Thomas Cook’s real bad times
JUSTIN King’s report into the failings of Thomas Cook over the death of two children in a Corfu hotel in 2006 is the very least that was necessary after a terrible tragedy.
The former Sainsbury’s chief executive found a financially driven culture at Cook, with scant regard to health and safety. The dilatory responses to the efforts of the parents to obtain a meeting with the travel firm suggest customer service that bordered on neglect.
The internal inquiry increasingly is a device used by companies that find themselves in an ethical fix.
Barclays set up a review by leading City lawyer Anthony Salz in the wake of the Libor scandal. But it did nothing to halt the bonus culture which he criticised in his 2013 report or to prevent further scandals, including foreign exchange market rigging and cheating in the dark pools where professional investors trade shares. At BAE Systems, former Lord Chief Justice Harry Woolf led an ethical clean-up after disclosures of alleged bribery and corruption in China, the Middle East and other jurisdictions.
Such probes are intended to show that management and boards are on the case and recognise moral shortcomings. Reports by the great and good offer a temporary shield from investor and media criticism and provide an opportunity to repair reputational damage.
They also can be dangerous. Companies in the firing line, and their expensive City lawyers, are given an opportunity to plough the field before the statutory enforcers gain access.
Such reviews can make life difficult for the official investigators who have to fight claims of qualified privilege for witness statements and commercial confidentiality for vital documents. In effect, the selfappointed inquiries can be used to protect executives and directors from potential regulatory action, or even criminal prosecutions.
Instead of the forensic, cool and independent examination one might have hoped for from someone of King’s reputation, he found it necessary to heap praise on Thomas Cook for being a ‘true leader’ in its industry. If Cook is a leader in customer service, the behaviour of the rest of the industry doesn’t bear thinking about.
Putting to one side the soft-soap, the reality is that health and safety at the group has been overstretched and despite a tragedy dating back to 2006 the actions of the company were insufficient and slow, King finds. No doubt the report has been heavily lawyered so as to minimise the possibility that former and present executives are inoculated from legal liability, and to make it as difficult as possible to use modern company law governing corporate manslaughter from being brought into play.
King’s recommendations for improved health and safety prac- tices, including better monitoring of carbon monoxide risk, obviously must be adopted. But the real scandal at Thomas Cook was that of management insouciance to a ghastly event. By neglecting to address that in robust terms, King’s review is sadly wanting.
Chinese burn
THE enormous investment in cleaning itself up made in the aftermath of the money-laundering and sanctions-busting scandals looks to be paying off for HSBC.
It is still capable of suffering embarrassment, as the tax swindles at its Geneva branch demonstrated early in 2015, but the level of fines and penalties reduced dramatically in the third quarter of the year.
This enabled it to deliver a 32pc lift in profits to £3.95bn.
Critics argue HSBC’s hurried withdrawal from some emerging markets, ranging from Turkey to Latin America, is rash as it leaves itself far more dependent on China and the Pacific.
Indeed, the results show vulnerability to Chinese risk in the shape of a 4pc drop in revenues partly as a result of the stock market turbulence in the summer.
Chief executive Stuart Gulliver plays down the impact of market swings on bad debts. But the International Monetary Fund worries about the impact on stability should China’s slowdown and rotten exposures in the financial system spill over to Hong Kong and the rest of the region.
Meanwhile, Gulliver and the HSBC board are craftily keeping George Osborne on tenterhooks as to plans for domicile, despite getting a major tax concession in the Budget. HSBC should be careful not to overplay its hand given the gyp from the rest of the banking fraternity.
Viva Visa
THE £15bn buyout by Visa of its European sibling will come in quite handy for Britain’s banks.
Barclays looks as if it will be the biggest beneficiary, which should be a nice arrival gift of up to £1.3bn for new chief executive Jes Staley.
An unnoticed beneficiary of the generous deal will be newly floated Worldpay, which is due to collect about £900m for its 5.9pc stake.
But before anyone gets overexcited, 90pc of the proceeds look as if they will pass back to private equity owners Advent and Bain Capital.
Funny that.