In recent years, the public has watched as scandals have arrived, like tsunamis, in huge waves. Economies cannot function without healthy banks, yet in the banking crisis of 2008 many of our financial institutions seemed intent on self-destruction. Governments cannot lead without a basic respect for the political process, yet in the expenses debacle of 2009 many politicians seemed bent on befouling the entire political class.
And then there was News Corp.
In this, the biggest scandal in British corporate history, we have seen a whole new dimension of sleaze unfolding. Here is a corporation that manifestly exerted major influence on sovereign affairs, using tactics that could have been those of a criminal gang. It may well have done so with the knowledge of its leadership, or some of its leadership: the courts will form a view on that in due course. But even assuming that leadership avoids jail, they will stand indicted as unprecedented icons of lax oversight. Either way, corporate risk assessment will never be the same again.
We now act on a stage where a major international corporation can project awesome global power one week and face potential ruin, by increment of dire revelation and legal process, the next. No responsible corporation will be able to conduct its risk assessments without entertaining fears of an equivalent scandal. No responsible shareholder will be able to back a corporate horse without asking itself where the ‘For Nevilles’ might lie under the saddle.
The magnitude of the stakes for News Corp requires consideration in context. The travails of the Murdochs unfold against a narrative of change that would seem to read something like this. The public knew their bankers tended to favour risk over sobriety in their bonus-building. They knew their politicians favoured champagne rather than Macon Blanc when being entertained. They knew their media barons were powerful enough to swing election results. None of this knowledge had, in and of itself, proved sufficient to ignite a popular pushback on anything like the scale of the firestorm we have seen swirling around Murdoch.
But that was not to say there wasn’t plenty of smoke in the air. The bankers managed to return to their casinos with barely a slapped wrist, but not without much banker-bashing in search of a collective focus along the way. The politicians succeeded in escaping with a good talking-to, mostly self-administered, but with much evidence of public grudge-bearing carried over. The media barons were allowed to tittle-tattle on, so long as the targets of their cruelty were overpaid footballers and the like.
But when the brushwood is smoking in this way, a trigger such as the Millie Dowler phone-hacking incident can be especially deadly. Her posthumous treatment by the News of the World touched a public nerve that turned the smoke rising around News Corp into a major conflagration.
In the process, new horrors are being flushed out. They show ever more clearly how interconnected all this cosiness and flirtation with malfeasance is across the British elite. In particular, we have learned that, far from investigating such impropriety assiduously, the police have often been at the same parties as the perpetrators. Small wonder, people are now saying, that so few financiers ended up in jail after the banking showdown.
It is impossible to predict, as things stand, where it will all end. But an overarching implication has now crystallised. Britain seems to be in the mood for a certain clearing of house. The days of tacit ‘understandings’ are over for the elite. No banker can expect any quarter if the ongoing trend for gambling in search of bonuses leads to a new round of trouble in the times ahead. No politician can expect to escape if they accept the lavish hospitality of corporate leaders who plunge from grace. No media executive can aspire ever to emulate Murdoch and his methods again.
The implications reach far across the corporate world. In every sector, risk managers and investors will have to ask themselves where the potential triggers might lie in situations that today smoulder but which seem unlikely to ignite public lust for justice. Where could a skeleton-filled cupboard be hidden? Are there any Sean Hoare-type figures lurking, waiting to blow the locks off? When will the merely malodorous personality shift shape, perhaps overnight, into a weapon of mass destruction able to bring them, their employers and even the wider operating context, down in flames?