Wednesday, 18 June 2014

Shredded - A Review



Shredded:  RBS, the Bank that Broke Britain

I was given a review copy of Shredded at the end of May. It's taken me a long time to read it. That's in no way a criticism of the book, which is quite fascinating and full of interesting detail. But 500 pages of interesting detail take a while to get through, particularly when the day job gets in the way.

I had thought that I already knew the RBS story. RBS was a client of Cranfield at the time of the NatWest takeover, and I knew many of their staff.  And I'd followed with some dismay their battle to buy ABN Amro. (The day Barclays withdrew from that race, I happened to have some Barclays managers in my exec finance class.  I started the morning by shaking their hands and telling them it was a great day for their bank.)

The story Ian Frazer tells goes far beyond what I thought I knew. He has Interviewed many of the protagonists (although, alas, not Fred Goodwin, which does at times make the piece feel one-sided). It is a fast-paced and sickeningly-depressing exposition of what can go wrong when all aspects of corporate governance fail miserably.

Not all company failures are failures of governance, and the trend towards greeting every setback with a shout of, "where were the non-execs?" really does irritate me.  But RBS was undoubtedly a governance failure.  A dominant CEO with megalomaniac tendencies, running rings around his chairmen and the non-executives; executives scared of being bullied, inventing stories about successes because he did not like to hear about failure; and regulators in the thrall of an apparent success story, unwilling to do anything that might offend its management.

In 36 chapters, the book tells the RBS story, starting with a corporate failure back in 1695 and running through to the current investigations into swaps mis-selling, LIBOR and forex fixing, and gross misconduct in dealings with SME borrowers.  That meant it took a long time to get to the bits of the story that were familiar (the Natwest story is nearly 100 pages in; ABN Amro some 15 chapters later).  That was mildly frustrating - there was a lot to get through before I could read the bits I wanted – but unexpectedly fascinating in its gory detail of the mismanagement and egregious spending.

Shredded is a story of corporate culture.  It will become a go-to reference for examples of how tone from the top can change a company.  It could easily act as a ‘How Not To…’ textbook on a governance course for non-executives, covering, for example, the egregious misuse of corporate assets; the dangers of mistaking good luck for good management; the perils of poorly-designed compensation systems; the dangers of an ineffective chairman and board. (Indeed, I intend to include the book as suggested reading on my own NED course at Cranfield.  And I’m grateful to Ian Frazer for his detailed endnotes, which make the text more useful for my professional life without in any way interrupting the reading experience.)

Overall, Shredded is a good read, and a clear example of what can happen when governance is subverted to personality.

2 comments:

  1. Tone from the top can (and indeed should) change a company - in the absence of such change, one might question what the top people were there for! Examples are a little rarer, I suspect, of the influence that "shareholder tone" has companies?

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