‘Economic violence' caused RBS failure, study argues
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Academics have claimed that a culture of ‘economic violence’ among executives at Royal Bank of Scotland Group (RBS) drove the institution’s failure.
A study by management experts from Newcastle University Business School and the University of Leicester use the term to describe a leadership style that threatens employees with redundancy and forces them to meet aggressive sales targets.
The research, published in the Organization Studies journal, claims that former senior executives at RBS used economic violence to build their reputation within the City and win approval for their “disastrous” expansion plans.
This led to individuals becoming caught up in a battle for status against leaders of rival financial institutions, which ultimately distracted them from problems within their organisation and essentially destroyed the company.
Sarah Robinson, senior lecturer in management and organisational studies at the University of Leicester School of Management, says: “A management culture of overt economic violence within RBS’ Scottish headquarters translated into the cultural capital that management would use in their battles for power in the City of London.
“Competition among banking leaders for legitimacy within the field triggered irrational behaviour, which contributed to the financial crisis.”
This cultural capital allowed RBS to win backing from within the City to take over Dutch bank ABN Amro, which propelled the bank onto the international stage.
However, Robinson argues that RBS executives “missed problems of ‘toxic assets’ and bad debt” during the bank’s expansion because they were distracted by attempts “to legitimate themselves by competing successfully against the English elite banking leaders”.
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Readers' comments (1)
Anonymous | 22 Jun 2012 6:10 pm
Having worked in the Nat West arm of the bank, I think it was the most poisonous atmosphere I have ever experienced. Implied threats were regularly made and any sign of failure jumped upon leading to a culture of blame, and deliberate ignorance of some of the work practices. Where staff spoke out they were made examples of by a culture that did not tolerate anything less than total blind obdience. The result was that staff knew well what was going on but were scared to speak out in fear of their jobs. The collapse of the RBS group was ultimately inevitable.
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