Tuesday, 7 March 2017

Charlotte Hogg: The ‘Revolving Door’ and a Lack of Vigilance

Today’s post is concerned with the news lately that recently-appointed Deputy Governor of the Bank of England, Charlotte Hogg, broke the Bank’s code of conduct when she neglected to declare that her brother, Quinton Hogg, worked for Barclays as a Director in ‘group strategy’. This post, whilst acknowledging that Hogg’s breach of the Code is an incredible and arguably terminal breach of her responsibilities, is more concerned with the larger picture of the so-called ‘revolving door’. This case simply adds to the narrative that not only is the controlling body of financial services drawn from a particularly small pool, but that the people in charge of the direction of these institutions, namely Mark Carney in this instance, have to be hyper-vigilant­ with respect to this issue of the revolving door – the small pool dictates that conflicts of interests are likely to not be far away with any appointment.

Upon being named as Deputy Governor in February of this year, Hogg also holds the position of Chief Operating Officer of the Bank, whilst also sitting on the Monetary Policy Committee, Financial Policy Committee, Prudential Regulation Committee, and the Court of Governors. Hogg, who had worked for Morgan Stanley previously, joined from Santander UK where she was head of retail banking, and it was this exposure to the marketplace that, according to the Financial Times, made her more qualified for the position of Deputy Governor than internal candidates. However, this need to fill the positions that are charged with regulating the financial industry with those who have had exposure to it is the quintessential problem that is encapsulated by the ‘revolving door’ theory. Yet, this is just one element of the news story regarding Ms Hogg.

Whilst it is an issue having people in such influential positions that also have links to the financial industry because of their previous careers, there is a justification in that there is no degree that one can take to prepare for the position – only experience and intricate knowledge of the workings of the economy will do. However, the conduct of the people in these positions is all important, and for Ms Hogg today’s news makes for dismal reading. It emerged at an appointment hearing at the end of February (for her new role) that Charlotte’s brother Quintin worked for Barclays in the position of Director for Group Strategy, which entailed examining ‘regulatory changes, ring-fencing rules and capital requirements’ – it is a stinging coincidence for Charlotte that her role on the board of the Prudential Regulation Committee is to set rules for the capital requirements of banks in the U.K., including Barclays. This potential damage was compounded however because when the issue was raised as part of her answering of a questionnaire before the appointment committee, Hogg proudly stated ‘I am in compliance with all of our codes of conduct. I know because I helped write them’; however, this was simply not true and as of 2013, when she took up the position of Chief Operating Officer, she had never declared her brother’s role at Barclays. Hogg’s defence, whilst admitting responsibility, was that she does not ‘discuss work’ with her brother and that she did not know what position he held at Barclays. This meek defence was met with mercy by some and scorn by others, with John Mann MP, who is a member of the Treasury Committee, stating that ‘this is simply a question about standards in public life and in this regard she failed and must resign’. Arguably, Hogg’s position at the bank is becoming increasingly untenable by the day, and it is likely that Carney’s verbal warning will not be enough and that Hogg will resign from her position. However, this case brings up a much larger issue in society.

Hogg, who admits readily that she has been ‘incredibly lucky’ with the family that she was born into, represents the ‘elite’ in society. She is the child of two peers in the House of Lords. Her father, the third Viscount Hailsham, and her mother, Lady Hogg, have been synonymous with Conservative politics in the U.K. for a number of years – Douglas, her father, was embroiled in an expenses scandal when he claimed, as MP for Grantham, £2,200 for cleaning his moat at his 13th-Century Manor House in 2009 which saw him become the first politician to leave Parliament as part of an extensive ‘expenses scandal’, whilst her mother, Sarah, led John Major’s ‘Policy Unit’ whilst he was in power in the 1990s. In addition to this, and perhaps indicatively of the interconnectedness of the elite, Hogg is the cousin of the infamous Hoare Banking Family, owners of the fourth-oldest bank in the world.

Hogg’s interconnectedness is obviously not her doing, but is something which has to be a factor when deciding how to govern. For too long there has been too little emphasis upon this miniscule pool of talent being perpetually promoted to positions of influence and control over society. It is known, but never acted upon, which is an extraordinary issue for society – the meek defence from Charlotte in defence of her breach of the code of conduct she herself helped to write is an incredible demonstration of the contempt with which society is held by certain members of this ‘elite’ – it is important that this is communicated as extensively, and loudly, as possible in order to at least promote the idea of change.

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