September 16, 2015 | Kelly

20 years on, what has City leadership learnt from the collapse of Barings?

Rogue financial trader Nick Leeson arrives at Singapore's Changi airport surrounded by local police officers on November 23, 1995

On 21st September 1995, People Management published an article of mine on the failings of the Bank of England’s Board of Banking Supervision report on the whole Nick Leeson saga and the £800m loss it caused. It had taken them five months and their aim was to identify the lessons to be drawn for institutions, for the banks’s own regulatory and supervisory arrangements and for the UK system of regulation more generally.

I read it with care since Kingsley Napley, Leeson’s lawyers, were considering me as an expert witness on the so called ‘soft issues’ should his case be tried in the UK. Predictably, the report covered none of these aspects and I noted that no HR person was interviewed. I made the point that, if a team had been killed, all the human aspects of the case would have been included in the investigation and in public inquiry conducted by an eminent QC like Charles Haddon-Cave.

There was nothing on Leesons’s competencies and job description, the recruitment process and his record at Morgan Stanley where he was before Barings. Furthermore, nothing on his appraisals, the culture of the Bank overall and that of its Singapore team. Nothing on management communications or employee research. Barings management were flying blind on the people issues as well as the financial controls.

Did the Barings case led to a different approach? YES if one looks at the rise in compliance and regulatory bureaucracy. Absolutely NO if we look at the failures and scandals which have plagued the City so often over the past 2O years.

Anthony Salz’s report in April 2013 on the culture of Barclays during the Bob Diamond era (supposedly costing £17m) made all the right points about pay and the link to broader behaviours, the importance of relationships not transactions, insufficient status for HR and that a few investment bankers had lost ‘a sense of proportion and humility’. It was all sound stuff but papers on good management thinking like this have been around for decades. It was standard best practice.

In writing about Barings at the time, the Financial Times stated ‘there is something wrong with the City’s officer class today’ as if, before big bang, high minded leaders in then locally owned firms did not behave badly. Of course they sometimes managed badly (as the Barings leaders did).

However, I am not sure there are City bosses who are somehow above the battle today. Most people at every level in the City feel they are judged by others (and themselves) according to personal performance –their deal making, their investment success, their hands on involvement in operations that matter. That is all vastly more important to them than being regarded as a good manager or leader and there seems to belittle incentive to change that thinking given insufficient reward for the management of risk to the corporate entity as a whole. They may respect management qualities outside the City, e.g. Martin Sorrell, but on their own patch it is strictly personal.

As a result truly great employer brands are hard to build there and individuals will continue to cause disasters. That is a culture that will need much more than any report to change.