Anthony Hilton: Proof in spades that a drive for bonuses undermines integrity
Any attempt to manipulate the rate has to have been a joint effort
Saturday 30 June 2012
As people must by now know in every corner of the planet, Barclays was this week fined a record amount for its involvement in attempts to manipulate the benchmark used to set interest rates for much of the western world.
But that clearly will not be the end of the matter, and indeed, RBS has now indicated that it is talking to the authorities.
Any attempt to manipulate the rate has to have been a joint effort, because the official published rate is an average derived from the inputs of several banks. In the calculation – done by Thomson Reuters on behalf of the British Bankers' Association – the most extreme numbers at the top and the bottom of the range are ignored precisely to make sure that a rogue number cannot distort the bigger picture and anything submitted by just one bank is diluted by the averaging process. Obviously the laws of mathematics mean that all the items of data which are used will have an influence on the outcome, but the effect of just one item will be muted.
However, it has been the stuff of press reports from various venues around the world for several years that several more banks have been caught up in the inquiry. As recently as early May, the Wall Street Journal identified half-a-dozen banks caught up in a Libor investigation in Canada, one of whom – not Barclays – was said to be co-operating with the authorities. There have been earlier, similar reports from Asia, and indeed London, which described traders from several rival banks getting together so that collectively there would be enough of them to shift the rate in the direction they wanted, even if they could not be sure in advance by how much.
But what is really worrying is what this says about the evolution of business culture – not just in banks but across the board. On the day when the Barclays fine was on its front page, the second page of the Financial Times carried a story about a German banking executive being jailed for four years having admitted to receiving $44m (£28.1m) in bribes from the Formula One motorsport entrepreneur Bernie Ecclestone, whom, it should be stressed, was not charged.
The same paper also carried a report about Glencore, one of the world's biggest mining and trading houses, which said it and 15 other firms had just been fined for bribing an EU official in exchange for "secret information." And on yet another page, it was reported that at the annual meeting in Tokyo of Nomura, Japan's largest securities firm, the chief executive, Kenichi Watanabe, apologised to shareholders for his firm's involvement in three insider dealing cases in Japan.
All that in one newspaper on one day. What more evidence does one need that the philosophy of shareholder value – profit above all else – has created a huge loss of understanding that business is actually about serving customers.
Too many of the incentives designed to boost profit act even more powerfully to undermine employee morality and integrity.
International Women's Day 2014: The shocking statistics that show why it is still so important
Feminist quotes to inspire you on the International Women's Day
Oscar Pistorius trial: Case turns into a bizarre safari following the tracks of a wounded lion
Belle Knox: How the porn star student from Duke University became bigger than Justin Bieber
Liam Neeson on death of wife Natasha Richardson: ‘When I hear the door opening, I still think I’m going to hear her’
Apple's Tim Cook: Business isn’t just about making profit
Thousands of young people forced to go without food after benefits wrongly stopped under 'draconian' new sanctions regime
Ukraine crisis: New navy chief 'defects' and surrenders Crimean HQ as Putin claims ultranationalists forced intervention
Britain's top vet sparks controversy with call for ban on slashing animals' throats in 'ritual' slaughters for halal and kosher meat products
Ukraine crisis: Russia dismisses '3am ultimatum' as 'total nonsense'
If you're horrified by a flame-roasted dog, you should be shocked at a hog roast
- 1 Saudi preacher who 'raped and tortured' his five -year-old daughter to death is released after paying 'blood money'
- 2 Academy members voted for Oscar-winning 12 Years A Slave 'without watching it'
- 3 Orgasm machine to deliver climax at the push of a button
- 4 Liam Neeson turned down James Bond role to marry Natasha Richardson
- 5 Livr: A social network only for drunk people
iJobs Money & Business
£12000 per annum: Inspiring Interns: The company works with Tier 1 FTSE 100 Ba...
£32000 - £36000 per annum + generous benefits: Pro-Recruitment Group: * TAX * ...
£37000 - £40000 per annum + £20000 benefits package: Pro-Recruitment Group: **...
£30000 - £35000 per annum + generous benefits: Pro-Recruitment Group: Mixed Ta...