Off message: Standard Chartered’s Sands – Death by a thousand cuts
Standard Chartered’s PR machine does not seem to be helping turn the bank’s story around at a critical time for CEO Peter Sands.
When the Chinese developed the ‘death by a thousand cuts’ in the 10th century they did so believing it to be the most gruesome method of torture one could employ.
Just such a slow slicing has been playing out in front of our eyes in the form of Standard Chartered Bank and its beleaguered chief executive Peter Sands.
Standard Chartered has always been a bank that has marched to the sound of its own drum in terms of strategy. It learned how to make money by going into emerging markets others weren’t that crazy about and carving out a position below that of the domestic banks with which it competed. By any business school analysis, that is a losing proposition. But Standard Chartered, by running a lean ship and doling out credit wisely to long-term customers it knew well, was able to make a decent go of it.
The turning point was in 2012, when the bank was accused in New York of hiding oil-related transactions with Iran and other countries on the US’s no-go list.
StanChart’s first public move was to deny the allegations – a move that won it some admiration among those who feel the US casts way too wide a shadow in the world of global banking regulation.
Alas, the bank also violated the first principle of good communications – don’t open your mouth until you know what you’re talking about.
The bank was forced to back down from its denial and ended up paying £340 million in fines for concealing sanctions-busting oil deals.
And that brings us to the second remarkable bit of communication skulduggery in this terrible tale. At the time the US fines were levied at the end of 2012, StanChart chairman John Peace apologized publicly, blaming the breaches of US sanctions law on “clerical error.”
That is such a monstrous misrepresentation it beggars belief. What actually happened was that the employees were directed to remove anything that could identify the origins of the parties involved in the oil trades. No wonder Peace later felt obliged to apologise for the remark.
And where, I would ask, were the senior comms and investor relations people insisting that the first public utterances acknowledged the reality of the offence? One can’t know if they were even in the room when that statement was being discussed, but if they were, one hopes they had the chutzpah to make the case for something of a more honest nature.
And now the tale turns to Peter Sands, the embattled, embittered and selectively visible chief executive who at the moment has two very intertwined headaches. The share price is at a five-year low – not a particularly brilliant place to be when savvy investors are constantly lowering the weighting of financial institutions in their portfolios. And in August last year StanChart was fined a further $300 million for failing to impose the measures it had promised in 2012 to prevent further lapses in its anti-money laundering procedures.
So what’s a PR to do?
For starters, the bank is employing a tried and true methodology whereby you avoid the press and talk directly to investors. Sands and his team were recently in Hong Kong assuring people that all is under control.
But if the PR people have enough gravitas and enough acumen, they’re reminding the IR guys and Sands himself that what you say to investors inevitably seeps through the shale deposits into the ears of savvy journalists.
The other technique that the StanChart PR team is employing is that when the top of the house is under pressure, promote whatever else you can. A cursory review of StanChart PR activity for much of last year would support that notion. In all fairness they’re doing a good job in the Middle East and Asia of getting out the door with their deals and their team hires and reshuffles.
But the headwinds quickly came back in the first week of 2015 when StanChart announced it is shuttering its cash equity business. The bank said it was doing so as part of a bigger plan to deliver “at least $400 million” in cost savings in 2015. Fair enough. When the ship is sinking, you need to start throwing nonessentials overboard – if not to save the ship, at least to placate the investors.
We don’t know at the moment how much sensitivity was shown to the purported 200 “roles” – sometimes called people – that are going to be affected by the move. If I was cynical I might suggest that number grew by whole multiples in the dialogue with analysts and investors when they started adding back-office, risk-management and support roles that would be caught up in the move.
And finally, StanChart reminded us that it intended to keep its convertible bonds and equity derivatives business. Good luck with that, guys. If anyone knows of a bank that successfully operates an equity derivatives or a convert business without cash equity, please raise your hand.
At the risk of being shrill though, the view from outside suggests that the PR machinery at the top of the house isn’t that strong. If it had been, the chairman’s statement in 2012 would never have made it out the door. At the same time, Sands needs to go on the offensive publicly about what the bank intends to do about its sluggish share price and the renewed investigation.
Good PR people must possess equal shares of brains and nerves. I’m not sure what is missing in the balance at StanChart, but it is very clear that good communications protocols are being ignored at a time when they could prove critical to turning things around.
Off message is written by a senior adviser to the financial PR industry