The era of corporate humiliations

“I am sorry”. “We are sorry”, “I am profoundly sorry”. These were some of the statement I have been hearing in the past few months from some of those CEO’s who were respected and adulated by the world till a few months ago. This has been an era of humiliation , right from the time the economy started crumbling. Are these people the real culprits?. Yes and No.

They were driven by the market, the same accounting systems, the same quarterly PnL’s, all which has been created by them and many more like them. But the same shareholders who are now asking these people to be held accountable created this situation by going behind companies which existed for short term profits. This lead to a situation where the company started to be run by people who used all means and mechanism to ensure that they looked at short term gains. This means that people who were whistle blowers were thrown out mercilessly, however senior they were. It was shocking to hear that the british bank HBOS had four years ago sacked and gagged a very senior executive who warned the board that the bank was taking excessive risks. What we see here was a total failure of “ corporate governance”.
Now this was not just happening in the western world. In India we had the CEO of one of the largest IT companies called satyam going behind bars for showing an inflated cash. How he managed to do that inspite of having some very highly respectable independent board members, a vigilant security exchange and reputable auditors is worth a case study. In china they had one of their business tycoons going behind bars for committing serious frauds, apart from the other “milk and toy” scandals. Some companies are using this opportunity to file for bankruptcy , since this is the easiest time to walk out safely under the pretext of a slow down.

In this video you will see RBS and HBOS bosses, Sir Fred Goodwin, Andy Hornby, Sir Tom McKillop and Lord Stevenson apologies for their role in causing the credit crunch. To be honest it’s a bit embarrassing to see some of these CEO’s apologizing publicly. A look at their body language and you can see that they are trying to cover up their humiliation.