Ex-HSBC CEO: "Capitalism Remains In The Dock"

Capitalism and the financial system which underpins it remain "in the dock" in the wake of the banking crisis, yet there remain no credible alternatives to them, the former head of HSBC has said.

Speaking publicly for the first time since the emergence of revelations about tax avoidance facilitated by HSBC's Swiss private bank, Lord Green of Hurstpierpoint told a City audience that rebuilding trust in business and other pillars of the world's economic infrastructure was essential.

"At their best the markets are an indispensable servant of human welfare, even if at their worst they are a terrible master," he said in a speech at St Michael's, a church in the heart of the City of London (LSE: CIN.L - news) .

Lord Green, who stepped down as HSBC's chairman in 2010 to become David Cameron's Trade Minister, did not directly address the behaviour of the British lender, which was last month engulfed by a tsunami of allegations about the tax affairs of its clients and its own executives.

However, he acknowledged the "widespread public perception that some multinational businesses and some wealthy individuals play fast and loose with the tax rules, so as to squirrel away income into low tax jurisdictions and avoid making their rightful contribution to the public wellbeing".

Lord Green has not been called by either of the Commons select committees which have been taking evidence on the HSBC tax avoidance scandal, with Westminster sources suggesting that Conservative MPs are not keen for him to appear before the General Election.

The former HSBC veteran, who spent nearly three decades at the bank, said in his speech that it was not only banks which had been cast in an uncomfortable spotlight.

"We know that public disquiet with business and with the financial sector in particular has many roots: the destructive financial engineering of the greedy days before the bubble burst in 2007/8; the sense that in too many sectors the market works to the detriment of the weak - small business, for example, either as competitor or as supplier," he said.

Lord Green said he believed that "the loss of trust [was] much more systemic" and that it dated back to the "turbulence" of the 1960s, "when the post-war era found its voice".

"It is business as a whole - particularly big business - which has lost respect and trust," he said.

"Indeed, not only business but all sorts of other institutions: politicians, the police, not least the media themselves, to name but a few... Society is becoming more questioning, more suspicious, more atomised."

Outlining his perspective about how that mistrust could be overturned, Lord Green said he "believed that the responsibility of boards is for the long term sustainable growth of the company, and that achieving this requires not just a profitable business model but proactive employee engagement, and a responsiveness to both clients and community".

"Practical wisdom dictates that a strong culture of values is therefore essential to sustainable value maximisation," he said.

Lord Green said that company directors had to ensure that the purpose and responsibilities of their businesses were "clearly articulated and understood throughout the organisation - and indeed, not merely understood, but accepted and lived throughout the organisation".

And he added that it was down to boards and senior management to embody the principles of ethical conduct.

"If for them it is nothing more than rhetoric, this will become obvious to those who hear and watch them.

"Even if everyone knows the company's mission statement off by heart, that's not the same as living by it," he said.

The former HSBC chief concluded by stressing that he "believe[d] profoundly in the City - in the role of the markets in creating human welfare".

"But I hope it also clear that I recognise the dilemmas - because the real world of the markets is shot through with imperfections that we will never completely expunge - because we as individuals are similarly prone to failure - because the dilemmas and challenges are real, significant and hard, if not impossible, to avoid.

"And finally, I hope it is clear that I believe that we have no alternative but to take the moral risk of engagement in that ambiguous and imperfect world, because so much is at stake for development, both social and individual, around the world".