Wednesday 19 January 2011

The Good and the Bad of Governance Beyond Boardroom


Running counter to the current commentary on the financial services sector, a big cheer to Goldman Sachs and a big raspberry to Barclays for today's reports.

On the upside, it appears that Goldman's new governance culture (see previous post) does have some teeth. It is reported today that Kevin Connors, co-head of global forex sales in G10 currencies, was fired last week for breaking internal compliance rules. However, and here the cheers are deserved, he had not acted illegally nor harmed clients. So undermining the firm's culture and reputation, even if no external rules have been broken, is now a sackable offence. I wonder if other financial services firms will follow suit...

On the downside, Barclays was fined £7.7m by the FSA for misselling Aviva funds. The reaction from IFAs has been a little predictable. However, this fine comes on top of having to refund £60m to complainants. This is a significant governance situation and evidence of a sales culture misaligned to corporate strategy. Whether senior management announces a recovery programme in the next few days will be a sign of how seriously they are taking their governance culture mistakes.

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