Lex Greensill: When bad governance leads to harsh penalties

Lex Greensill might not be a familiar name, but it should be to anyone looking for a case study in bad corporate governance. 

The Australian-born businessman founded and ran the financial services firm Greensill Capital for ten years from 2011 to 2021. During that time, he amassed considerable wealth and established strong links with prominent British politicians, most notably former PM David Cameron. 

But it all unravelled for Greensill. His company filed for insolvency in 2021 amid a major scandal that hit international headlines. From there, his time at the helm and rationale behind key decisions were put under the microscope. It has now led to him signing a disqualification undertaking with the UK’s Insolvency Service in June 2026, meaning he has agreed not to run another company in Britain for the next nine years. 

The agreement came just days before a full trial of Greensill was due to begin.

“Director disqualifications exist to protect the public from those who have demonstrated they are unfit to run companies. A nine-year ban is a significant period – above the average for director disqualifications – and reflects the serious nature of Lex Greensill’s conduct.”

These are the words of the Insolvency Service’s chief executive, Duncan Beach, and serve to frame how relevant this case is in modern corporate governance. 

Nowadays, regulators are keen to establish their dominance in governance regulation. That means that, if directors or other corporate leaders make poor decisions, those regulators will frequently pursue harsh penalties. Publicly too. Years of repeated governance scandals like the UK Post Office or Carillion, have motivated regulators to make an example of those who cross the line. By the nature of these things, new examples will inevitably continue to outdo those that came before. 

Greensill is not the first to land this kind of penalty, nor will he be the last.

Before any discussion, we should note that as part of the investigations into his firm’s collapse, Greensill was not found to have acted dishonestly. His team have repeatedly been eager to emphasise this, probably because it separates Greensill from the more sinister areas of governance wrongdoing – it’s one thing to make mistakes, it’s another to make them intentionally. 

Nevertheless, regulators have maintained that mistakes were made. Here are the main ones, based on the Insolvency Service’s findings: 

• He breached fundamental duties: Corporate leaders are commonly asked to exercise “reasonable care, skill, and diligence” as part of their work. It’s a mantra many in governance have heard a thousand times before, but it’s frighteningly common for those principles to be forgotten. According to the Insolvency Service, Greensill breached his duties here. His company’s original business was based on supply chain finance. This is the practice of a big company with access to cash (Greensill) paying the supplier of a good or service, while the actual buyer takes a routine 60-90 days to pay the invoice. Under normal circumstances, there’s nothing wrong with this practice, but hindsight has revealed that Greensill made multiple poor decisions, including engaging in speculation on future “possible” sales that never materialised, and giving cash to single, specific clients with bad credit. Eventually, Greensill’s insurer refused to continue coverage because of these practices and, unable to find another, Greensill’s liquidity entered crisis mode.

• Bypassing legal consents: The most glaring mistake revolved around Greensill Capital’s lending to Katerra, a US construction company. Without the required consent, Greensill directed his companies to enter into these transactions, despite the fact that they essentially removed insurance-backed protections from the loan notes.
• Catastrophic risk mismanagement: Removing crucial safeguards without proper authorisation is a dramatic red flag when it comes to risk. It shows a reckless disregard for key stakeholders. The funds used to purchase the above loans were controlled by Credit Suisse, and the decision to act without consent ultimately cost the Swiss bank a staggering $440 million loss when the protective mechanisms failed.

Lex Greensill rose from being a sugar farmer to a financial giant over the course of his business career. However, he ended up steering his own brainchild into a £1.6 billion loss.  

Stories like this have happened before, and they will happen again; the key takeaway is the regulators’ appetite for penalties. Banned from running a company in his global base of operations for almost a decade, Greensill now has a very public mark of shame on his business credentials, all for not following basic rules of governance. 

It may just be in the UK, but his reputation will be difficult to shed further afield, especially when his past decisions angered the likes of financial giants like Credit Suisse.  

Ultimately, governance It is a strict legal duty, and today’s regulators are more than willing to strip leaders of their power and livelihoods when they fail to uphold it.