The past few months have seen an unwelcome outbreak of hubris across the investment banking industry. Perhaps a dose of humility might be in order? My latest column for Financial News.
It’s only hubris if you fail, said Julius Caesar. Yet, despite the collective failure of much of the investment banking industry over the past five years, you don’t have to look too hard to find that hubris is alive and kicking.
Most recently, it reared its head with the flotation of BTG Pactual, the turbo-charged Brazilian investment bank, which dismissed a fine of €350,000 on its chief executive André Esteves for insider trading in 2007 by Italian regulators as “essentially irrelevant”. As if to underline its arrogance, the bank said in its prospectus – before the judgement was published last week – that whatever the outcome of the investigation, it would have no impact on the bank or on Esteves’ position.
Imagine, for a moment, the reaction if the chief executives of JP Morgan Chase, Goldman Sachs or Barclays were to find themselves in the same position and take the same line.
Not that these banks are bastions of humility. At JP Morgan, chief executive Jamie Dimon continues his one-man campaign against global regulatory reform, seemingly arguing that his bank should be uniquely exempt. Goldman Sachs has shrugged off demands from shareholders to separate the role of chief executive and chairman, and in the first quarter continued to pay its staff at the same rate as last year when a token cut of 10% would have boosted uninspiring pre-tax profits by 13%.
Barclays seems shocked that shareholders are angry about its decision to pay chief executive Bob Diamond far more than his predecessor, despite his admitting that last year’s performance was unacceptable. Meanwhile, Citigroup said it didn’t see the shareholder revolt coming, in which 55% of investors last week voted against its executive pay.
Hubris is more widely embedded in the collective approach of the investment banking industry to a leaner post-crisis environment…