Reputation lessons of NatWest’s Farage fiasco and what to do next

By Damian Reece

The correct decision for NatWest and its Coutts subsidiary regarding Nigel Farage should have been not to exit him as a customer. I don’t say this with the benefit of hindsight, after the chief executives of both organisations were forced to quit. Rather it’s the answer screaming at you from the evidence put in front of the Coutts Reputational Risk Committee last November (all 40 pages of it) and NatWest’s own statements about its values on its website.

So how did they get it so wrong and what are the lessons to learn?

Lesson 1. Actions speak louder than words - if you’re going to adopt values you must live up to them.

In private, NatWest said it decided to “exit” Nigel Farage because his publicly stated views were at odds with its position as an “inclusive organisation”.?But in public it felt unable to say this. Why? Why not stand up and say what it believed, rather than invent a cock and bull story about Farage not meeting the banks financial criteria? Doesn’t NatWest believe in its values? Why won’t it stand up in public and defend them?

The basic truth is that what NatWest says, is not what NatWest does. Its values and actions are not aligned. If it had not exited Farage it could still claim today to be an inclusive organisation that acts with integrity – and Dame Alison Rose and Peter Flavel would still be in jobs and the entire NatWest board would not be under siege from justifiably apoplectic shareholders worried the whole ￡21 billion edifice is being run by incompetents.

Incompetence does play a large part in this farrago. The fact NatWest took such a disastrous decision was largely because the people involved don’t understand what reputation risk is, or how to assess it. This is clearly evidenced in the 40-page report that reveals the decision-making process. Secondly NatWest people don’t understand NatWest values. For the Reputation Risk Committee of Coutts (and of the NatWest Group which also knew what was going on) equality, inclusivity and non-discrimination mean their exact opposites when it comes to clients.

It must have come as something of a shock to these committee-dwellers to realise that inclusivity doesn’t mean excluding customers for no good reason. But a shock it clearly was, albeit too late. They had exited Farage and, in the cold light of day, came to the awful realisation they didn’t have a leg to stand on because their actions were the opposite of their values. If they’d wanted guidance they could have consulted their own website which says: “We celebrate and respect everyone’s strengths and differences” (my emphasis underlined). In the scramble to cover up their egregious mistake came the dissembling over Farage’s financial status, a botched attempt at briefing a journalist and the reputation of Coutts, NatWest, Alison Rose and Peter Flavel in tatters – not to mention the NatWest Board.

Lesson 2. Reputation risk is more complicated than you think.

Throughout its deliberations on Farage, the Coutts Reputational Risk Committee were focused on the reputational risks of having Farage as a customer. This stemmed from the fact that his status as a Coutts customer was in the public domain. Their first mistake was to assume that a fact being in the public domain, and the same fact being widely known to the public, are the same thing. They are not. I would stake my Coutts mortgage (if I had one) on hardly anyone being aware that Farage was a Coutts customer (until now, that is) and of those who did, I’m willing to bet virtually none of them cared a fig. Why would they? Am I going to think less of Waitrose if Farage shops there? Or stop going to Lord’s because he’s a fellow spectator there too? In almost any potential controversy that Farage might become embroiled in, his status as a Coutts customer would be utterly irrelevant. The only scenario where it might drag Coutts into the mire would be if Farage ever become involved in a financial crime involving his bank accounts with Coutts. Even if you accept this as a possibility, it is grounds only to monitor the risk and be ready to act in a timely way in accordance with your regulatory responsibilities as a bank – and Coutts would get reputational brownie points for so doing.

Moreover, the Coutts Reputation Risk Committee were guilty of blinkered, groupthink focussing only on the reputational risk of having Farage as a Coutts customer. There was no meaningful discussion of the reputational risk of not having Farage as a Coutts customer. This was the key reputational risk which was missed because it did not get properly debated or examined. Farage’s subject access request shows there was at least one voice that highlighted there were no legal grounds for exiting Farage and that he was likely to go public if he was exited. But the obvious reputational risks to Coutts and NatWest of Farage going public were deemed insufficiently serious (because they were insufficiently examined) and the wrong decision was made.

Whoever chaired the meeting failed to ensure a balanced and full debate about all the reputational risks, clearly failing to understand that reputational risk is often multifaceted with many pros and cons. The evidence on which Farage was exited was woefully one-sided with a reliance on negative press commentary about Farage from the Guardian and the Independent. August publications as both are, there was no consideration that Farage has many supporters in other sections of the media, or at least people willing to defend him.

