When giants fall, their history is to be researched by journalists. This gives us the opportunity to look what happens in boardrooms. After the collapse of Ahold a few years ago, all of the boardroom meetings has been covered. The journalists are often helped by the fact that the collaps of a giant causes a lot of collateral damage: fired and therefor unhappy top managers, or others that seek salvation by confess (in order to reduce the chances to be accused of mismanagement themselves). Now Fortis is being examined.
This morning I read in the FD (Financieel Dagblad december 1st) an interesting insight in the Fortis files. Two really interesting points. One is that the board had no idea what the consequences would be in the market from their idea to raise 8 billion extra. In their opinion this was a ‘technical financial’ valid action. Even after the protest of three very important investors, they still valued their idea as rational behaviour. In the market their action was percieved however as the last desperate action of a bank out of control. A very interesting gap in view on the world and selective blindness to signals from outside (from their own perspective these were weak signals, all the rest of the world would consider them as Screaming Out Loud signals).
The second interesting point, related to the first, was the role of little things. The bank had a strong tradition within the french speaking elite of Belgium. The rich all had a very strong position in the bank. All together 15% of stock was in hands of this subgroup. They were however neglected. Their role in the board had been vanished, exchanged for a more international view. Lippens, being one if their lot, should have been aware of the importance of this group, but did not communicate with them. When they were confronted with the new emission they had not been consulted on, they started a ‘revolution’ and tried (in an indirect way as Belgiums normally like to act) to get rid of the complete board.
Clinton used to write on his desk ‘It ’s the economy stupid!’. The fallen big firms and institutions could all engrave on their grave ‘It is the little things that make you fall, stupid!’