The Security Exchange Commission (SEC) has been expanding its probe into Asian banks and their hiring process. In short, the SEC believes that Asian banks have been intentionally hiring family members of powerful individuals in order to build connections. If so, the banks may be guilty of what essentially amounts to bribing.
Now the SEC appears to expanding its inquiries to new banks and is compiling more data on hiring practices. Further, while most of the focus has centered on banks in Hong Kong and family members from China, the SEC may be expanding its broad across Asia. Further, banks in Europe have been contacted for information and more US banks are being sought out.
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So far, no banks has been formerly charged or accused of wrong doing and the SEC is still in the information gathering stage.
SEC: Programs allegedly set up to hire well-connected people
For the past year, international banking giants, such as Morgan Stanley (NYSE:MS) and Citigroup Inc (NYSE:C), have been under investigation for allegedly setting up formal programs to hire the family members of well-connected people across Asia. Allegedly, the programs were not simply based around informal connections, but instead set up and designed specifically to target high profit people.
Basically, when Prime Minister Jr. graduates from high school, he or she could have her resume quickly moved to the top of the resume pool, regardless of his or her skills and achievements. The banks then hoped to use the family members as leverage, or at least ways to open doors to state-owned firms in China.
Is hiring connected people already a common practice?
It’s fair to wonder if banks are really committing bribery by hiring well-connected people. While the formalization of a program specifically to hire well-connected people would appear to cross some ethical lines, the complex system of relations, references, and the power of a name on a resume brings suggests that the practice could already be wide spread, if not formalized.
The simple fact is that the easiest way to get your resume to the top of a stack of a hundred resumes is to know a senior manager or otherwise well connected person in a firm. And if you happen to be the President’s daughter or your Uncle runs the IMF, is it really hard to believe that your resume will get an extra long look, and perhaps the benefit of the doubt?
Regardless, informal influence is different than setting up programs and openly looking for candidates specifically for their connections. This is especially important in developing countries where bribery and corruption is more wide spread.