People risk in the boardroom: failure to accept personal responsibility

HSBC has been in the news a lot just recently and the UK Parliament Public Accounts Committee (PAC) were grilling three more executives on Monday 9 March to delve further into the tax evasion scandal that happened at the banks Swiss subsidiary. It was a grueling encounter even for the most hardened company executive not helped by the live television screening which no doubt provided some members of the PAC with the opportunity to play to the camera.

Rona Fairhead, an HSBC non-executive director and member of the HSBC Financial System Vulnerabilities Committee and Nominations Committee, appeared to have come off worst if only because she happens to be Chair of the BBC Trust and she was at once stage been questioned on her competence to undertake this role. Whether she will be made the scapegoat remains to be seen but she is certainly a busy woman as evidenced by her profile on the HSBC website [1]. As well as the non-executive director role at HSBC, she is chairman of HSBC North America Holdings Inc.; chairman of the BBC Trust; non-executive director of PepsiCo Inc. and, by invitation from the Prime Minister, a British Business Ambassador. Nobody questioned her on whether she actually had sufficient time to fulfill her onerous duties as a non-executive director of HSBC.

The question, however, that was most at issue during Monday’s PAC investigation was whether the three executives were prepared to accept personal responsibility for what took place at the Swiss bank. Here is what Rona Fairfield had to say [2] :

“What the committee (PAC) has to understand is that people at my level at HSBC were paid far too much to be actually personally responsible for anything and it was entirely unreasonable for anyone to expect me to know anything about anything”.

In fact if the PAC members had looked at the published value statements of HSBC [3] they would have found under the value ‘Dependable’ this:

“Taking personal accountability, being decisive, using judgment and common sense, empowering others”

Pretty clear you would think. But the three executives appeared either unable or unwilling to give a straight answer to this question of personal responsibility although Chris Meares, former CEO of HSBC Global Private Banking, came close [4] :

“I absolutely take responsibility for the control failings that may have happened…….although I am not aware of most of these events that were reported in the Press”

Despite persistent questioning, Meares was not prepared to add the word ‘personal’. One can only assume that the executive’s legal team had told them not use the word personal before the word responsibility because of the possible consequences of doing so.

However, inserting the word personal is not just a question of semantics. Chris Meares’ words could easily be interpreted to mean taking responsibility along with others (in the boardroom) which moves the goalposts towards collective responsibility and apportions blame to everybody so, nobody is to blame, we’re all to blame. Sack one, sack us all, sue one, sue us all.

Whilst it is true that all directors, whether they be executive or non-executive, are jointly accountable for the running of the business, this failure to accept personal responsibility is a (people) risk which needs recognizing and mitigating, particularly in a boardroom environment where the tone is set and the values that filter down through the organization will provide all members of staff with how they are expected to behave.

If personal responsibility is missing in the boardroom it will be missing further down the line as well. Furthermore, what is the point in having a value statement which specifically talks about personal responsibility if it doesn’t apply to everyone.

So what can be done to mitigate this risk? Here are a few thoughts:

  • Have the concept of personal responsibility for directors enshrined in law when things go wrong with the internal control system  with consequences for the director.
  • Draw up individual (signed) codes of conduct for each director which, inter alia, clearly define personal responsibility and provide examples of when it applies.
  • Enhance directors’ training by including personal responsibility, what it means, when it applies, what are the consequences. This would be particularly important as part of the induction process.
  • As part of the interview process, probe the director’s understanding of personal responsibility (using examples) and ensure it is in line with the board’s expectations.
  • To ensure fatigue does not set in, the Chair should start each board meeting with a ‘reminder’ of the board’s duties including the acceptance of personal responsibility
  • More broadly, monitor people risk incidents in other boardrooms (where reported) and make sure any lessons involving personal responsibility are learnt.

One bank where personal responsibility looks to be high on the agenda is Lloyds. Its Code of Personal Responsibility: ‘The Way we do Business is Based on Our Values’ [5]  has a clear focus on the individual as, for example, this statement illustrates:

I consider the risks and implications of my actions and advice and hold myself accountable for them and for the impact that they may have on my customers, today and in the future”.

Whilst this statement is focused on customers it is repeated in the context of colleagues and communities. It would be nice to see it extended to stakeholders so that everybody is included, including shareholders whom, the board, in particular has a responsibility to. Of course, it is assumed that the Lloyds Code of Personal Responsibility applies to all members of the board as well.

In the case of HSBC, the full story has yet to emerge. We don’t yet know who knew what and the extent to which illegal actions/decisions (another people risk) were being taken by staff in the Swiss bank, ie. was there a culture of tax evasion as some might think?  Or indeed if the staff were in collusion with customers who wanted to evade tax. It may be that some of the staff were being coerced by customers. What we can be sure of is that the call for all board directors to be held personally responsible when something goes wrong will not go away.

We will leave the final words to Stephen Green the former Chairman of HSBC when the Swiss tax evasion scandal was taking place. They are taken from his Book, “Good Value: Reflections on money, morality and an uncertain world”.

“Capitalism needs to integrate values with value. We have to recognise – boards, management and owners alike – that values go beyond “what you can get away with”, and that values are in the end critical to value – to sustainable value, that is. Better risk management, enhanced regulation, codification of directors’ responsibilities in company law – all these things are necessary. But they are not, and cannot be, sufficient without a culture of values. As individuals, we do not govern our behaviour simply by what is allowed by law or regulation. We have our own codes of conduct and hold ourselves accountable. We take responsibility for our actions. The institutions of capitalism – businesses, banks and other institutions of the financial markets – have to do the same”.

So far Stephen Green has refused to speak on the scandal. Could it be because these words may well come back to bite him?



[1] See

[2] See

[3] See

[4] See

[5] See

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