Ethics and governance in the European Financial centers

Fortis, which is a major bank in Luxembourg, has this week published a press release relating to a Cheque for EUR 2,500 presented to “Les Amis de Gambie”, a charity.
The presentation was made following an in-house campaign at the bank to raise awareness of environmental protection issues. Called “Eco Vert”, the campaign was organised by the Facility Management Department and consisted of a series of actions aimed at the entire staff.
Employees had the possibility to purchase hand-made chocolates crafted in the shape of the campaign's mascot, Eco, the green owl. Some 10,000 chocolates have been sold in the space of four months, and the money will be used to finance the installation of solar panels at an orphanage under construction in Sinchu, a project conducted by “Les Amis de Gambie” in the North of Gambia.
As explained these efforts are part of Fortis's initiatives to promote sustainable development and position itself as a socially and environmentally responsible organisation.
But when looking the bottom of the press release it is explained that with a market capitalisation of EUR 40.3 billion (30/11/2007), Fortis ranks among the fifteen largest financial institutions in Europe.
Therefore the society is given 0,000000057736720554272500000000 % of the market capitalisation, which is very considerable effort for a Corporate Body that communicates on it (the society is given 0,00000371913121094912000 % of the 672.2 million euros of Net profit attributable to shareholders according to Annual Report 2006.

To be fair one must take into account every press release relating to money given in 2007 :
6 February 2007 : Cheques for a total of € 5,000 to Fondation Luxembourgeoise contre le Cancer and Info-Handicap
25 July 2007 : 4.000 euro cheque for Ligue HMC
October 2007 : EUR 2,000 cheque to ‘Réimecher Heem’
12 October : cheque for EUR 1,500 to “Haus vun der Natur”
14 November 2007 : EUR 2,000 cheque to the ‘Frënn vun de Staatléche Kannerheemer’ association
5 December 2007 : Cheque for EUR 2,500 presented to “Les Amis de Gambie”

The total is : EUR 17,000 : 0,000025290092234454000000000000 % of the net profit of EUR 672.2 million reported as well in a press release.

Additionaly the Fortis Foundation Luxembourg was launched on 15 mars 2006 with a budget of EUR 500,000 (0,000743826 % of the net profit of EUR 672.2 million) to provide financial and other support for projects promoting social progress and well-being in a broad sense (see page 46 of the CSR Report 2006)

Even though any money that is given to non profit making societies is good, this is perfect example of the wrong approach to CSR in Luxembourg as explained in a previous post. Expressed Business ethics and/or deontology is unfortunately missing despite it is the critical criteria for CSR and sustainable development for the financial organisations. A google search on the word ethics, éthique, déontologie or deontology on site:fortisbanque.lu is empty. Nevertheless to be fair, for these words but deontology there are references for a search for site:fortis.com.

The www.fortis.com has an area about CSR. Business ethics is not quoted in the Mission and vision page. But the first page of policies and guidelines is relating to integrity. How integrity can be trusted by stakeholders when firms in Luxembourg communicate on this word while publicly not complying with it?
Fortis communicates as well on its Principles of Business Conduct. But what is the value of such code for stakeholders when companies including auditors behave publicly in a way that do not comply with their own code if any?

Why Fortis commitment would be reliable?

Anyway by not repudiating publicly those who behave publicly in a way that do not comply with their own ethical statements (either fellow bankers or suppliers), Fortis Luxembourg unfortunately weakens the credibility of its own policies and guidelines in a small center like Luxembourg where there must be no gap between what is said and what is seen, implemented and enforced publicly. One knows where the falsehood starts. One ignores when it ends.

I am sad about that for the brand.

According to PwC UK, business ethics is the cornerstone of Corporate responsibility.
Other topics (Marketplace, people, environment, Community Affairs) are based on it.

I find it telling that entities that are supposed to abide by the same code of conduct should have so different views on corporate responsibility despide the fact they are independent.

The reason why there are differences may be found in the deep culture of the jurisdiction where they do the job.
There is an actual "ethics denial" in Luxembourg compared to other financial centers (UK, Switzerland) and even compared to entities in Africa.

The problem in Luxembourg, like in small tax havens, is that issues are hidden or hushed up to protect the reputation in the short term and everyone plays this stupid game including the fourth estate : stupid game because everybody knows everyone and the conflict of interest is permanent.

The consequence is that there is not corrective action and the reputational risk is actually growing so is growing the center in the framework of an international will to fight fraud, money laundering and corruption : will either from organisation like Transparency International, OECD or political will like in the USA.

Luxembourg has many qualities and PwC Luxembourg has a special role to play to acculturate true ethics because it is the leader. They can do it.

PwC Luxembourg put online very some interesting videos on topics that are explained by its experts.

There are currently 3 podcasts with two speakers.
John Parkhouse, Leader of the Investment Management and Real Estate Practice at PwC Luxembourg, tells about the results of this years' Fund Manager MiFID Survey and the results and analysis of the Alternative Investment Survey 2007.
Mark Evans, Fund Distribution Leader at PricewaterhouseCoopers Luxembourg, tells about some of the key trends impacting the distribution of cross-border funds now and over the next couple of years.

As supporting material, a pdf file is provided.



Know more