Nick Leeson might seem an unlikely choice to give advice about ethics and leadership, especially to MBA students about to embark on new careers. After all, he’s best known as the rogue trader who went to prison for bankrupting British merchant bank, Barings, in 1995 by hiding US$1.4 billion in losses in an error account.
But that’s also exactly why Leeson said the students should heed his advice. He knows firsthand what happens when you cross the line.
‘‘I wanted to be successful, as all of you do, but, unfortunately, I’ll always be remembered for my biggest failure. That’s probably the thing that is most difficult for me to take, personally,” he said. “It is always going to be the most embarrassing period of my life because it’s the complete opposite of what I wanted to achieve.”
Don’t be afraid to admit your failures
Don’t be afraid to admit your failures is a lesson he impressed on Ivey students during a presentation via Skype, as he currently isn’t allowed to travel to Canada. He said one simple move could have changed everything: a cry for help. He was only 25 when he was promoted to head Barings Bank’s new futures operation in Singapore, where the crime occurred, and didn’t have the experience needed for the responsibilities of the role.
“I saw asking for help and advice as a sign of weakness when really I should have seen it as a sign of wanting to do things correctly,” he said. “I was definitely surrounded by people who could have pointed me in the right direction – who maybe had faced some of the same or similar dilemmas in the past and made different decisions – but I didn’t do that. I thought I was able to cope.”
Leeson said desire to succeed and fear of failure caused him to cover up a mistake made by an inexperienced team member, which led to a loss for the company, by hiding it in an error account. He continued to use the account to cover his own mounting losses as he gambled the company’s money in hope of correcting the situation.
“It wasn’t about making money or greed or anything. I continued to act that way because I thought I would have the opportunity to correct the situation. It was pure survival,” he said. “The wider impact of my actions was not something that I really thought about and I should have.”
Leeson has paid a high price for his mistakes. He has served time in a Singapore prison during which his wife divorced him and he developed colon cancer. And he’s still haunted by the recognition that he could have behaved differently and wants to share those learnings to help others. He shared his story through the book, Rogue Trader, in 1996, which was the basis of a feature film of the same name in 1999.
“I would have done it all differently, but I’m never going to be afforded that opportunity. What I try to do now is share my experiences and try to work forward from that point,” he said.
Ethics matters
He cited the need for ethics programs in the classroom and more workplace support.
“I’ve been asked: Why was my moral compass so narrow? Why wasn’t I thinking about shareholder value? Why wasn’t I thinking about how my actions affected other people? It genuinely never occurred to me because I think that has to happen before you have a problem. You have a template by which to measure,” he said. “Ethics has a huge place in the classroom as people are learning about the way that they should behave going forward. I’d like to think that if those things had been more accurately or properly portrayed to me years ago that some of my decision-making would have been very different.”
Future protection for financial markets
Leeson also discussed the systematic risks that still exist in financial markets. Although his actions might have kick-started the GRC (governance, risk management, and compliance) revolution, he said he’s appalled by the number of financial scandals since the collapse of Barings Bank.
“Governance has improved, but we continue to have problems,” he said. “There’s a lot of box-ticking that goes on. The challenges are sometimes superficial and they’re not as intelligent or as meaningful as they should be. People should be pushing and prodding and making sure that controls are in place and that they continue to challenge intelligently.”
He suggested three areas for improvement:
- Risk management should be continually active;
- Markets should be transparent; and,
- Regulation should focus on quality rather than quantity.
“There is no silver bullet to ensure the safety of an organization, but I’m a firm believer that if you have robust and effective controls within an organization, then that will be sufficient to mitigate some of the risk that you face. If you do it well, then your organization will be kept safe. If you do it poorly, then you’re heavily at risk.”
