I have commented many times that the culture of an organisation is lead from the top and that its values and behaviours are only as good as their level of tolerance for non-compliance. It was therefore of interest to me that a well-known major organisation such as QBE Insurance (Australia) has seen it necessary to fine its CEO $550,000 for a major breach of their ethic code.
In mid-2014 QBE issued its code of business ethics and conduct one of which required employees to disclose to their manager “any close personal relationship that may cause a conflict of interest” In introducing the code the CEO said “our ONE QBE values are not just words on a page – they are the very essence of our culture and how we work and are intrinsically linked to our long-term vision”.
After recently admitting a relationship with his executive assistant, that he had not reported, the CEO placed the board in the difficult position of deciding what to do. The result was the fine, and while large was no doubt acceptable on such a large remuneration package. In other words he received a smack on the hand.
The question is not the relationship, or the level of fine, but the acceptance that values broken at the top of an organisation can be simply resolved by a fine. What is the message that the rest of the QBE staff can take from this? Breaking the ethics rule will cost me a fine, hopefully in line with my pay, but I will keep my job, or there are different rules here depending on your position.
The Board missed an important opportunity to re enforce the required Culture of the organisation and has in fact said that inappropriate behavior can be tolerated if the person is senior or important enough to them.
Another recent example was Uber’s CEO. In Uber’s case, assuming the cultural reason for avoiding acting against bulling/ harassment claims was due to the fear of losing a top performer, then we can assume that behavior is not part of how that organisation evaluates overall performance. The message given culturally is misaligned and confusing. It is as if the organisation is saying, “If you can make rain, go ahead and bully. If you are the only one with the secret code, sexual harassment will be ignored. Go ahead and act inappropriately.”
When developing a Culture where Values and Behaviours are a key component it is incumbent on the leadership of the organisation (including the Board) to ensure that tolerance of poor behavior is low, that failures at any level will be investigated fairly and quickly and that repercussions are uniform across the organisation.
Boards have long tolerated a whole range of behaviors, simply by not paying attention to behavior at all. Up until very recently, boards of directors considered behavior as a topic for management, rather than directors. Even now, too many boards are motivated by pressure from regulators, rather than by a deep-seated belief that behavior is as much a part of performance as financial measures. But boards today can actively show their lack of tolerance for certain behaviors. They can request data on key behavioral metrics, or on factors such as how strongly behavior is considered in performance review, or how often behavior is a cause for promotion, reward or dismissal.
Did the QBE Board make the right call?