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Let the Show Trials Commence

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    Let the Show Trials Commence


    ...hopefully just in time for Xmas viewing


    As the world reels from the fallout of the credit crisis, the first imperative has been to stabilise the financial markets to avert disaster. But we also need to ask why it happened, and how to avoid it happening again. And for this, holding to account those responsible is crucial.

    In the United States, civil and criminal courts can be brought into play. But the UK has a poor record in dealing with white-collar excesses. A major part of resolving this crisis must be for those responsible to get their comeuppance. This would set the tone for the future and help change a culture of greed, short-termism and corporate irresponsibility.

    The FBI has already begun an investigation into Fannie Mae, Freddie Mac, Lehman Brothers and AIG, looking for possible fraud. The next question is whether senior staff and the boards of these organisations will face legal action in the US. Though the parallels may not be direct, we have examples of corporate malfeasance being severely punished in the US in the Enron, WorldCom and Hollinger International cases.

    Right now, a number of senior people in Britain's financial services sector ought to be feeling distinctly uncomfortable about their personal financial circumstances. But some probably should be fearing for their liberty, too.

    Some commentators have said that going after individuals is victimisation. But something has gone seriously wrong with corporate governance. This catastrophic failure highlights the need for ethics and professionalism to be at the heart of business. And in order to change business culture, this ethos needs to be extended to schools and other business professions.

    Remuneration and incentivisation packages for senior figures within the banking world have rocketed, but these rewards have become too closely linked to short-term, easy-to-manipulate financial metrics. The traders of derivatives want to have their "profits" recognised straight away in the employers' accounts and, thus, in their annual bonuses. But bonuses need to be related far more closely to long-term financial performance and, importantly, to movements in cashflow, rather than profitability. Rewards should not be paid out until proceeds have been banked.

    The roles of the chairman and chief executive are ultimately ones of accountability - to shareholders, to customers, to staff and, whether they like it or not, to government, the taxpayer and society at large. But our increasingly well-defined principles of corporate governance have not prevented this crisis. We therefore need to open our thinking to alternative models and, in particular, to the role and effectiveness of independent non-executive directors.

    If directors ignored bad habits, if they accepted complacency after a prolonged bull market then they should be held accountable. If they have overseen failure, and allowed greed to flourish then they are accountable for this, too.

    Naivety has also played its part, with well-meaning people succumbing to the seductions of advanced risk management techniques at the expense of common sense. And perhaps we accountants haven't said no enough, either.

    The world of finance has made billions. Those privileged to lead this sector need to explain what is happening and why. They need to be part of the solution, because regulators can't be cleverer than entrepreneurs on the front line. However, where entrepreneurs prove to be negligent or irresponsible, it's right that they should find themselves in court.

    #2
    Originally posted by AlfredJPruffock View Post
    [I]
    In the United States, civil and criminal courts can be brought into play. But the UK has a poor record in dealing with white-collar excesses. A major part of resolving this crisis must be for those responsible to get their comeuppance. This would set the tone for the future and help change a culture of greed, short-termism and corporate irresponsibility.
    We used to know hoe to do these things properly. A few heads on spikes at key transport intersections would prove educational.

    Comment


      #3
      This is just so funny. Nothing will happen. Where money is involved and especially where commission is paid, you will get corruption.

      We do not have the space in our prisons so forget it. I would rather they lock violent prisoners up for longer, than fill them up with mortgage salesman, solicitors and bankers.

      What we need is proper regulation and commonsense, which we have not had under this incompetent lot.

      Comment


        #4
        Let’s hope the RSPCA don’t try to stop the show on the grounds on inbreeding
        Originally posted by cailin maith
        Hang on - there is actually a place called Cheddar??

        Comment

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