HSBC and the art of the failed apology

MoneywiseEditorMark's picture
Saying sorry is simple enough. Even my 18-month-old son has mastered the art, which he unfortunately has to demonstrate all too often – usually after whacking his older sister over the head with a hard plastic toy or slapping me in the face when he’s tired.
The point is: he knows when he’s done something wrong and immediately tries to atone for his mistake.
Contrast my toddler with banking giant HSBC, which has recently been found to have used its private Swiss arm to help hundreds of wealthy clients dodge tax and conceal millions of dollars of assets. Its work also extended to advising its clients on how best to evade the tax authorities in their places of residence.
The revelations were published by a range of global newspaper groups on 9 February 2015, sparking outrage that built to the point where HSBC’s chief executive, Stuart Gulliver, was forced to issue an apology a couple of days later to “all HSBC customers, shareholders and colleagues” for the bank’s actions, offering his “sincerest apologies”.
I have two major problems with Gulliver’s mea culpa.The first is that it came eight years too late. By the bank’s own admission, the data that uncovered the tax evasion came to light because an employee – Hervé Falciani – stole it in 2007 before it eventually fell into the hands of tax authorities in 2008.
Gulliver states: “Since 2008, our Swiss Private Bank has been completely overhauled. We have fundamentally changed the way HSBC is run and have established much tighter central control around who are our customers.”
So why didn’t HSBC come clean eight years ago and issue a fulsome apology at the time the data was stolen? Why bury the truth until it had no choice but to come clean and admit wrongdoing? Instead, Gulliver’s belated apology makes it appear as though the bank only came clean because it was forced to by the media.
It also makes one question whether the apology is genuine at all. In 2007, the world was a very different place but eight years and many banking scandals later – not to mention a global recession – it seems as though today’s banking chiefs are still not prepared to tackle corporate misbehaviour and endemic venality. Unless they get caught.
My second problem with Gulliver’s apology is that he should have addressed it to all of us, not just his own customers, shareholders and staff. Tax avoidance hurts us all – if no one paid their fair share society would collapse, of course. What happens when rich individuals and the world’s largest companies avoid tax is that middle- and lower-income earners shoulder a greater share of the tax burden than they should. This hits all of us directly in the pocket, lowering our standard of living.
Tax evasion is bad for the economy. Unlike large companies, smaller firms do not have an army of accountants and tax specialists to help shift their money into tax havens – making it harder for them to compete with larger competitors.
Moreover, if large companies are able to bury cash in offshore tax havens and use creative accounting to fudge figures, then how on earth can ordinary people – private investors and pension savers – figure out whether it is worth investing in? If we cannot see exactly what’s on a firm’s balance sheet, that company could easily be on the verge of bankruptcy, putting investors’ retirements and even livelihoods at risk.
On top of that there’s the theory that, because shady characters often use tax havens to shelter cash earned from illicit activities such as drugs and terrorism, tax evasion hurts all of us by allowing criminals to operate and even flourish, causing havoc in our communities, and costing us in the tax needed to clean up the mess left behind (police, social services, NHS, etc).
So nice try at an apology, Gulliver, but next time you should address that apology to every single, law-abiding, tax-paying member of the public in Britain and beyond – it’s all of us your bank has damaged, not just those with a vested interest in HSBC.