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Accountability at HSBC

Nowhere has the issue of corporate accountability in multinational organizations been as big a challenge as it was in HSBC. In particular, the 2015 revelations regarding wide sets of illegal activities connected to the Swiss branch of HSBC paint a grim picture of the challenges of accountability. The revelations did not only spark debate as to the regulation of banks but the accountability of large institutions in the United Kingdom. As one of the largest banks in the UK and with branches in many other countries, the organization has a responsibility to maintain the highest accountability standards for emulation by other entities. Indeed, all these issues are covered in the company’s statement of business principles and code of ethics. However, the implementation of the documents remains a big farce as far as the recent accountability revelations are concerned. More worrying perhaps is the absence of prosecution of either the company or the managers leading to a scenario where the public deems the company as too big to prosecute.

The revelations about the documents covering the operations of the company between 2005 and 2007 are quite worrying because they implicate the Conservative Party under the Tory Government. However, even after the public glare, the government failed to initiate any attempts or measures to prosecute the company. Indeed, the Americans were right in questioning whether some financial institutions are too big to be taken to trial (Zadek et al, 2013). The scandal at HSBC Suisse is in part due to the banking Act of 1934 which statutorily mandates as secretive ventures that should protect the information of their clients. Essentially, this regulation provides an important conduit for storage of large sums of money by foreign clients to evade investigation from their respective governments.

The scandal facing the bank is a violation of business ethics to which the bank itself has a responsibility. In addition, the actions of the company’s board to stay intact and not resign from their posts paint a negative picture of their integrity. This comes at a time when the editor of the Telegraph which was aligned to the government resigned after the revelations. It is expected that the directors of the board take responsibility for the actions that led to the emergence of the scandal. Indeed, the current board chairman was then the finance director of the company meaning that he had apt knowledge of the happenings. In fact, it is argued that the decisions to acquire Safra bank and make it their Swiss branch had the blessings of the then finance director who happens to be the current chairman. The general laws of ethics dictate that the board members should resign and pave way for proper investigations of their actions.

While the actions of the board members may go unpunished as the inaction of the government has shown, the sustainability of the company is now in question. In fact, most of the investors have started to pull out in fear of other scandals coming up in the near future. The lack of accountability within large organizations is not only detrimental to the company’s public image but also its long-term sustainability (Bebbington et al, 2014). Indeed, there is evidence of collapse of large multinational companies due to a lack of accountability and especially in terms of taxation. However, the lack of initiative by the government to prosecute the masterminds could mean that the government officials had prior knowledge and were therefore acting in partnership with the board members. Still, a dent of the company’s image in the public eyes could mean a loss of customers and investors therefore serving the organization a huge blow in terms of its sustainability.

The case of HSBC is not an isolated one as other case studies have pointed out in the past. In fact, the issue of lack of accountability in large multinational companies has been in existent in the entire world leading to questions regarding governments’ commitment to prosecution of corporate criminals (Gray et al, 1996). In the United States, large companies have been involved in several scandals leading to the near collapse of some of these companies. One particular instance is the scandal involving the German giant car maker, Volkswagen and its operations in the US. The scandal was revealed in late 2015 after officers from the Environment protection Agency found out that cars had software that could detect when their engines were being tested. Upon detection of the tests, the cars would then change their performance therefore improving the results. This development had the net effect of reducing the volume of emission from the car’s diesel engines and thereby improving their sales in the country.

The Volkswagen and HSBC scandals among a list of many others point to the challenges of holding large corporations to account. In particular, the management of these organizations is to blame for violation of governance principles that regulate their actions. For instance, it is obvious that the Volkswagen Company had a chain of command that allowed the installation of cheating devices on their cars. It cannot be that the decisions were made behind the overall management’s back. The actions therefore erode the transparency of the corporations in general and that of individual managers. The governments need to do much more in regulating corporate accountability to avert such similar cases in future.

 

References

Bebbington, J., Unerman, J., & O’Dwyer, B. (2014). Sustainability accounting and accountability. Routledge.

Gray, R., Owen, D., & Adams, C. (1996). Accounting and Accountability: changes and challenges in corporate social and environmental reporting. Prentice Hall.

Zadek, S., Evans, R., & Pruzan, P. (2013). Building corporate accountability: Emerging practice in social and ethical accounting and auditing. Routledge.