The collapse of Barings back in 1995, due to Nick Leeson’s overzealous trading, was an incredible story: the UK’s oldest merchant bank, with assets of nearly £1bn, brought down by a working class lad from Watford to the point that it was eventually bought by the Dutch banking and insurance firm ING for just £1.
As the world’s press whipped itself up into a frenzy over the affair, the bank’s staff found themselves unexpectedly on the hunt for new jobs, with a scandal-hit employer at the top of their CVs.
Recent events have blown any expectation that this was a one-off out of the water. And the size of new casualties make Barings look like a drop in a large ocean of financial malpractice.
Enron, the US energy giant worth hundreds of billions, was driven into bankruptcy after a whole series of corrupt practices came to light late last year. And Andersen, Enron’s auditors and one of the largest global firms of accountants, was implicated in the scandal. Its future is now the subject of much speculation.
When a company collapses, there are a lot of casualties. And along with investors, employees are top of the list. If the company you are working for goes bust, you need another job, so what are the implications for you if your company goes bust?
It has to be said, irrespective of your position there is likely to be some stigma attached to having worked for a company that collapses. The best CVs are usually those littered with success stories rather than failures.
But there is a great deal of realism in the business community about the circumstances in which companies go under and the role most staff have to play in the collapse.
Most companies and individuals recognise that the type of fraud and financial malpractice we have been discussing is generally limited to very few people in an organisation, and usually those at the highest level.
In the case of Barings, once the executives who were implicated in the failure to control Leeson’s trading activities had resigned or were sacked, the financial community at large was sympathetic to the complete non-involvement of the rest of the Barings staff and most employees went on to enjoy successful careers post-Barings.
The same openness to accept that you were simply in the wrong place at the wrong time seems to be true of current reactions to the more recent corporate collapses. But there are some hurdles that ex-employees of failed businesses, do need to think about.
The first is the difference between those circumstances brought about as a result of a specific fraud and those that were due to poor controls or inappropriate accounting policies. For example, if the directors of a company are committing fraud at the highest level, you as an employee, even at a senior level, are unlikely to have been expected either to know about, or to influence the malpractice.
By way of contrast, where we are not talking about specific fraud but generally poor or ineffective financial controls, you may well find yourself being tarred with the same brush as the business.
Even though you may well have had nothing to do with determining policy or in establishing the internal controls, poor practices will indicate that you have been working for a company that operates to less than the highest standards and which knows how many areas of its operations are sub-standard. This could make it easier for a potential employer to choose someone with a less uncertain background over you.
We should also give consideration to the role of the external expert in the form of the company’s auditors. It is generally accepted that a competent review should uncover most forms of financial malpractice and if malpractice comes to light, the auditors have a legal obligation to disclose it. Hence the difficulties that Andersen currently finds itself dealing with. Almost inevitably, those partners and senior managers directly involved find themselves implicated.
So what do we conclude? Bearing in mind certain exceptions, in most cases, a past employee’s career prospects should not be irreparably damaged by having worked for a company that has gone bust or found itself the centre of attention as a result of its accounting practices.
There may well be some stigma attached in the first instance, but a frank and confident approach to the matter in interviews should quickly lay the concerns to rest.
That said, in the current market it would be better not to be in the position of having to find a new job, and especially not under circumstances where the company you used to work for has gone bust.
Thoroughly researching companies before you start working for them, such as reviewing all recent press commentary, is certainly to be recommended.
And, if for any reason, you sense something odd is happening at a company for which you are working, you need to take advice, very quickly and early. Having heard or read something that gives rise to suspicions could well implicate you if you are not very careful.
However, such circumstances are extremely rare and even if it were to happen to your company, as long as you behave professionally and with appropriate common sense when you become aware of a problem, your career should not suffer.
- David Hughes is managing director of Executive Connections recruitment consultancy.