Apple Battery Issue and Slowing Down iPhones Issue (Business Ethics)

Sarah Hart

Brancatelli

BLBLU 3443

3 May 2017

HSBC: How Marketing Could have Helped

In our presentation, we decided HSBC made some ethical mistakes when they choose to

knowingly launder money, create a fake compliance department, and skip doing research on the

company’s internal culture and the external environment. A company’s reaction to a large

scandal says a lot about that company. If they run a new campaign, take ownership of their

mistakes, or show initiative to change what went wrong, they will often be remembered in a

much better light than the company that chooses to sweep the incident under the rug and move

on. Although it is never a good idea to keep the mistakes in the mind of the consumer, it is

always better to create a positive association of the company in light of the mistakes that were

made. For HSBC, they chose to ignore the mistake and hope that consumers forgot. Luckily for

them, consumers did forget. The government was unable to do anything more than give a fine

and then make various suggestions which were never followed up on. Although this was good

for the bank, it puts a bad name on marketing and the importance of marketing within

companies.

To summarize the scandal, HSBC was assisting drug cartels and funding various people

and organizations on the “do no business’ list. This list includes people in the drug trade, Al

Qaeda, and other known smugglers, and corrupt individuals or organizations. For the most part,

this was well known throughout the entire organization. A few people tried acting as whistle-

blowers by sending emails to upper management about the lack of organization, the fake

compliance department, and the corruption that was clearly occurring. However, they were

yelled at for interfering with processes, overstepping job boundaries, and trying to prevent

business. In other words, they were told to shut up and do their job rather than create paperwork

or problems within the company 1 . When Everett Stern finally decided to go to the FBI, the

money laundering was discovered. London prosecutors fined the company $1.9 billion and the

US gave a deferred prosecution agreement. This is essentially a document that moves

prosecution until later and is normally dropped if the company no longer continues acting

illegally, pays all fines, and reorganizes as requested. In the case of HSBC, no officials were

charged, the bank was let off the hook, and nothing came other than the initial fine and requests

for the company to improve compliance and research 2 . In response, the company released a short

1 Mollenkamp, C. and Wolf, B. (2012). Special Report: HSBC's money-laundering crackdown riddled with lapses.

[online] U.S. Available at: https://www.reuters.com/article/us-hsbc-compliance-delaware/special-report-hsbcs-

money-laundering-crackdown-riddled-with-lapses-idUSBRE86C18H20120714 [Accessed 1 May 2018]. 2 Viswanatha, Aruna, and Brett Wolf. 2012. HSBC to pay $1.9 billion U.S. fine in money-laundering case. Thomson

Reuters. December 11. Accessed May 01, 2018. https://www.reuters.com/article/us-hsbc-probe/hsbc-to-pay-1-9-

billion-u-s-fine-in-money-laundering-case-idUSBRE8BA05M20121211.

apology, paid the fines, and claimed they were going to change the compliance department and

do research into the various branches of the bank.

This response seems like the bare minimum the company had to do; they never tried

harder than they had to either. The stock price was never drastically affected: it dipped ever so

slightly, they got off easy, people forgot, and then it went back to normal. As I said earlier, the

marketing department had to do very little damage control even though billions of money had

been laundered in the drug trade. A few articles cited outrage at London prosecutors for not

doing more, but very few articles were outraged at HSBC’s actions, surprisingly enough. While

researching to try and find what HSBC did in reaction, I was only slightly surprised to see this. If

a company doesn’t get outraged internally at the illegalities occurring in a Mexican branch, then

why would a company have a strong marketing department to clean the reputation? If the

marketing department is anything like the compliance department, then they probably don’t do

much. They never went out of the way to run campaigns and regain trust, they never made an

effort to raise the stock price, and they never tried to convince the public HSBC is a worthy

company. Instead, they waited for time to run its course and for another company to have a

bigger scandal and distract the public. Although there is inherently nothing wrong with doing

nothing, the point of marketing is to create and maintain a reputation for the company. Inaction

falls somewhere in between this because they didn’t create a new or better reputation yet also

failed to maintain the reputation they had before the scandal was discovered.

HSBC was fined $1.9 billion for the crimes they committed, a mere 5 weeks of profits.

