Turn the Lights On – the C-Suite Can No Longer Afford to Ignore Misconduct
Senior management cannot wilfully remain in the dark if they want to attract the best talent, protect their own reputation, and retain the loyalty of clients. We set the scene on the sort of corporate malaise that is starting to besmirch some of the most prestigious organisations.
There are a number of “conduct” types that exist in every corporation and are not acceptable in the modern working environment. The challenge that whistleblowers, regulators, employees (current and future), and the press are laying before the C-suite is how effectively the most senior executives now move to address these. Sadly, a culture of denial, a leaning towards words without action, and a continued acceptance of 20th century standards and business practice mean these subcultures persist unpunished. There is now no defence for this.
Apathetic senior managers are starting to pay a steeper price for their recalcitrance. The press is more active than ever in publicly shaming these instances. The emergence of new technology and systems is exposing these abusive behaviors transparently in the internal data set. Perhaps the most long-term impact revolves around the growing influence and concern among employees, regulators and even clients.
“Reputation, customer loyalty and a sustainable business are now at risk from tolerance of unacceptable conduct.”
Senior management needs to hold up a mirror to their organisation and ask themselves if some or all of the conduct types that are being revealed at their peers and other companies of a similar size, history and structure are also occurring on their watch. They then need to define the parameters of behavior and categorize them with an appropriate approach and process to root out, address and remediate them.
The last two years has presented a blizzard of conduct abuses that have either been tolerated, denied or actively suppressed by some of the world’s most successful and reputable global companies. These are only the ones that have become publicly known so far.
The abuses and policy breaches that have come to light display a varied spectrum of conduct, from inappropriate and unprofessional, to criminal and egregious. A number of instances of senior executives having consensual relationships with other (usually junior or subordinate) colleagues have resulted in very high-profile resignations in the last year. One example is Mark Wiseman who was global head of equities at BlackRock and the alleged successor to CEO Larry Fink. Far more controversial was an incident at UBS which is still going through due process.
UBS is being sued for gender discrimination and sexual harassment by a former graduate trainee who alleges she was raped by a senior colleague almost 20 years older than herself who had influence and control over her career; it is a case that attracted the attention of senior management at the UK Financial Conduct Authority. She is seeking damages for alleged victimisation suffered after reporting her grievances and alerting managers to what she described as an “offensive and humiliating” work environment. The ex-trader alleges the incident took place on 22 September 2017, after which a report was made to the Metropolitan Police which is still under investigation.
According to the legal document, in which the claimant set out the case, UBS allowed the man accused to work in close proximity to the former trader for at least two weeks after she reported the allegation; she claims she had to use fire escapes at work to avoid encountering him. She also alleges that UBS breached its own internal rules by delaying disciplinary action against the employee, as well as a “gross violation of privacy” throughout the bank’s investigation of her rape allegation. She claims that the bank monitored her social media accounts and coerced her graduate friends into disclosing her messages to them. In an interview with the FT, she is quoted as saying, “UBS wouldn’t have asked all his friends, ‘is [name removed] a rapist?’ But they were asking mine ‘does [the woman’s name] sleep around?’”
Lloyd’s of London, the most established wholesale insurance market in the world, has also had a torrid time in the press as it has faced up to the reality that there are widespread culture and conduct issues that have dogged the market for some time. Lloyd’s commissioned a culture survey last year from the Banking Standards Board that revealed gender bias, a reluctance for complainants to “speak up”, undue stress related to performance goals, excessive alcohol consumption, and a preponderance towards leaders turning a blind eye to inappropriate behaviour. John Neal, the chief executive of Lloyd’s, was shocked by the results and stated that they portrayed a toxic culture that has “for too long gone unspoken and with impunity.”
The Wells Fargo fake accounts scandal is a story that just will not die, and for good reason. Banking regulators have taken action against the most senior executives at the firm for their roles, either tacit or complicit, in the activity that went on and led to enormous personal gain in the highest ranks. Criminal investigations are now being considered by Department of Justice officials in California and North Carolina against the same individuals. The misconduct was based on the aggressive sales tactics and bullying of many lower level employees (who were subsequently fired), in an attempt to hit exorbitant account opening targets. Wells Fargo’s Internal Investigations team put together a report in 2017 analyzing the suspicions after observing unusual funding and changes in phone numbers. This report placed the majority of the blame on Carrie Tolstedt, ex head of community banking who subsequently had to give up $67m in stock grants. The report said that she disclosed little to the Board on the extent of the ethics issues in her team and “never voluntarily escalated sales practice issues, and, when called upon specifically to do so, she and the Community Bank provided reports that were generalized, incomplete and viewed by many [on the Board] as misleading.”
Investigative reports on the broken and uncontrolled sales culture at Wells Fargo make for distressing reading. Sales team members talk about their colleagues being in tears on a regular basis, facing grillings on activity and targets four times a day in sales calls, and frequent oneto-one coaching sessions in closed rooms that were tantamount to severe management bullying. One sales exec was so stressed at work he developed an addiction to hand sanitizer to get him through the day – drinking it! The sales targets set were totally unrealistic and depended on a culture of cross-selling which was far from being in the interest of the customer. Interestingly, an internal report by the same unit had highlighted the same issue taking hold 13 years earlier with sales numbers being manipulated to achieve personal gain. But the decentralized model at the bank, CEO Stump’s belief in Tolstedt, and her orders to “run it like you own it” all led to one of the biggest examples of toxic misconduct ever in financial services.
An incident at a conference in the US last year shows how the range of misconduct types has widened and the sensitivity required by all when on the professional stage. Ken Fisher, the billionaire founder of the highly successful fund manager, Fisher Investments, was called out after making remarks as a speaker at a conference, where he made references to genitalia and likened trying to win new clients to “trying to get into girls’ pants”. Fisher was shocked at how negatively members of the audience reacted and said in a subsequent interview with Bloomberg, “I have given a lot of talks, a lot of times, in a lot of places and said stuff like this and never gotten that type of response.” Mr Fisher typifies a group of individuals in finance who have not grasped how much the times have changed.
Perhaps top of the league come the claims of Lauren Bonner, the face of #MeToo for Wall Street, and her extensive lawsuit that paints a grim picture of systemic gender discrimination, sexism and harassment at Point 72, the legendary asset manager founded and run by Steve Cohen. The ex-chairman of the firm, Douglas Haynes, is accused by Bonner of running a boys club that excludes women, of denigrating women by writing “pussy” on his white-board and ensuring that women would never be paid equivalently to men even where they were more qualified and performing better. Haynes left the firm after Bonner’s lawsuit went public; he has claimed that he is now “unemployable” and will remain that way unless he can clear his name legally after the allegations. The same fate awaits many in the future that get exposed for multiple forms of misconduct.
There is no turning back, no justification for delay or inaction now. Companies can, and must, turn the lights on and limit exposing themselves to these foreseeable threats that are lurking but discoverable within their communications data. The scenarios described above are going on in a number of companies and are widespread within their internal data; are you 100 percent sure this does not happen in your own organization?