chairman], in particular, has shown himself incapable of facing the realities of what placed the bank in jeopardy.” Lord Stevenson told the commission the disaster was not his fault as he was “only there part-time”. Yet for that hands-off management he received £815,000 a year in pay and perks.

It speaks volumes about the now-defunct Financial Services Authority that Sir James Crosby, fiercely criticised in the HBOS report, was a member for part of his time at HBOS and later became the authority’s deputy chairman. Whether the new Financial Conduct Authority will bring more effective regulation remains to be seen.

The “tripartite” regulatory system set up in the Blair/Brown years was a disaster; the restoration of authority to the Bank of England is a step in the right direction. But, while the establishment of effective regulation of banks, with serious sanctions for misconduct, is essential, even more important is a radical transformation of the whole culture, not only of the financial sector but of corporate practices generally. The exposure of mis-selling by SSE may only be the tip of an iceberg: investigations are ongoing into selling practices at Scottish Power, npower and E.ON. The pursuit of the fast buck is not restricted to ‘casino’ banking; corporate governance is in a state of crisis.

Politicians north and south of the Border must realise that public opinion will not tolerate any feeble or cosmetic addressing of this problem. Its iconic symptom is the shameless culture of bankers’ bonuses, still defiantly flourishing. Until that ends, public faith in corporate integrity will not return. We cannot tolerate a society in which it is deemed necessary for local authorities to constantly trim public services, but equally necessary for an executive in a loss-making bank to be paid a large bonus. We have heard all the ingenious, technical, patronising arguments in favour of over-remunerating bankers and they are unpersuasive. It is time to tame the private corporations.

Immigration positives

SCOTLAND has always prided itself on being a welcoming destination for immigrants and, as our report on page six details today, that continues to be the case. The racial tensions that have in the past plagued other parts of the UK have largely been avoided north of the Border due to a tolerant acceptance that immigrant workers play their part in boosting the economy. Not only does this incoming wave often provide the workforce for jobs that need to be done but also, by dent of low pay, are sometimes shunned by the native population, it has at its crest a vanguard of entrepreneurs whose main aim is to forge a new life for themselves and their families. Where would the nation be without its Italian, Chinese and Indian restaurants? As the Lord Provost of Edinburgh, Donald Wilson, points out: “Migrants bring with them a wide variety of new ideas, beliefs, customs and skills – benefiting the city’s economy and its diversity.” But as this newspaper has highlighted before, some highly skilled immigrants who want to legitimately live and work in Scotland fall foul of the restrictive policies put in place by a Westminster government to protect UK borders from an influx of illegal migrants. Putting aside the issue of independence, the Scottish Government should continue to argue its corner for an immigration policy that better suits Scotland’s needs.