LET’S IMAGINE that confidential information comes into the possession of your
team members, who make use of it. How should you react?
You are a senior manager in a firm of investment managers with a publicly
stated commitment to the highest standards of ethical behaviour. You are due
to make a presentation to a big corporate client that is looking for a new
asset-management firm to run its pension fund.
Your firm is keen to win the business and has committed considerable resources
to its bid, for which initial presentations were held last week. After the
presentation, you learn that the proposal was well received and you are on
the short list against only one other firm. Your bid team members are full
of confidence and report that the enhancements they are going to make to
their initial proposal will deliver a knock-out blow to your rival.
You are pleased that confidence is high but are surprised at the level of it
and, also, that some of the proposed enhancements to your firm’s proposal
are fairly radical.
During the days approaching the final presentation, you jokingly say to the
young graduate recruit providing office support to the team that it is
almost as though they have a spy in the opposition camp. “Oh, it’s better
than that,” he replies gleefully. “We have chapter and verse on their
proposal because they left their pitch book in the waiting room and we have
given it a good home.” Then he opens his desk drawer to reveal the book.
If someone carelessly leaves a document lying about and you find it, it is
only human nature to look at it. And, when you discover that it relates to a
competitive bid, taking it back to your office to have a good look at it
(before you return it to its rightful owners) makes good sense, doesn’t it?
After all, they would do it to us. All’s fair in love and war and this is
war.
Actually, it isn’t and even in war there are rules. But this is business and,
while it is highly competitive, there are rules and principles to ensure
that certain standards are maintained. In this instance, tempting though it
may be to take advantage of a competitor’s carelessness, your team’s actions
in taking the pitch book back to the office and making use of it have gone
beyond acceptable behaviour and, bearing in mind the circumstances, might be
regarded as theft.
But, having discovered that your firm now has a competitor’s property in its
possession, what should you do?
Assuming that you do feel uncomfortable about it, the least you could do is
shred the book and tell the owners you have done so, or return it to them.
In both cases they will be aware that you have seen the information.
But would your action be enough, or should you do more? And, if so, what?
Knowing the commercial impact on your firm, you might hesitate. But the
appropriate course of action should be clear. Bearing in mind your firm’s
reputation (and thus your own) for the highest standards of integrity,
options must include withdrawing from the bid process altogether, advising
both the client and your competitor of your reasons for so doing.
Alternatively, you might consider that it would be sufficient to replace
your bid team with other “untainted” members of staff, but it must be
debatable whether that would be practical given the stage the bid process
has reached.
If you still need convincing that honesty is the best policy, the question you
might ask yourself is what your reaction would be if the boot were on the
other foot and you discovered that confidential papers belonging to your
firm had come into the possession of a competitor?
Finally, would it make any difference to your response if your team had found
the material in the back of a taxi?
This scenario is based on something that actually happened. In that case, the
management of the firm that obtained the competitor’s pitch book took strong
action against the members of its bid team, resulting in dismissals and
formal cautions.
- Integrity At Work In Financial Services is published by the Securities &
Investment Institute, priced £10, and available from its online bookshop at sii.org.uk
CONFLICTS OF INTEREST
YOU are the head of an investment-banking division that includes an M&A
business and a private-equity operation. Your M&A team is advising a
client on the acquisition of ABC Ltd, which is the subject of an auction
process. Your private-equity colleagues are also bidding for ABC. The
potential conflict of interest has been managed by Chinese walls (the
protocols that insulate different departments).
The M&A team tells you its client is through to the final round of the
auction for ABC. The only other bidder now is your private-equity team.
The M&A team’s due diligence has resulted in a surprisingly low valuation
of ABC. Your instinctive reaction is to ensure the private-equity valuation
is similar to that of M&A’s. The private-equity bid would commit your
group to an investment of several hundred million pounds. You are concerned
at the financial impact if the private-equity team paid too much.
THE DILEMMA: As head of investment banking, what should you do?
Remember you are constrained by your Chinese walls and must observe client
confidentiality.
Option 1: You say no more about the valuation.
Option 2: You commission an independent valuation from outside the firm.
Option 3: Quietly ask the private-equity team if it has done sufficient due
diligence on the value of ABC.
Option 4: Refer the problem to your compliance people.
OPTIMUM SOLUTION: Option 1 You must remain impartial and act honestly
and without favour by observing Chinese walls and respecting client
information confidentiality.
TRADING BREACHES
TWO DEALERS in your firm have committed breaches of trading limits. Dealer A
is inexperienced and his breach is accidental rather than deliberate.
Dealer B is a senior dealer and she has exceeded her authority on several
occasions but is highly profitable. She is valued greatly by the firm and
may be considering a move to a rival.
Their manager is considering sacking Dealer A but recommends that senior
management talks to Dealer B “off the record”.
THE DILEMMA: You are the chief dealer. What do you do?
Option 1: As dealing breaches are not uncommon, take no further action.
Option 2: Follow your manager’s pragmatic recommendation.
Option 3: Decide that Dealer B be disciplined as she should know better.
Option 4: Involve senior management and HR, reemphasise policy on trading
limits and send both dealers a written warning.
OPTIMUM SOLUTION: Option 4. Management needs to enforce company
procedures in a fair and consistent way.
