Dr Pamela Yeow, Lecturer in Human Resource Management and Deputy Director of MBA Programmes, Kent Business School, University of Kent comments on – More banks facing interest rate rigging investigation http://www.bbc.co.uk/news/business-18621354
Once again, the global financial world is rocked by yet another scandal centred on the banks. Yesterday Barclays was fined £290m ($450m) for trying to manipulate interest rates at which banks lend to each other (LIBOR rates). Regulators in Europe, the US and Asia have said that investigations into other banks are “ongoing” with similar sanctions and consequences meted out if found guilty.
Trust has been an issue that’s increasingly been researched over the last two decades. Trust is seen to be an essential element to social exchange, economic processes and organizational effectiveness. In recent years, indeed in the last couple of days, many other scandals have erupted, like the Formula One Bernie Eccelstone/German banker scandal involving tax evasion, corruption and breach of trust, the Madoff brothers and the Ponzi scheme, Rupert Murdoch (News Corp) phone hacking scandal, Enron and the MPs expenses scandal to name just a few.
Globalization has forced modern corporations to thrive in an increasingly international, competitive and dynamic business environment. With expanding market deregulations, ineffective monitoring and incentivizing of profit-driven, unethical behaviour associated with corporate mindsets that promote a preoccupation with quantification, the anonymity of core stakeholders and the firm-centric models of stakeholder relationship, it is not necessarily surprising that there has been a rise in organization-level failures in the form of complex corporate and government scandals.
According to the Edelman Trust Barometer (2012) which measures global trust levels, over the span of just one year (between 2011 and 2012), trust in business and government institutions have fallen significantly. This loss of trust has also been accompanied by an overall change in the public’s way of assessing company reputation, which has shifted from a focus on the quality of products and financial performance to honesty and transparency. Trust repair must be on the top of the agenda now for all these mega-corporations.
Banking Institutions and corporations need to win back the trust of their customers. Barclays need to do this fast before they lose their footing as one of the UK’s leading banks. Their share price has already taken a hit, as have other banks which are currently being investigated. How do we go about rebuilding trust? How do we ensure that this does not happen ever again? Without trust it is impossible to function the way we do these days. Where do we go from here, if this is taken away from us? More sanctions, more checks and balances, more suspicion and mistrust?