Most penalties for financial wrongdoing are levied on institutions rather than the inventive executives who master-mind these grubby manoeuvres.

Regulatory authorities themselves do not benefit from the fines they collect, now amounting to serious money – over £500 million in this year alone. Apart from relatively modest retentions to cover regulators’ costs, the money is transferred to the Treasury and applied for a variety of good causes.Yet imposing a massive fine on a company effectively punishes its shareholders rather than the perpetrators, who may suffer some reputational damage before moving on to pastures new.


The record of fines on companies shows an astronomic rise, yet those against individuals in senior management positions have tumbled by 40 per cent in the past four years, and dwindled to only 18 fines last year.

This defies every notion of decent governance

This defies every notion of decent governance. In the eye of a perfect financial storm, whose ravages have been exacerbated by ineptitude, delinquency and corruption on a scale never previously encountered, you would expect to see a corresponding measure of retribution meted out. Yet of all those who perform a “Significant Influence Function” only 0.03 per cent have actually been fined, despite the Financial Conduct Authority’s drive to step up enforcement against individuals as well as firms.

A company may have a distinct legal personality but, as a company, it lacks the mental capacity to commit wilful acts of “moral turpitude” such as market-rigging. Only people can do that. Doing it in the name of their company should afford them no protection.

iniquitous to punish shareholders for offences committed by management

It is therefore absurd and iniquitous to punish shareholders for offences committed by management: first, by destruction of shareholder value and then by loss of dividend income following a massive hit on the income statement.

It is farcical for government and regulators to bleat incessantly about good governance when those responsible for its implementation are given every incentive to ignore it – from bailouts of institutions too-big–to-fail, to penalizing shareholders for the malfeasance of management.

Companies fined for market manipulation, mis-selling or otherwise ripping off customers have a board of directors, often including an impressive array of highly paid non-executive alumni; an audit committee; a risk committee; and external auditors. Amid all this burgeoning talent the crucial concept of taking personal responsibility for the consequences of one’s own actions (or inaction) is corporately fudged.


Even as late as November 2012 the Treasury was sufficiently deluded to pronounce the merger of Co-operative Bank and Britannia Building Society a success. Yet we know that £2.1 billion was lost after the disastrous 2009 merger, annihilating the entirety of the combined entity’s post-merger capital, due mainly to the write-down of corporate loans so plainly beyond the bank’s risk-appetite that they should never have been made in the first place.

People, not institutions, were operating this mindless charade

People, not institutions, were operating this mindless charade. Naturally, both entities were replete with committees. One of the functions of an audit committee is to assess the medium to long-term sustainability of proposed executive actions, notably mergers and acquisitions, and the integrity of related accounting treatments. Sir Christopher Kelly’s final report on the Co-operative Bank highlights its management’s tendency to seek ways of flattering financial performance whenever they believed the accounting rules permitted them.

What was the focus of audit committee members when the seeds of self-destruction were being sown under their noses? Or the focus of the external auditors? We have so far heard the familiar litany from KPMG that their audits were “robust”, “rigorous” and suitably challenging to management.

Maybe current models of risk-based audit methodology no longer concern themselves with such trifles as systemic accounting opportunism, but if we accept at face value KPMG’s insistence that their audits were robust and followed “all relevant professional standards”, we are bound to enquire: Of what earthly use are those standards?

A disgruntled investor, overheard at the Barclays AGM in April: “Wake me up when they put one of these rogues in jail”.