Case Study Culture

CASE STUDY on CORPORATE CULTURE/WHISTLEBLOWING
In the workshop on Corporate Culture we will examine the case below and ask
ourselves what went wrong and how that might affect the organisation we are
working for.
It addresses TWO important topics at the same time; The culture of an

organisation as well as the difficulties of handling “whistleblowers”
Detailed case study – Barclays Bank
In May 2018 the Financial Conduct Authority (FCA) and the Prudential Regulation
Authority (PRA) jointly fined Barclays CEO Jez Staley £642,430 for violating a
conduct rule requiring individuals to act with due skill, care and diligence. The
penalty related to his two attempts to identify whistleblowers who had raised
concerns to Barclays executives, in two separate letters, about the prior conduct
of a senior manager the bank had just recruited.
As part of that penalty, the FCA and PRA required Barclays to submit an annual
report to its UK regulators on any allegations against its senior managers as well
as any attempts to identify anonymous whistleblowers in any case whatsoever.
Under the terms of the enforcement action, designated “whistleblower

champions,” approved by UK regulators as senior managers, must personally
attest each year to the soundness of the bank’s whistleblowing systems and
controls.
In mid-December, the New York State Department of Financial Services (NYDFS)

announced its own regulatory action against Barclays, as well as against the New
York branch where Staley maintained an office. Although the state’s $15 million
penalty grabbed headlines, a careful reading of the department’s documentation
reveals a number of facts not included in the FCA Final Notice. From these can
be drawn new lessons on the sequence of events that led to the penalties.
Bending the rules
Barclays appeared, in the view of the NYDFS, to have a suitable set of policies
and procedures, a competent and well resourced department to handle and
investigate whistleblowing complaints and an annual training programme
advising staff of how to raise concerns and address related matters.
Nevertheless, “it appears that the positive cultural transformation, which Group
Compliance has been working hard to instil in more than 100,000 Barclays
employees worldwide, was not nearly complete,” the department concluded.
The NYDFS also directly criticised Staley for seeking to identify the
whistleblowers and discussing the matter with people outside of the institution.
Both actions were in direct contravention of Barclays’ policies, the regulator said.
What’s more, both the group chief compliance officer (GCCO) and the group
general counsel (GCO) advised Staley in a meeting on 29 June 2016 against
trying to discover who had mailed the letters. The following month, Staley
received the Monthly Whistleblower Champions’ Report, which indicated both
letters were being treated as whistleblowing complaints. A few days later, on 9
July, the head of Investigations and Whistleblowing reminded Staley that he
should not attempt to discover more about the individuals. But within three
days, without consulting either the GCCO or the GCO, Staley took steps to
uncover the identify the sources of the complaints.
By all accounts, Staley’s actions appear to have been a genuine attempt to

protect a friend against what he believed to be a malicious and unjustified
attack–one that could also hinder his ability to hire senior executives going
forward. But he undermined the bank’s policies and exposed it to additional risk
by discussing the letters with two ex-colleagues who had never worked for
Barclays, the New York regulator concluded.
Enough blame to go around
The NYDFS also noted that Staley was not exclusively at fault for the infractions,
as other senior executives and members of the board of directors also failed to
act properly.
Staley’s chief of staff, for example, had been present in the meeting between his
principal and the GCCO and GCO on 29 June 2016, when Staley was advised not
to investigate the whistleblowers. A week later, the head of Investigations and
Whistleblowing informed the chief of staff that the letters were being treated as
formal complaints. Given that context, the NYDFS found it surprising that the
chief of staff raised no objections when Staley disclosed a few days later that he
would try to find out the names of the whistleblowers. Nor did the chief of staff
seek confirmation from the GCCO or the GCO that Staley’s plan had indeed been
cleared.
Whilst the board of directors acted properly in commissioning an independent

