Worldwide: Lessons To Be Learned - May 2017

Last Updated: 23 May 2017
Article by Dina Medland, Peter Swabey and Leo Martin

A double fault

Dina Medland writes about business, with a focus on corporate governance

In using his position as CEO of Barclays to try and uncover the identity of a whistleblower, American banker Jes Staley has landed himself a 'severe reprimand', a cut in his bonus, a boardroom that stands by him – and an investigation by the UK's financial regulators.

This case is going to be seen as a real test of the commitment of the Financial Conduct Authority and the Prudential Regulation Authority to their declared emphasis on ethical behaviour and individual accountability at the very top of a UK plc. An important part of new thinking in regulation has been around the critical importance of whistleblowing.

It is very hard to believe that anyone could get appointed to the position of CEO of a major bank and be completely unaware of that essential piece of regulation. Mr Staley was hired in part to restore integrity.

As Andrew Tyrie, Chair of the House of Commons Treasury Select Committee said: 'The Senior Managers and Certification Regime is supposed to ensure that whistleblowers are protected. This is the first proper test of those rules, and it is for the regulators to test whether Barclays had the right processes in place. The Treasury committee will take a close interest in the regulators' conclusions.'

Whether or not Mr Staley's actions are a 'sackable offence', it is clear the circumstances make it even more critical for there to be a proportionate response – and there is no indication of that happening at time of writing.

The UK's emphasis on corporate governance reform and the re-establishment of that elusive thing 'trust' in the nine years since the financial crisis is still evolving, slowly. As a financial institution – and one whose place in the Libor scandal may still not be entirely clear – Barclays sits centre stage in the public eye.

To respond to such a transgression of ethical standards at CEO level by merely cutting the money to which he is seen as being entitled is surely a double fault – one that cocks a snook at regulation, at corporate governance reform, at shareholders, and at the public at large.

Encouraging signs

Peter Swabey is Policy and Research Director at ICSA: The Governance Institute

Dealing with whistleblowers is a challenge that is vitally important companies get right. Jes Staley has clearly got it wrong. I can accept that he might ask 'who is it?' and be told that it is inappropriate to ask. Had he accepted that response the matter could, and should, have blown over. Unfortunately, he sought to reopen the issue. This raises questions over the sanctions against Mr Staley and the strength of Barclays' culture of encouraging whistleblowing.

In my view, Barclays and its Chairman John McFarlane have got it about right so far, but there remains work to do.

Mr Staley reportedly described the issue as 'an unfair personal attack sent via anonymous letters ... related to personal issues from many years ago', about an employee he had known for a number of years.

There can be a fine line between whistleblowing about an individual and a personal smear, and whistleblowing policies should not afford protection to the malicious. Clearly in this case, Barclays have taken the view that even though Mr Staley believed that this was not a whistleblowing situation, he was wrong to think so and wrong to get involved.

The Barclays board has shown it regards this as a serious misjudgement. They have reported him to the FCA, which may take further action. He received a public reprimand from Mr McFarlane and, although the board has expressed its unanimous confidence in his leadership, it has also made it clear that this transgression is going to hit him in the pocket.

What does this say about the culture at Barclays? I find myself encouraged by the fact that, when originally asked, there was someone at Barclays with sufficient confidence in the culture to say 'no' to the CEO. It is a pity that person did not get the subsequent request. I also find the bank's willingness to go public about it encouraging – it might be tempting for some organisations to hush the matter up. Here, the Barclays board are clearly and publicly performing their fundamental role of holding management to account.

For the future, it means the spotlight will be on Mr Staley and Barclays and both have to be seen to be clean. Neither party can afford a recurrence. Mr Staley should have learned his lesson and Barclays may wish to review its procedures to ensure that, if he has not, it does not matter.

A work in progress

Leo Martin is Managing Director of GoodCorporation

This will be a real test for the FCA and the PRA, whose rules on whistleblowing clearly state that a whistleblower's confidentiality must be protected and that firms need to create a culture that encourages employees to raise concerns about poor behaviour.

It is hard to see how any organisation can be seen as creating an open culture – with employees feeling confident to speak out – when its CEO instructs his internal security team to identify the author of a whistleblowing letter. With all that has been said about reforming behaviour in the banking sector, it seems clear that this is still a work in progress.

Whistleblowing is an essential component of good corporate governance, which needs to be embraced at the top.

An effective board will ensure the right culture is in place, paying particular heed to employee confidence in raising concerns and to monitoring the ways in which they are dealt with. Avoiding any form of repercussion or detriment is essential.

Employees are the eyes and ears of an organisation and are likely to spot misconduct as soon as it starts. A good business recognises it is in its best interest to hear of any issue long before it become a whistleblowing case – and such businesses create open environments where it is normal to challenge and raise concerns.

Whistleblowing is a real challenge for businesses. In the organisations where GoodCorporation has assessed whistleblowing arrangements, we found that 37% (24 out of the 65 companies assessed) had either wholly inadequate or partially inadequate whistleblowing systems.

The key reasons for judging the systems as inadequate related to two key factors: poor communications about the system and lack of confidence people felt in using the system. This high rate of inadequate procedures shows clearly that this should be a focus for regulators and businesses alike.

Stop press

At the time of going to print, Mr Staley had just apologised to shareholders at the AGM and, in spite of some questions, was re-elected by more than 97% of the vote.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
In association with
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration
Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:
  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.
  • Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.
    If you do not want us to provide your name and email address you may opt out by clicking here
    If you do not wish to receive any future announcements of products and services offered by Mondaq you may opt out by clicking here

    Terms & Conditions and Privacy Statement

    Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

    Use of www.mondaq.com

    You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.

    Disclaimer

    Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

    The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.

    Registration

    Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

    • To allow you to personalize the Mondaq websites you are visiting.
    • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
    • To produce demographic feedback for our information providers who provide information free for your use.

    Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

    Information Collection and Use

    We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

    We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

    Mondaq News Alerts

    In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.

    Cookies

    A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

    Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

    Log Files

    We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.

    Links

    This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

    Surveys & Contests

    From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.

    Mail-A-Friend

    If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.

    Emails

    From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

    *** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .

    Security

    This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

    Correcting/Updating Personal Information

    If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

    Notification of Changes

    If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

    How to contact Mondaq

    You can contact us with comments or queries at enquiries@mondaq.com.

    If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.

    By clicking Register you state you have read and agree to our Terms and Conditions