Stuart Gulliver, HSBC and where the buck stops

In February 2015, then HSBC boss Stuart Gulliver had to front the media and analysts over an International Consortium of Investigative Journalists (ICIJ) report that showed almost $300 billion passed through the bank's accounts held in Geneva by more than 100,000 clients and 20,000 offshore companies between November 2006 and March 2007.

Two years before, Gulliver had agreed that HSBC would pay $2.5 billion in fines to the US Justice Department for failure to maintain an effective program against money laundering by Mexican and Colombian drug cartels. The ICIJ said "secret documents revealed that the global banking giant profited from doing business with arms dealers who channelled mortar bombs to child soldiers in Africa, bag men for Third World dictators, traffickers in blood diamonds and other international outlaws".

"It seems to me that we are holding large corporations to higher standards than the military, the church or civil service," Gulliver told the media. "Can I know what every one of 257,000 people is doing? Clearly, I can't. If you want to ask the question could it ever happen again - that is not reasonable."

Professor Henry Mintzberg, a Canadian management and strategy guru, told the Financial Times that Gulliver's reasoning was "horse shit".

"You can't excuse [scandals] by saying we have so many employees," he said. "You ...have got to be on the ground to have a sense of what your organisation is all about."

As in Australia today, the HSBC affair prompted commentators to suggest that far from being too big to fail, many large companies, including the bank, were too big to manage. While HSBC is one of the world's largest banks, with more than 230,000 staff, it's actually not in the big league. The US Department of Defence has 3 million, Walmart 2.3 million, Foxconn 1.2 million, Volkswagen 626,000 and British conglomerate Jardine Matheson 430,000. By contrast, Australia's biggest bank has 51,000, and Woolworths and Wesfarmers have more than 200,000 each.

Sam Walton, who turned Walton's Five & Dime in Bentonville (population at the time 9942) into a company worth $330 billion, used to spend much of his time in his stores. Was that Sam getting close to the customer, or creating a sense of community where everyone in the business felt empowered? When Jack Welch became CEO of GE, he introduced the Work-Out process. It put the leaders of each business in front of 100 of their people, eight to 10 times a year, to let them hear what those people thought about the company, what they liked and didn't like about their work, how they were evaluated and how they spent their time.

"Work-Out will expose the leaders to the vibrations of their business - opinions, feelings, emotions, resentments - not abstract theories of organisation and management," Welch said at the time. Real communication takes countless hours of eyeball to eyeball, back and forth. It means more listening than talking. It's not pronouncements on a videotape, it's not announcements in a newspaper. It is human beings coming to see and accept things through a constant interactive process aimed at consensus."

Eight years after taking over, Welch said: "There's still not enough candour in this company. By candour I mean facing reality, seeing the world as it is rather than as you wish it were." Unfortunately, no one had the candour to tell Jack he stayed too long.

But is the real barrier to boards and CEOs knowing what is going on in a company the combination of performance pay and the focus on shareholder value, which increases the divide between the C suite and the rest - employees, customers and communities?

Time magazine's Rana Foroohar, in a 2016 article titled "American Capitalism's Great Crisis", wrote: "You and I are also part of a dysfunctional ecosystem that fuels short-term thinking in business. The people who manage our retirement money are typically compensated for delivering returns over a year or less. That means they use their financial clout (which is really our financial clout) to push companies to produce quick-hit results rather than execute long-term strategies.

"Sadly, I fear that the contrast between corporate profits and corporate pay means we may be at a tipping point ... in the absence of real economic growth, and stronger job creation (and even more importantly, the creation of better-paying jobs - much of what we are creating is low-level service work). At some point, everything in the markets must connect back to Main Street."

So, what happened to HSBC's Gulliver? He retired in February this year after, in his own words, "the most extensive transformation program in HSBC's 153-year history. HSBC is simpler, stronger and more secure than it was in 2011". As the UK Telegraph's Jon Yeomans pointed out: "Not to mention shrinking the bank: HSBC has exited half the countries where it was present and cut 87,000 jobs, while hiring 7000 compliance officers."But three years later the same journalists and analysts who roughed him up generally agreed Gulliver had brought the bank back from the brink.

Julie Connolly