investigation when Staley’s own actions were “whistleblown” to them in January
2017, it had failed to act in June 2016 when several members received the first
letter, according to the department. The regulator found no fault in the fact that
the board discussed the letter with Staley, since it included
allegations (subsequently rejected) that he had compromised Barclays’ hiring
process to assist a friend, but members failed to ensure that Staley had no
further involvement in the investigation. In a nod to recently implemented FCA
Rules on whistleblowing, the NYDFS also criticised the board for not proactively
supervising the case.
Dissonance at the top
The New York regulator also recognized the validity of what has become
something of a truism in the compliance world: that the so-called “tone at the
top” can have a very important effect on institutional culture. While Barclays
executives had taken appropriate steps to comply with new regulations on
whistleblowing programmes, “a senior, influential” member of Barclays staff
made it known within certain divisions of the bank that “if you are not prepared
to stand up, be counted and put your name on something, why should we listen
to you?”
This mixed messaging could have led Barclays staff to believe that the bank was
not serious about its whistleblowing programme, that whose who spoke out
would be ignored and that they should not expect to be protected. Accordingly,
the department criticized the bank board and its senior managers for not clearly
communicating policy goals to staff.
Selective policy enforcement
Although Barclays’ whistleblowing procedures seemed at first blush to be

adequate, the bank had left out two important scenarios: what to do if a
whistleblower’s allegations implicate senior management and how executives
should handle complaints they directly receive. The NYDFS noted that the
“controls in place at the time failed to address this circumstance.”
At the time, Barclays’ policies required staff to undergo annual training on

whistleblowing that included an overview of how individuals could speak out
anonymously and what protections they should expect when doing so. But the
bank’s most senior managers and its board directors were exempted from this
requirement–an exception that the NYDFS found “concerning” given the
likelihood that related decisions would be made by individuals in the highest
echelons of the institution.
At the very least, it could be suggested that this exemption sent the wrong
message to staff: bank management isn’t interested in problems reported by
whistleblowers.
Lessons to be learned
There are many lessons to be learned from the Barclays saga:
 Policies and procedures, in all but very rare circumstances, should apply
to all staff, from the lowest-paid staff member up to the chief executive
and the chair of the board of directors.
 Equally, senior managers and board directors must ensure that policies
and procedures are adhered to by seeking proper assurances rather than
simply assuming compliance.
 A consistent “tone at the top” is critical in demonstrating to staff that

compliance with the bank’s policies and procedures is important. Any
inconsistent messages or actions may lead to staff confusion and lack of
“buy in.”
 Suitable corporate governance procedures are critical in ensuring that

those at the top of an organisation properly direct staff in proper
implementation.
 Training in whistleblowing issues in particular, and compliance matters in

general, should be compulsory for all staff, even the chief executive. Staff
may ponder what impression an exemption from training for the chief
executive and other senior management gives, and whether it is a key
element of an adequate “tone at the top”
 Barclays previously had given the NYDFS assurances on two occasions

about its whistleblowing systems. It is important that, when assurances
are given to regulators, subsequent actions are consistent with their
words.
In conclusion, staff should carefully review their documentation and consider

whether similar events could occur at their firm. If so, they might learn from
Barclays’ mistakes.

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CASE STUDY on CORPORATE CULTURE/WHISTLEBLOWING

It addresses TWO important topics at the same time; The culture of an

Detailed case study – Barclays Bank

Under the terms of the enforcement action, designated “whistleblower

In mid-December, the New York State Department of Financial Services (NYDFS)

Bending the rules

By all accounts, Staley’s actions appear to have been a genuine attempt to

Enough blame to go around

Whilst the board of directors acted properly in commissioning an independent

Dissonance at the top

Selective policy enforcement

Although Barclays’ whistleblowing procedures seemed at first blush to be

At the time, Barclays’ policies required staff to undergo annual training on

There are many lessons to be learned from the Barclays saga:

 A consistent “tone at the top” is critical in demonstrating to staff that

 Suitable corporate governance procedures are critical in ensuring that

 Training in whistleblowing issues in particular, and compliance matters in

 Barclays previously had given the NYDFS assurances on two occasions

In conclusion, staff should carefully review their documentation and consider

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