Salgado elected “the worst CEO of 2014”

Salgado elected “the worst CEO of 2014”

Former Banco Espírito Santo (BES) boss Ricardo Salgado has been named the “Worst CEO of 2014” in an “exhaustive study” highlighted by the BBC.
Study author, professor of strategy and leadership Sydney Finkelstein explained to the corporation’s Capital radio station why the disgraced banker has made it to the top of the list of business disgrace.
He was “the kingpin of an interlocking and complex set of entities that controlled the second-biggest bank in Portugal — and brought it to bankruptcy,” Finkelstein told the BBC’s Mike Johnson.
It is exactly why Salgado is on €3 million bail – but while a parliamentary inquiry currently interrogates those thought to hold answers to the scandal, judicial proceedings remain noticeable in their absence. Nonetheless, Finkelstein has reached his own conclusions.
“Putting 250 family members into management and leadership jobs might make for grand family reunions, but it can hardly be justified on the basis of sound managerial practice and judgment. Salgado, and some other family members, lived like kings in large estates, unhindered by even the most rudimentary oversight of the bank,” he explained to the BBC’s Mike Johnson.
“Salgado made extensive use of off-balance sheet financing to keep ESI (Espírito Santo International) companies afloat; the stake in BES was valued on the books of Salgado’s holding company at $2.7bn, when its market value at the time was $565m; and Salgado signed a letter to the Venezuela state oil company on BES letterhead guaranteeing the safety of their $365m bond investment in ESI, an act contrary to a central bank directive to not mix bank and family business”.
Finkelstein’s research stressed that despite Salgado blaming an accountant for the whole mess (an accountant he told the parliamentary inquiry last week had “disappeared”), the CEO of Semapa – a company to which ESI was trying to sell bonds – told Parliament that “nothing was ever done without Salgado knowing”.
As Portuguese newspapers report updates from the inquiry each day, it is now understood that the missing accountant has been in touch with MPs and is very keen to give his side of the story as soon as possible.
Finkelstein explains that there are “multiple ongoing investigations pinning the blame squarely on Salgado. The question of fraud has been raised” even though Salgado himself denies this, blaming the Bank of Portugal for “forcing” BES into bankruptcy.
“It may be there was no intent to defraud, and that Salgado when faced with bad investments in a tough economy was trying to keep it all afloat,” he continued. “However the fact that ESI expanded so aggressively … must be seen for what it is: bad management”.
“In the end… this remains a cautionary tale of the incredible power of hubris to destroy empires, and the reputation of those that created them”.
To listen to the full interview access: www.bbc.com/capital/story/20141216-the-worst-ceos-of-2014