Bank of Scotland’s experience holds lessons for all companiesJuly 1999
The collapse of the joint venture between Bank of Scotland and Pat Robertson, the US TV evangelist, clearly illustrates the dangers of appraising a new business venture on financial criteria alone. This deal collapsed for strictly non-financial reasons and the so-called ‘soft’ issue of the intended partner’s ethical performance was the decisive factor.
There are five key conclusions to be drawn from the affair. First, it clearly shows how social responsibility issues can directly hit the bottom line. Companies that fail to make social strategy an integral part of their wider business strategy, should expect to encounter similar problems – and not just with new business ventures.
Second, it is very difficult to apply a single value system in a global market. Robertson’s comments on minority groups, acceptable perhaps to 55 million Americans, were not popular in Scotland, despite the strong spiritual, ethnic and economic links between the two countries. Robinson was more than just a loose cannon: his values didn’t fit.
Third, the speed with which the deal unravelled. Bank of Scotland was obviously caught off its guard. Without social as well as financial risk avoidance and mitigation systems in place, crisis management is inevitable because there is no time for a considered response.
Fourth, the press presented this as an ‘ethical investment’ story. A year ago only churches and charities on the one hand, and arms companies on the other, received this treatment. Now any institution, even a venerable and trusted bank, is vulnerable.
Fifth, the role of ethical investors, who served as an early warning service. They can hardly claim anything as martial as a scalp, but their antennae picked up the trouble coming very early on. They realised that the risk lay not in the finances of the deal, but in the differing values of the two parties. The bank realised this as well – too late.
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