Mark Carney gave opening remarks on a panel on ‘law, ethics and culture in banking’. I thought they were unfortunate.
They come shortly after the resignation of Charlotte Hogg, newly appointed Deputy Governor at the BoE. She had forgotten to declare that her brother worked at a bank. This amounted to accidentally concealing a potential for, or an appearance of a conflict of interest, since the BoE regulates banks, and deals with a lot of sensitive information that they would benefit from.
Carney and the Bank initially took a stand hoping that Charlotte Hogg could stay in post, admonished. It was the Treasury Committee, and Ms Hoggs’ gracious response to that in resigning that concluded the affair in a way that Carney had not planned for.
I don’t have anything helpful to add by way of adjudicating what would have been the right outcome in this case. This is not my point in writing this post.
My first thought is that Carney’s interjection seems like someone simply trying to get the last word in an argument that they wound up losing. Why draw attention to all this again, and to what end?
Carney stresses that what he describes as [and seems to be, precisely] an ‘honest mistake’ is not ‘a firing offence’. But again, what is being said here, and of what use? One translation is merely: ‘It’s not a firing offence, but, as we have seen, events are likely to be taken out of our hands so that you will, in fact, finish up without your job, but you’ll have the satisfaction of knowing that we will keep on batting for you with our words after the fact?’ No comfort to Ms Hogg. And not much comfort to her successor. Surely Carney needed to either accept that this is, essentially, a job-ending offence, (call it ‘firing’ or something else if you prefer), or do something material to suggest how next time it won’t be.
Carney draws attention to the fact that he disagrees with the outcome generated by the Treasury Committee, which ‘reached its own judgement’ which ‘I fully respect.’ Respects but respectfully judges to be flawed and disproportionate, we surmise from his speech. Why highlight this, if there is no credible plan to push his own view of how things should play differently next time? Absent this, these sentiments look like sour grapes, achieving little other than revealing that he is fed up about it.
The speech develops an unfortunate analogy between the Hogg affair and the problem in regulating employment in finance in general. He seems to suggest by the speech that if we terminate contracts because people forget to declare an important potential/appearance of conflict of interest, there will be a talent shortage.
Really? This seems totally implausible to me. Is anyone really going to be dissuaded from applying for a £300k/pa compensation package because they might lose it if they forget to write down what their family members do for a living? Of course not. Carney also seems to try to raise the stakes in support of his personal lost cause in the BoE: ‘it’s not just our DG recruitment that will suffer: it’s the entire talent pool in finance!’
Carney’s broad substantive point is fine: At some point, make the penalties so severe and the talent pool will indeed suffer, harming the industry and those on behalf of whom it intermediates. But the argument suffers from the inappropriate analogy made with what happened to Charlotte Hogg at the BoE.