Firms shouldn’t bank on spies
Older readers will have seen many established New Zealand businesses taken over by ambitious entrepreneurs shaking the old company to its foundations.
Credit Suisse has followed a similar pathway. It had a halo in Switzerland and was the bastion of the Zurich establishment. But in 2015, the board hired a chief executive to give the place a shake-up, one Tidjane Thiam.
He certainly has made an impact. Much of what gave the bank its distinctive character has been dismantled.
Enter Iqbal Khan, a young unashamedly ambitious executive at the bank. He happened to be the next-door neighbour to the chief executive and they had a falling out. The dispute was driven by ambition, ego and insecurity that apparently spilled into their private lives.
It seems that the more powerfully placed chief executive won the struggle because Khan resigned in June of this year. However, he secured employment with Credit Suisse’s arch rival UBS and that apparently sent a shiver through Credit Suisse. They were fearful that the young rainmaker would take his clients and former colleagues with him.
What did Credit Suisse do? In a plot reminiscent of a James Bond movie, executives of the bank ordered surveillance of Khan.
What the private detectives uncovered was unknown, but the operation fell apart when Khan triggered a confrontation on a quiet manicured street in Zurich. He noticed he was being followed and started photographing and confronting those perpetrating what he no doubt saw as villainy.
All hell broke loose. A board investigation followed and found the saga had severely damaged the bank’s reputation. Two very senior executives in the bank have resigned and they have been blamed for the botch-up. Zurich’s public prosecutor is still investigating the matter.
Much of the public anger in Switzerland, of which there has been plenty, is directed at the new chief executive and what he is perceived to represent.
Doesn’t that echo some of the publicity that we get in New Zealand about the direction some of our corporate directors are taking their business in?
When a senior powerful executive leaves a business in New Zealand and heads the competition or sets up on their own, the same fears arise in the corporation they are leaving. Generally, once a person gets into a senior position their contract will have restraint of trade clause that endeavours to restrict their ability to work for a competitor, often to prevent them from taking trade secrets or taking other key staff members. Many major New Zealand businesses have ended up in court defending such clauses.
Air New Zealand, for example, unsuccessfully engaged in a bitter dispute in the Employment Court to enforce Grant Kerr’s six-month restraint of trade clause to prevent him from starting his employment as head of Jetstar New Zealand, despite having already worked out six months gardening leave.
Clearly the best way to keep clients loyal to a corporation is to provide excellent service and try to retain their loyalty when a key employee departs.
At the end of the day our laws, if properly used, will serve to moderate the bleeding of clients when key players leave a corporation.
While private detectives in New Zealand say they carry out surveillance work which can assist in catching poaching of employees or clients, the Credit Suisse saga demonstrates that this may do more harm than good.
The real tragedy of the Credit Suisse case and others like it is the collateral damage to people generally. Surely respect for others is more important than using power to crush them.
Peter Cullen is a partner at Cullen – the Employment Law Firm. He can be contacted at peter@cullenlaw.co.nz.