Archive for the ‘Cronyism’ Category

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Cronyism alive and well

May 6, 2009

Study reveals true extent of ‘old boys network’ between Government and banks

03 May 2009
By Tom Peterkin, Scottish Political Editor
Source
LINKS between Government and the banking sector have been condemned in a new report that has uncovered the extent of the “old boys network” at the top of British public life.
Britain has a greater culture of cronyism than Europe or the US, according to the study, which identified key individuals who have moved jobs between politics, financial institutions and the bodies charged with regulating the banking industry.

The report warns the close relations between business and politics “lead to a confl ict of interest at best and a suspension of critical faculties at worst”.

The study of 116 of the world’s most successful companies will be presented to a Global Forum on Public Governance, run by the Organisation for Economic Co-operation and Development (OECD), in Paris this week.

The research looked at so-called “revolving door connections”, when a company employs former or current politicians, civil servants or members of regulatory bodies, or where individuals move from the financial sector into politics, Government or regulatory bodies.

Barclays was the most connected British-based company with 14 revolving door connections.

Two of the Barclays examples were Mark Clarke and Sarah Cox. Clarke is director general of finance at the Department for Business, Enterprise and Regulatory Reform, but worked at Barclays from 2000 to 2003. Cox was an international consultant at Barclays from 2001 to 2004 and has since joined the UK Cabinet Office’s business support group.

“The Government and the political classes have very close links to the banking industry,” said the report’s author David Miller, a Professor of Sociology at Strathclyde University, who specialises in researching lobbying.

“I believe this could be one of the factors behind the disaster that has befallen the financial markets. There has not been enough regulation of these connections.”

The organisations with more than five revolving door connections were Royal Bank of Scotland, HBOS/Lloyds Group, Barclays, Citigroup, Credit Suisse, Deutsche Bank, Dexia Group, HSBC Holdings, JP Morgan Chase and Co, Standard Chartered Bank and UBS.

Six individuals with RBS connections included Quentin Davies, Labour MP and a minister at the Ministry of Defence, who was an RBS adviser until 2003, and Sir Philip Hampton, RBS’s chairman, former chief executive of the Government-owned UK Financial Investments.

Perhaps the best known person with HBOS connections named in the report is Sir James Crosby, who was chief executive of the bank from 2001 to 2006 before leaving to become deputy chairman of the Financial Services Authority (FSA), the UK body responsible for regulating the financial sector.

Crosby resigned from the FSA after claims by the whistleblower Paul Moore, the former head of risk at HBOS, that he mismanaged the bank.

Three revolving door connections were identified at Standard Life, including Gerry Grimstone, the chairman of the board who was appointed as one of the UK’s Business Ambassadors in January.

Paul Flynn, Labour MP and member of Westminster’s Public Administration Select Committee, said:

“Coziness is the enemy of efficiency and coziness leads to a lazy brainedness and a lack of thinking and inventiveness.”

A Barclays spokesman said: “Barclays recruits people on the basis of their skills and experience, whether as full-time staff, as non-executive directors or as part-time advisers.

“Where they may have held senior roles in the public sector, their recruitment is undertaken in line with governmental and civil service governance policies.”

A spokeswoman for Scottish Financial Enterprise, the body that represents the Scottish financial services industry, said: “From our point of view, the greater the understanding between business and the public sector the better.”

A Standard Life spokesman said: “It’s important that any board has a wide variety of backgrounds and experience, which is what we have at Standard Life.”

RBS and HBOS declined to comment.

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