What may be said of Rona Fairhead’s (HSBC’s Chairman of the Audit and Risk Committee) performance at the Public Accounts Committee (PAC) on March 9? Well, she wore a very elegant three-strand pearl necklace at the Select Committee.
Three HSBC executives appeared at the Select Committee session; Stuart Gulliver, the current CEO; Chris Meares, a retired executive board member; and Fairhead, who, it seems, is paid £513,000 per year part-time, to take full responsibility for absolutely nothing at all. This in itself, I suppose is success of a kind.
The PAC questioning of the HSBC executives on the tax and Swiss bank account scandal that has enveloped the Geneva subsidiary of the bank, at times appeared to suggest to the Committee that it was confronted by the Three Wise Monkeys, but the laughter both in the committee and gallery that accompanied some of the HSBC answers, soon enough suggested that the Select Committee was actually faced by nothing more than the three stooges.
At times the PAC session seemed to turn into little more than an elaborate HSBC game of “pass the parcel”, but not by passing it to each other, and without even a parcel; a strange ritual dance that bafflingly for outsiders seemed both obtuse and bereft of meaning. I did not realise until today how difficult the words “full” or “direct” were to understand; confronted by the binary option of a simple “yes” or “no” answer to move forward the PAC interrogation at all, completely defeated the combined intellectual resources of three highly paid masters of the universe.
The explanations of the HSBC corporate organisation structure offered by the three executives, in the period under review by the PAC, often turned on the term “federated”: which required an observer to grapple with the newly presented mysteries of the significance of this 130 year old federation, which seemed to suggest the 257,000 HSBC workforce were, in consequence of being “federated”, operating like ‘atoms in the void’; matter in motion, meeting, agitating, colliding but remaining throughout entirely separate entities. It became difficult to understand just how such a company could even devise a simple organisation chart. It is a big bank; there are big salaries; there were big job titles, with big terms like “CEO” or “Global something-or-other”; but the precise nature of what used to be called ‘line responsibility’ in the organisation remained exasperatingly elusive throughout the PAC session.
In 2012 HSBC found itself in trouble with the American regulatory authorities for activities in Mexico, and was fined:
“HSBC Holdings Plc agreed to pay a record $1.92 billion in fines to U.S. authorities for allowing itself to be used to launder a river of drug money flowing out of Mexico and other banking lapses. Mexico’s Sinaloa cartel and Colombia’s Norte del Valle cartel between them laundered $881 million through HSBC and a Mexican unit” (reuters.com; 11th December, 2012).
We may reasonably believe this would have put HSBC audit on high alert thereafter. Now in 2015 problems relating both to tax avoidance and tax evasion have been raised by regulators at the Geneva subsidiary in Switzerland:
“Europe’s largest lender is in regulators’ sights after details about how its Swiss private bank allegedly helped wealthy clients evade taxes were leaked to the media and published last week” (reuters, reported in the Telegraph; 18th February, 2015)
According to Fairhead’s vigorously defended view, it is the HSBC “frontline” staff who should carry the can for any failures. These staff operated a long, long way down the federated hierarchy from the lofty, almost saintly role of the non-executive, non-involved perspective of the scrupulously distant Fairhead Audit Committee; or, Fairhead argued, it was, first and foremost, the unscrupulous tax-evading customers who should carry the can: while Fairhead and the Audit Committee spent their time kicking a quite different can (called “process”, although nobody on the PAC seemed to understand quite what that can had to do with reality) deftly down the road. As best and as fairly it seems possible to understand Fairhead’s own case, she was entitled only to consider issues that came to her committee, and it seemed even then it was not incumbent on Fairhead to be pro-active or sceptical about the information supplied. For the rest, this relied on the application of “process”; which was the responsibility, presumably, of someone else.
Alternatively, John Crace in the Guardian briskly summarised his interpretation of Fairhead’s argument:
“What the committee had to understand, Fairhead continued, was that people at her level in HSBC were not paid to be actually personally responsible for anything and it was entirely unreasonable for anyone to expect her to know anything about anything” (Guardian; March, 10; p.13).
The PAC Chairman Patricia Hodge MP suggested that the fairly obvious weaknesses of Fairhead’s HSBC audit committee leadership (given the unravelled outcome in Geneva), whether through naivety or incompetence, simply did not seem to attempt persistently or forensically enough to investigate the Geneva subsidiary, which was growing profits by 50%+ in the relevant period, but which “routinely allowed clients to withdraw bricks of cash, held accounts for drug dealers and colluded with wealthy clients to conceal undeclared ‘black accounts’” (Guardian report; March, 10; p.4); and including outcomes that may have cost HMRC £135m in tax evaded, according to Hodge. Hodge concluded that this should lead Fairhead to consider her position at her other, but major role in British public life, as Chair of the BBC Trust. The acute and forensic barrister Stephen Phillips MP, on the other hand thought Fairhead should resign from HSBC.
Generally, resigning is not the way responsibility works in Cameron’s Britain; taking personal responsibility, we must understand, is something suited only to those ordinary folk who regularly take their seat at the dinner of life, some distance below the salt. It is a kind of inverse squares equation – the higher the position attained in Britain the less responsibility anyone is expected to accept for anything at all that actually happens, save only collecting the salary, any bonuses that may be available, public esteem, other lucrative job offers, and perhaps a gong; or even a seat in the House of Lords.
Dress well, speak softly, ensure you have an impeccable metropolitan network, above all do nothing but always do it assiduously, demonstrate only that you can waffle effortlessly and endlessly, or are even just surprised and helplessly inarticulate under pressure; these are the hallmark traits of success, and establishes the appropriate order of priorities to succeed in this culture.
The smart move, however is simply not to attend PAC meetings; but this seems to require more clout than the three stooges could deploy. Clearly they only possess a ‘B’ list network. Meanwhile it appears that Conservative MPs have blocked or even “vetoed” the PAC’s attempt to call to account the Conservative Peer, past HSBC Chairman, recent Conservative Party Trade Minister and long-time associate of David Cameron, Lord Green (politicshome.com; March, 10). This was reported as an “accusation” against Tory MPs by the Guardian on 9th March, and front-page headlined as “Tory MPs ‘let ex-HSBC boss off the hook’” on 10th March. However it happened, that is how to do it in modern Britain; rely on a good network and say nothing at all.
To think; Johann Lamont was right after all; people are receiving something for nothing in Britain; she was just looking in the wrong place.