This money can easily be used to increase awareness of the brand in a positive light. Recently,

HSBC announced a sustainability plan to donate $100 billion to financing a transition to a low-

carbon environment and growth. They also plan to source completely renewable energy by

2030 3 . A plan like this is a response to the turmoil that has been occurring lately. They have been

accused of still laundering money and of having not complied like believed. It’s possible this

sustainability plan was being created and finalized for 8 years and the release only coincidently

coincided with the South African money laundering charges. A sustainability plan is a great

thing, but it’s about 8 years overdue. If the company had released an initiative like this to be at

the forefront of sustainability efforts, the company would not have had to worry about the

potential effects of money laundering. The people that are passionate about environmentalism

would have been more likely to ignore the company’s shortcomings if they knew the company

was trying to better the world around them.

Having worked in Marketing for a global country, it is easy to see how these problems

may have occurred. If the culture at HSBC is extremely reliant on upper management, then not

much can get done without approval. If upper management is aware that there are issues within

the company but doesn’t care as long as money is flowing into his pocket, then it probably makes

it even more difficult for marketing to accomplish anything. Additionally, marketing has a

3 http://www.climateactionprogramme.org/news/hsbc-to-invest-100-billion-in-sustainable-financing-by-2025-as-

part-of-its

negative reputation as useless, or merely as sales support. Companies rarely invest large amounts

of money into this department and often make the goals to create sales materials and promote

products. In effect, marketing aims to increase the sales of company by providing salespeople

with all that they need. In the real world, however, marketing is stuck with a small budget to run

events, campaigns, pay for awards for products, put on tradeshows, create materials, translate

those materials, and create a face and reputation for the company. HSBC was not well organized.

It was spread out and there seemed to be a lot of miscommunication and confusion between

countries, branches, and departments. There was a severe lack of cohesion that allowed money

laundering to occur in the first place. There is no reason to assume that the marketing department

would be any different across countries and branches.

There are a lot of situations where someone requests a brochure or item from marketing

and never discloses the purpose, uses it for a different purpose or marketing doesn’t care enough

to ask. Materials that are made for international probably aren’t any different. Mexico probably

requested questionable materials from the marketing department, but as said, if the compliance

department is a sign of the rest of the company, marketing probably didn’t ask very many

questions. Brochures, flyers, info sheets, etc. are all items the marketing department commonly

needs. I have no idea how the internal system works for HSBC in particular, but if a form with

required information is not already needed, this would be a good first step. Creating a program

that details all the information needed, the date needed, the reason it is needed, and any other

apropos information would allow marketing to have a better idea of what they are making. This

would make it easier for the item to go through legal and compliance departments, allow for

transparency, and anything questionable can be checked. Potential customers can be researched,

company culture would be clearer, and there would be less secrecy. This is important for a

company that has been involved in so many scandals because upper management needs to start

caring about what goes on within HSBC and the numerous branches and subsidiaries.

Another option for HSBC and the marketing department is to have a damage control

team. Ideally, the company would have no scandals and no need for this department, but that

seems unlikely in the near future. A damage control team can be made up of a variety of people

across the company and within departments that have commonly had issues with scandals such

as tax evasion, creating false subsidiaries, or in potentially high-risk countries. This team can

create a plan for both the short term and the long term with specific actions after a scandal is

discovered or the company is accused of illegal activities. Plans can include details such as what

newspapers will be contacted, important information to include in CEO statements, a guide for

press releases, and other crucial items. This plan can also include how to speak to the public and

how to conduct interviews in such a way that the company can still be construed in a public light.

Marketing is a very dynamic department, but is generally underappreciated in its

importance. Many banks and firms miss the importance of marketing because marketing does not

directly bring in sales, often needs a large budget, and is rarely seen as client facing. Small

departments mean that there are less people to do any damage control and only so much time can

be dedicated to each request or job function. When HSBC came under scrutiny for potential

illegal activities, extra time should have been taken out of everyday activities and put into

creating press releases, shareholder statements, talking to the press, and any other number of

activities. A company who has not been involved in scandals needs to focus on these potentials

rather than assuming they will never happen. Although all companies hope these issues never

occur, they do and they need to be handled effectively. Sweeping problems under the rug only

works when you get lucky, it is not a good long-term solution.