The distinctive smell of schadenfreude was evident rising above the towers of Canary Wharf as the story broke about Jes Staley’s brush with the FCA. At first sight, at least, here we have the chief executive of another major bank failing to uphold the values he espouses so strongly in all his public speeches.
Another sign surely of hypocrisy and corporate hubris, of the canker eating at the soul of our financial system? I for one am not convinced. For me, this signals a change in the ethical weather. Let’s imagine what might have happened in the bad old days.
A whistleblower writes to the board to object to an appointment made by the chief executive. The chief executive utters the words “who will rid me of this turbulent priest?” (or the twenty-first century equivalent) and the hunt begins.
Later, probably many years later, a remorseful chief executive is forced to admit ordering a witch-hunt and his bank, which acted upon his orders without undue agonising over matters like right and wrong, is forced to admit liability. The whistleblower claims retaliation and a “cover-up”, forcing an uncapped settlement at an employment tribunal despite the best efforts of battalions of corporate lawyers.
The bank’s share price is affected, its reputation further eroded in the public’s mind; the FCA, forced into action, levies a punitive fine. The chief executive, whatever his other qualities, is forced out by a board anxious to ditch a now toxic asset. Result: damage, woe and carnage.
Now let’s compare it to what happened at Barclays. The Barclays whistleblowing procedures were sufficiently robust to ensure that, when the chief executive unwisely ordered his head of security to discover the whistleblower’s name, this breach in procedure was immediately highlighted back to the chief executive, who rescinded the order.
Although Staley subsequently, and wrongly, sought to discover his or her name again, the whistleblower was never compromised and has not been retaliated against. There was no “special handling” or “cover-up”. Instead, the board “self-reported” the incident to the FCA – upholding and strengthening their own corporate values. Apparently, Staley will suffer a blow to the pocket administered by the board but will keep his job, thus allowing Barclays to retain the services of a successful and effective chief executive and avoiding the uncertainty of an unplanned leadership change and the attendant share price damage.
The real question in all this is how many of our other financial institutions would have come through this sort of moral test so well? Here, I think the answer is less Panglossian.
The narcissistic and megalomaniacal senior executive remains an enduring City stereotype for a reason. Shareholders and customers, who ultimately pay the fines levied on the banks, have become cynical about the extent to which wrongdoing by senior executives will ever be acted upon.
In the Barclays case, the whistleblowing system worked, protecting the bank from further harm and mitigating the impact of an indisputably poor decision from the very top. Other financial institutions, however, are less well served. A culture of executive invulnerability all too often still applies and internal whistleblowing processes are seen by some as little more than fig-leaves. Unless and until other banks make the moral and financial commitment to change this, public trust in their boards will remain low.
Schadenfreude can be fun, but it’s no substitute for real cultural change.