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Where Was HR in the Banking Crisis?
Human Resources via Yellowbrix
November 02, 2009
Protests, injuries, clashes with police, and one death. These were the chaotic scenes reminiscent of the infamous poll tax clashes of the 1990s, of a besieged London on 1 April 2009. This time it wasn’t government policy that sparked the ire of 4,000 protesters.
Their fury was directed at a small legion of staff — the greedy City bankers who were pocketing huge bonuses as the country plunged into recession. It’s a far cry from the heady days of the late 1980s — glorified by the 1987 film, Wall Street. Michael Douglas won an Oscar for portraying the darker side of this industry as Gordon Gekko, a scheming megalomaniac taking part in risky deals and living by his now infamous affirmation: “Greed, for lack of a better word, is good.”
Skip forward 20 years to the City of London and it was Goodwin (Sir Fred) and his Pounds 703,000 pension, not Gekko that came to personalize a sector, sick to the core, and bringing the country down with it.
But while much has been written about the leadership of these banks, surprisingly little has been said about HR’s culpability as the people in charge of remuneration setting. As investment banks and financial institutions are shamed in the press and their CEOs dragged are across the coals, HR professionals have remained conspicuously silent.
And it begs a question: where was HR when employees in the financial sector were being incentivised by their ‘mega bonuses?’
When HR magazine approached the HR directors in some of the investment banks at the heart of the bonus fiasco, it was greeted by further silence. Goldman Sachs accepted a $10 billion bailout from the US treasury last year. In July the bank announced it would be giving staff a pay and bonus pot of Pounds 12.3 billion.
HR asked the bank how far its HR department was involved in the decision but a spokeswoman said it could not give any comment on the subject of bonuses. It was a similar story at Morgan Stanley: “On this occasion we will decline to comment,” it said.
What about Royal Bankof Scotland? In February it was reported to be paying out Pounds 1 billion to staff in bonuses. Less than a fortnight later, common sense seemed to have returned: awards to staff would now be based on sustained long-term performance, not short-term revenue generation.
The bank’s existing profit share bonus scheme has now been terminated so those associated with the ‘major losses’ of 2008 would not enjoy a pay increase or bonus. When HR asked the firm’s head of HR, Neil Roden, to talk about his involvement in these issues, he was unfortunately ‘unavailable.’ Later, an industry insider suggested he “would not have been directly involved in remuneration issues” anyway.
Is that ‘not directly involved,’ or involved but doesn’t want to talk about it? Two-thirds of respondents in an HR magazine poll admit HR in their organizations does have a say on remuneration strategy, so are HRDs involved in bonus structures getting away with it?
Chris Roebuck, ex-global head of talent at UBS, and founder of Transformation, defends the banking elite. “There was no culture of greed in the banks,” he asserts controversially. “The crisis happened because those at the top of organizations were not asking the right questions about what was going on. They didn’t know the value of the deals they were working with.”
