CEO Gaffe of the Week: Nomura Holdings

This year, I introduced a weekly series called "CEO Gaffe of the Week." Having come across more than a handful of questionable executive decisions last year when compiling my list of the worst CEOs of 2011, I thought it could be a learning experience for all of us if I pointed out apparent gaffes as they occur. Trusting your investments begins with trusting the leadership at the top -- and with leaders like these on your side, sometimes you don't need enemies!

This week, after taking a much-needed vacation, I'm getting back in the swing of bad acts by highlighting the now former CEO of Nomura Holdings (NYSE: NMR  ) , Kenichi Watanabe.

The dunce cap
When I signed up to write for The Motley Fool, I signed a contract that requires I not use my articles or any inside information for my own financial gain. In fact, you can get a firsthand look at the trading guidelines I follow by checking out the Fool's disclosure policy. The practice of not using insider information or pumping stocks to gain an unfair monetary advantage is part of many financial investment workers' contracts. It's just good business ethics.

However, some employees at Nomura Holdings, Japan's largest financial services firm, must have missed that class on business ethics.

Earlier this week, Mr. Watanabe and Nomura's chief operating officer resigned amid an insider trading scandal that has tarnished the reputation of his investment firm and is only widening in scope. Securities regulators are currently investigating Nomura for allegedly leaking information to clients regarding potential share offerings from Mizuho Financial Group (NYSE: MFG  ) , Inpex, and Tokyo Electric Power.

What's really ironic here is that Nomura has grandiose plans to expand internationally and one of those moves involved purchasing the Asian and European assets of the now-defunct Lehman Brothers in 2008. Now, with the dismantling of Nomura's management team, those plans may be put on hold indefinitely, which may frustrate shareholders even further. If we're learning anything here, it's that bad luck follows anything with the "Lehman" name.  

To the corner... everybody!
Seriously, no joke! Every last investment firm, large U.S. money center bank, and nearly all major European banks go to the corner, sit down, face the wall, and don't come out until you've thought about what you've done!

Since the year began we've dealt with the Goldman Sachs "Muppet debacle," JPMorgan Chase's (NYSE: JPM  ) $5.7 billion or so in trading losses from a poor trading bet in London, Bank of America's (NYSE: BAC  ) and Citigroup's huge CEO compensation hikes despite lackluster bottom-line results, a LIBOR-fixing imbroglio that puts Barclays (NYSE: BCS  ) and a handful of other European players at the center of a scandal to fix interbank lending rates for their own financial benefit, and now an insider trading scandal at Nomura.

It almost feels like we're putting a bunch of monkeys in charge of our nuclear launch controls without any training in how to operate them.

For Nomura, it's going to take plenty of time before investors forget about this latest debacle and the company will need to implement stringent controls to ensure this doesn't happen again. All I know is the financial services and banking sectors are becoming regular visitors to this weekly series and something needs to be done to fix that.

Do you have a CEO whom you'd like to nominate for this dubious honor? Shoot me an email and a one- or two-sentence description of why your choice deserves next week's nomination, and you just may wind up seeing your nominee in the spotlight.

Today I'm just touching the tip of the iceberg on the comings and goings of the banking sector. If you want truly in-depth analysis, you need to check out our latest premium research report on Bank of America. For the cost of a few cups of coffee you'll get our expert analysis on Bank of America from every angle for one year, with regular updates. To get your copy, click here!

Fool contributor Sean Williams owns shares of Bank of America, but has no material interest in any other companies mentioned in this article. He is merciless when it comes to poking fun at dubious CEO antics. You can follow him on CAPS under the screen name TMFUltraLong, track every pick he makes under the screen name TrackUltraLong, and check him out on Twitter, where he goes by the handle @TMFUltraLong.

The Motley Fool owns shares of Citigroup, JPMorgan Chase, and Bank of America. Motley Fool newsletter services have recommended buying shares of Goldman Sachs. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy that never wears a dunce cap.


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  • Report this Comment On August 10, 2012, at 2:32 PM, addikt06 wrote:

    Yup, I would add that banks are the most openly manipulated stocks in the market... just like LIBOR there is a lack of transparency in their stock prices. With all this negativity, you know things like entire top management being fired, bank stocks still don't budge. I highly doubt it's due to investor confidence in the banks.

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