The Garrulous Jay – The Bank & The Bill

Publish date


This week has seen then untimely demise of Credit Suisse, and the publication of Baroness Casey’s excoriating report on the Metropolitan Police. These are two very different organisations, with a shared common problem.

Anyone who has been blind-sided by the rushed takeover of Credit Suisse by its larger Swiss rival, UBS, clearly hasn’t been paying attention. The bank had been dogged by a series of scandals over the last few years that had battered it share price.

I believe all of these problems point to a deep-seated culture of risk-taking within the organisation.

This led to the “incompetence” that resulted in the multi-billion dollar loss when Archegos Capital Management went bust. It also contributed to the “serious failings” that left the bank nursing a $1.7 billion hit when invoice financing business, Greensill Capital, was shuttered. The company’s involvement in the Mozambique “tuna bonds” scandal was another example of poor risk controls and decision-making.

Turning to the Metropolitan Police, Baroness Casey’s report is a grim indictment of an organisation that, tragically, has been here before…

The Macpherson Report published in 1999 gives clear and detailed consideration to the term “institutional racism” before concluding that it was present in the Met at the time of the murder of Stephen Lawrence.

Over two decades later Baroness Casey concludes that, “We have found institutional racism, misogyny and homophobia in the Met.”

Here too the culture of the organisation is at the heart of its problems. As Casey points out, “The Met has been losing its way and the worst aspects of its culture have impeded its ability to recognise this.”

It might be tempting to dismiss “culture” as touchy-feely word not relevant or appropriate to the worlds of Big Business or public institutions, but nothing could be further from the truth. The culture of any organisation may not guarantee its success, but getting it wrong can ultimately lead to its failure.

Culture speaks to the motivations and behaviours of everyone within the organisation. For this reason it has to come from the top. A CEO, or Police Commissioner, sets the tone for his business or force: he or she leads through their own behaviours and expectations of others.

Ignorance can be no defence when things go wrong and the organisation’s culture is to blame. Any leader that presides over such an organisation unaware of its cultural deficiencies is failing in their role.

For this reason there should always be a role for active fund managers interacting with the management and staff of the companies they may decide to invest in. No amount of poring over spreadsheets and analysing company accounts can provide the valuable human-to-human insight into an organisation’s management that may in time profoundly affect its performance.

The same is equally true of those investment managers too: a dispassionate analysis of their past performance will never provide the insight needed to assess how ‘good’ they are or will be as fund managers over the long-term.

People and culture still matter, profoundly.