I have been watching with great interest the goings-on at Swedbank following its sacking of its CEO, Michael Wolf. It makes for an interesting laboratory into what can go on behind the curtain of bank's boardrooms. While there may be specific cultural and Scandinavian structural issues here at play, it nonetheless shows how change in the C-suite can have significant implications to a bank, its shareholders and its customers.
Wolf was sacked in February following his signing off a series of real estate deals which have been potentially deemed to generate conflicts of interest for those players involved, including other bank senior managers and their clients. Financial authorities in the country are investigating for any wrong-doing; Wolf staunchly maintains he has done no wrong. Wolf is an interesting character, being named as the only banker in the HBRs Top 20 CEOs at the end of last year and his own leadership in leading the bank's drive for greater adoption of digitalization, technology, and shrinking of its bricks and mortar network, as noted by Euromoney. However, shares hardly moved last calendar year and hoovered around the SEK 185 mark for most of the year.
Following the departure of Wolf and naming of senior Swedbank banker Birgitte Bonnessen as interim chief, we learn several days ago that the very chairman who presided over Wolf's removal would not stand for re-election following meetings between the board's nomination committee and institutional investors, as reported in the NYT on March 30th, leaving us with both interim CEO and Chairman roles. Then we learn on April 7th that shareholders voted (against auditor recommendations) to not discharge either the ex CEO nor ex Chairman Sundstrom from liability, which in Scandinavian markets keeps the cloud of legal action a real possibility for each executive, as reported recently by the Gulf Times.
So what is going on here? A disagreement over strategy, share price or customer satisfaction (where Swedbank trails others such as Handlesbanken)? We can't say for sure, but increasingly it is clear that personal conduct and ethical standards are a growing issue in the bank C-suite. Even if a CEO is not personally involved in the highlighted transactions, his or her reaction (or lack thereof) can set the tone for the rest of the firm and its development of culture standards. I have been told by another bank CEO that this is really soft touchy feely stuff, where you may be presented with a set of facts and decide one course of action (even to punish those involved by cutting of bonuses or demotions), only to later have a slightly different set of facts emerge and it can then be viewed that the first reaction was insufficient from a reputational lens. Of course, the medium term costs to shareholders can be great here, with significant but interim change in the C-suite causing a distraction to staff, clients and the regulator too. I say get on with it but draw a line under this - move on as soon a possible with a permanent management team focusing on building shareholder value to mitigate these distraction costs.
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