In the last week, we have witnessed two interesting examples of ‘the bad apple syndrome’, when very different organisations have tried to deflect criticisms of wrong doing, which have resulted in head-spinning sums of fines or alleged corruption.
Firstly, once again, we have seen multi-billion dollar fines being imposed on banks for foreign exchange manipulation, taking the total sums paid out over the scandal, to a sum of more than $10bn.
Additionally, this week, a number of FIFA executives have been accused of taking bribes, worth well over $150m, in what has been described as ‘a culture of rampant, systemic and deep-rooted corruption’.
In both scenarios, the response from the respective organisations has been framed around the ‘few bad apples in the organisation’ rather than any real discourse relating to the organisational culture that breeds such behaviour.
Martin Wheatley, the head of the Financial Conduct Authority (FCA), the UK’s financial watchdog, has suggested that the fines are changing the culture of the City of London for the better, albeit slowly – but is that really true?
Undoubtedly, the outcome of numerous investigations and recent financial reviews, have started to drive changes at Board level and create the right ‘tone from the top’ in a number of financial institutions. There is, however, little evidence to suggest that this is permeating the overall culture of those organisations.
To the contrary, the narrative based on a ‘few bad apples’, seems to be continuing to gain momentum. Whilst there is no doubt that the actions of a coterie (rather than the collective), need redress – both at individual and institutional level – these actions, in themselves, are not going to change the culture of organisations, anymore than solely investing huge sums into compliance activity.
Certainly, the $9bn fines previously levied on banks for rigging the Libor rate, not only failed to deter similar behaviour amongst foreign exchange traders, in some of the same institutions, but was taking place at a precise time when banks were assuring the public, investors and others, that remedial action had been taken following the initial fines and such actions were a thing of the past.
We have a similar situation with FIFA, who have had allegations of corruption swelling around it for decades, resulting in fines and bans, whilst once again, we are hearing of ‘intensifying corruption allegations’.
Remarkably, the response from Sebb Blatter, the FIFA president, was to distance himself from the storm that has engulfed the organisation, also suggesting wrong-doing of a few rather than a fundamental issue with the culture of the organisation.
Justifiably, the public at large expect investigating organisations, whether the FCA or indeed federal authorities to chastise individuals and organisations, through naming and shaming, levying fines or, where appropriate, seeking justice through the courts. However, none of those issues, in themselves, are likely to change behaviours within the organisations or have an impact on changing their global cultures.
The challenge within such organisations is to create a delicate balance of systems that address issues of compliance and governance, whilst paying particular heed to actions and behaviours that expound and sustain rich and ethical organisational cultures.
Hiroo Chothia – Senior Partner at the8group