What Bank’s are Doing to Improve Their Culture: Nothing
Today’s Wall Street Journal features two articles on corporate culture and large banks. Since regulators have been emphasizing the cultural deficiencies endemic within the banking industry, the industry has attempted to respond. According to the Journal’s reporting, the response is pathetic. Here’s a quick run down:
J.P. Morgan Chase held an exhibit and week-long speaker series in mid-December on the bank’s principles at its Park Avenue headquarters, including a
control officer and heads of diversity, administrative and corporate strategy.
Citigroup’s board last year created a new committee on “ethics and culture,” telling shareholders that it’s aware “of the pervasive public perception that many members of this industry do not behave ethically.”
Bank of America Corp. has been drilling employees to “identify, escalate and debate” – a reminder to report questionable behavior, and determine whether changes are needed.
BB&T Corp. has also integrated culture even more. CEO Kelly King said in a recent interview he discusses the bank’s culture on quarterly videos and plans to “spend some extra time” on it this year.
In the last two years, Wells Fargo has added questions to its annual employee survey to understand whether employees refer the bank’s products to friends and family, trying to decipher their confidence in the firm, said Pat Callahan, the bank’s chief administrative officer.
The bank also measures employee satisfaction through what CEO John Stumpf calls a “happy to grumpy ratio.” The idea, executives say, is that happy employees, defined as ones who say they are satisfied, are more likely to act ethically. Wells Fargo says the ratio clocked in at 8:1 in 2014, versus 7:1 in 2013 and 3.8:1 in 2010.
In fact, BB&T’s CEO best captured the industry’s overall attitude when he called culture “the new rabbit” Washington is chasing. The banks are responding as they have to every other initiative to reign in their behavior. They hold a few meetings, set up a committee, or conduct a survey. While Wells Fargo’s “happy to grumpy ratio” may be slightly amusing, I find Citigroup and Bank of America’s response to be disturbing. Citi set up a committee of its board to deal with the public’s perception of impropriety. In other words, it’s not the bank’s improprieties that are the issue, but the public’s attitude. At Bank of America, the answer is to get more employees to turn one another in because of questionable behavior.
Creating an appropriate corporate culture and standard of ethics begins with the CEO. Rather than establishing new procedures and programs, bank CEOs ought to take the expensive art work off their walls and replace them with mirrors. Then when they look up from their desks, they’ll be constantly reminded about who has to set the example. Since these executives never took responsibility for the financial crisis, they won’t be addressing Wall Street’s corrupt culture any time soon.