The rise and decline of a Belgian banking giant – Communication and business ethics in the Fortis case

Like many other countries Belgium was hit by a major banking crisis in 2008-2009. In this article we shall discuss the case of one Belgian bank, namely Fortis. For many years Fortis was considered to be the crown jewel in the Belgian financial landscape. At the global level Fortis Bank was the only Belgian company which as recently as 2007 was ranked in the top 20 of the Fortune 500 list, being preceded by only two other banking competitors. By the end of September 2008, however, Fortis was facing near bankruptcy and could only be saved thanks to crucial government intervention. Although most bank problems were directly linked to the US sub-prime crisis the Fortis case is more complex. We shall here concentrate on Fortis’ poor communication during the crisis and its effects on the bank’s image and reputation. In the first part of this article we shall retrace the Fortis success story up to June 2008 and also sketch the context of some of the managerial decisions taken in this period, which were - with the benefit of hindsight - most unfortunate. These include, firstly, a massive investment in CDOs (Collateralized Debt Obligations); secondly, Fortis’ overly ambitious takeover of the large Dutch bank ABN AMRO; and thirdly, a communications policy focusing on problem denial at the start of the collapse in June 2008. The second part will examine the impact of these decisions and how they forced Fortis into a downward spiral as from June 2008. An interesting question is whether in this particular case the bank’s denial policy can be imputed to a lack of ethics or whether it was the result of a lack of well-managed financial communication vis-à-vis the various types of stakeholders. We follow de Bruin’s (1999) definition of financial communication as denoting “any activity involving financial information and the promotion of the financial corporate image” and Balmer and Dinnie’s (1999) categorization of target audiences to whom financial communication should be addressed. The Fortis case may become a textbook example of communication gone wrong because of the failure, on the one hand, to distinguish between financial information and financial communication, and on the other, to diversify communication strategies and formats aimed at different stakeholders. As shown by research conducted by Watson Wyatt (1999), the failure of the majority of mergers and acquisitions could have been prevented if more attention had been paid to what is defined in the literature as soft or peripheral issues. The communication of information to the various stakeholders is one such issue. The findings of our analysis of three decisive communication events in the Fortis case illustrate that companies which fail to recognize this and to act accordingly do so at their peril.