One of the more alarming quotes from the Coutts document is: “…the media consequences are unknown should he chose to go public…” This shows a staggering lack of insight into the UK media. I could have told Coutts exactly what the media consequences would be of an irate Nigel Farage going public – I’ve seen it from inside a newsroom many times - he’d be gunning for you, and you have no defence.

The fact is there was very little reputational risk of having Nigel Farage as a customer, but huge reputational risk of exiting him. Having Nigel Farage as a customer clearly made some people on the Reputation Risk Committee feel uncomfortable, even angry, but they let personal feelings distort a rational assessment of the balance of risks and a terrible decision was made.

Lesson 3. How not to brief a journalist

A key reason why Alison Rose had to quit was her briefing of Simon Jack at the BBC. First never let your CEO anywhere near a journalist when a crisis is still raging – even if the CEO insists. The journalist is bound to ask the “wrong” question and your CEO is at risk. Many is the time as a journalist I had meetings with CEOs cancelled at late notice – often a red flag that something was up – but in this case it would have been obvious why NatWest felt it inappropriate for them to meet, and it was. Rose’s claim that she inadvertently left Jack with the impression Farage had been exited for economic reasons doesn’t stand up to scrutiny. Jack went back and double checked that he’d got the facts straight before broadcasting the story far and wide.

I am certain no British journalist will ever disclose a source, but Rose met Jack in a very public place, a charity dinner. They were seen talking together the night before his story aired. By refusing to deny she was the source for days on end afterwards, Rose effectively outed herself as the source of the misinformation. Her eventual admission and resignation were inevitable. If you’re going to brief journalists do it discretely, deploy a trusted but dispensable PR Johnnie and try it face to face over a coffee. Failing that a phone call which could, if challenged, have been about anything. There’s lots of ways, just don’t send in your CEO.

Lesson 4. Beware the subject access request

Any seasoned reputation adviser will tell you that subject access requests are the bane of corporate life. In a more transparent world where any electronic conversation is potentially disclosable you must be careful what you say, and the language used. Of course, companies must be able to interrogate situations and risks in the most robust way but everything you now say, that’s committed to the record, can be used against you. Appearing to endorse the opinion that your client is a “disingenuous grifter” was unwise, as Coutts has now discovered. I don’t believe that Coutts or NatWest ever considered the possibility that if they exited Farage, and he went public, he would deploy a subject access request. If the possibility had been raised in the Reputation Risk Committee the chair might have paused to think twice about the direction they were headed. Subject access requests exist for a reason, they allow individuals to hold organisations to account. They must be taken seriously.

Lesson 5. Stick to your knitting

The sort of inclusivity that NatWest should be extolling first and foremost is financial inclusivity. Congratulating itself on promoting financial literacy to all, for instance, would be a far safer bet as a bank than acting as a moral guardian to a vast customer base representing the full spectrum of a liberal democracy’s values. Like all banks, NatWest has a long way to go in making sure British people understand money and finance. Sort this out and it will go a very long way to ensuring the sort of inclusive and more equitable world it desires. ESG policies and corporate values more broadly have to align to a company’s business model and strategy, otherwise they become problematic very quickly.

Lesson 6. It always gets worse before it gets better

Farage now has NatWest and Coutts exactly where he wants them. Lawyers are being briefed, regulators are preparing to investigate, and 12-24 months of pain lie ahead. One positive is that the business is performing well, except the bank has just lost its CEO since 2019 and, of course, in this economic environment banks making big profits is a reputation headache all of its own. I predict more Farage-related disclosures to come, with more resignations required. Why wouldn’t compensation be on the cards? NatWest has a long way to go before it gets ahead of this story if it ever does. It’s doubly hard to effectively deal with a situation like this with a team of people who are clearly reeling from the last few weeks and I’m sure feeling bruised, angry and probably humiliated.

Moving forward

1.??????The bank needs to form a separate specialist Farage unit with new people to focus on achieving the best possible outcome from all of this.

2.??????The day-to-day comms team must focus on business as usual (after all people will continue banking with NatWest come what may). The bank cannot allow this farrago to distract from performance.

3.??????The new Farage unit needs senior reputation, comms, legal, political and investor relations input to map out the next period, the full implications of the affair for its business, and the likely legal, regulatory and media risks and how these are best mitigated.

4.??????It must lead the evolution of a new corporate narrative which must obviously stem from the findings of NatWest’s own internal investigations.

5.??????There’s no point pretending NatWest can make a positive out of this affair, but it can use it to change its organisation for the better. That should be the ultimate objective, and one that will allow it to start rebuilding its battered reputation.