Tidjane Thiam seems to have sat out an embarrassing spy scandal involving a former top executive. The Credit Suisse boss faces an uphill battle to restore trust and credibility in increasing isolation.
The smoke has cleared from a Credit Suisse-ordered surveillance operation on departing top executive Iqbal Khan. The two chief protagonists – and next-door neighbors – are both firmly installed in their respective jobs: Khan as co-head of UBS' $2.3 trillion private bank, and Tidjane Thiam as CEO of Credit Suisse.
The calm is deceptive: An ongoing, sealed official investigation of what actually transpired on a ritzy side street just off Paradeplatz, Zurich's main banking square, could shed some light into the ugly skirmish. The bare-knuckles affair undermines the carefully-cultivated tradition of gentility and secrecy among Switzerland's largest wealth managers.
More Questions vs Answers
Credit Suisse Chairman Urs Rohner managed the scandal with the help of white-collar law firm Homburger. By their own admission, Homburger's scan was neither forensic nor comprehensive – raising as many questions as it answered and doing little to bolster Credit Suisse's credibility.
None of this has stuck on Rohner, a battle-scarred litigator: further details of the months-long simmering feud between Thiam and Khan are almost certain to emerge. If evidence that Thiam was aware of the spy scheme surfaces, the CEO emerges in a lie, but Rohner remains untainted.
As it stands, Thiam still has his job, but with a dented reputation, considerably less gravitas and credibility, within a bank where the mood towards him has soured and his most important ally, operating chief Pierre-Olivier Bouée, was forced out.
Telling Staff Memo
Until now, Thiam hasn't lowered his guard: he views himself as strengthened by the outside probe, which found he wasn't involved in wrong-doing. The memo Thiam sent to staff after the Homburger investigation is telling:
In a brief missive, the CEO explains the surveillance scheme as «strictly an isolated incident», for which people had been held responsible. Credit Suisse's board had ensured transparency and accountability, and Thiam thanks employees for standing by the bank during the «deeply regrettable» time.
Abrupt Change in Tone
Thiam abruptly changes the tone of his email to Credit Suisse's strong performance this year (it reports third-quarter results on October 30), a three-year restructuring concluded last year, and the bank's return on equity target of 10 percent (recently reached).
He concludes with the remark that he knows every Credit Suisse banker and employee will do their utmost to illustrate that 2019 successfully cements the Swiss bank's grueling turnaround.
Those in the Know
Except: the scandal isn't buried yet at all. Prosecutors in Uster, a city of 35,000 people northeast of Zurich, are investigating Credit Suisse's deployment of private investigators; they are also probing within the bank.
To be sure, Thiam has little to fear from this investigation: it is highly unlikely that Khan's criminal complaint will lead to charges against the detectives or anyone else. The trickier point for Thiam is who within Credit Suisse – and evidence is mounting that more people did know – are privy to the substance of the Thiam-Khan dispute.
Morale at a Low
The spy episode isn't the first time Thiam has shown an automatic management style: despite the turnaround, there is little love internally for the CEO or his small circle of close-knit associates. The spy scandal has damaged the already low morale prevalent in the Swiss bank.
In Bouée, Thiam lost not just a long-trusted adviser from his McKinsey days, but also his «engine room» enforcer who executed the CEO's orders. Bouée ensured that what Thiam drafted was actually rolled out in practice.
Integrity, Reputation Dented
Thiam's relationship to Chairman Rohner has been a marriage of convenience for some time now. Rohner's cack-handed concession that Khan could move to Credit Suisse's chief rival with just a wispy three-month notice in between will have done little to repair the relationship between the chairman and CEO.
The result of the scandal is an increasingly isolated CEO with a dent in his integrity. The bank – whose capital as sixth-largest wealth manager in the world is its reputation – is dented beyond measure. The events of September will stick to Rohner and Thiam, as long as they are not fully and transparently explained.
