Some weeks a theme arises early and you just have to ride with it throughout the week. One Monday, Matt Kelly (the coolest guy in compliance) and I did our weekly Compliance into the Weeds podcast recording, which we now live stream. Our topic was the new Securities and Exchange Commission (SEC) mandate that public companies report on their human capital issues. Matt had blogged about the requirement and some of his initial findings in 10K reports in his post Corporate Culture and Human Capital Disclosures, where he focused on nuggets on culture he could mine from the 10Ks he reviewed.
His blog post and my discussion got me to thinking about some more micro issues in human capital; specifically, around the issue of trust in the work from home environment (WFH). I looked at some of the top ‘people issues’ around culture and trust. I then looked at employee to employee trust issues in the WFH environment. Today, I want to look at the erosion of trust from employees upward to senior management. Obviously this could focus on the income disparity when employees are laid off so that a Chief Executive Officer (CEO) can then claim his cost savings entitles him to a bonus, such as GE President Larry Culp who scored a bonus of some $47 million on the backs of thousands of laid off GE employees. What does that tell you about the value of employees at GE?
It could impact company-wide earnings, as was the case with the grocery chain Kroger Co., which had ‘eye-popping earnings of 139%’ according to the Detroit Free Press. The paper reported, “Kroger saw its net earnings for the first two quarters jump to more than $2.031 billion compared with $1.069 billion in the same period of 2019. Third-quarter profits, which were reported Thursday, were not included in the Brookings Institute report. When those are included, the company’s net earnings of $2.662 billion are up just short of 100% for the first three quarters compared with 2019.” Yet when a California city mandated Kroger increase pay by $4.00 per hour during the pandemic, Kroger simply closed its stores in Long Beach. What does that say about how management feels about its employees?
It is not simply the income disparity that many companies leaders are oblivious to; it is the work levels and stress in month 11 of the Coronavirus that is destroying employee trust. The latest example comes from the now suspended KPMG UK chairman Bill Michael, who made comments reported by the Financial Times(FT) on Monday that he told staff to “stop moaning” and to stop “playing the victim card” and their workloads during the Coronavirus pandemic. Michael then continued his tone-deaf rant by claiming “unconscious bias was “complete crap””. He also related to his staff that “he was meeting clients for coffee in spite of lockdown rules”. The UK has one of the strictest lockdowns in Europe and “One of the [meeting] participants said: “He literally said, ‘I know I’m breaking the law’ to meet up with people during the pandemic.””
This is but only the most recent example of company’s leadership blaming its employees for the hardships brought on by the Coronavirus pandemic. Indeed the 2020 Edelman Trust Barometer (released before the Pandemic lockdown) noted, “Business must take the lead on solving the trust paradox because it has the greatest freedom to act. Its immediate mandates are clear. An overwhelming number of respondents believe that it is the duty of business to pay decent wages (83 percent) and provide retraining for workers whose jobs are threatened by automation (79 percent). Yet less than a third of people trust that business will do these.”
What does corporate leadership say to employees? A large number are exemplified by KPMG UK chairman Michael, with a basic stop whining and get off your duff and work harder so I will make more money. Certainly, these CEO types are under pressure to deliver results because as all know, Wall Street never sleeps. Yet, in many cases, they are doing so on the backs of their employees. The FT stated, “Mr Michael’s comments were particularly badly received after a staff poll at the beginning of the meeting, which showed a high percentage of consultants were struggling to cope during the pandemic.”
The reason, as noted by Kevin Collins in a FastCompany article How the pandemic reset worker concept of work-life balance, is that today’s digital workers are “clocking in more work hours without seeing the ROI to their productivity.” It comes where there is professional noise leading to burnout. The biggest problem is that senior management is so removed from the reality of their workers everyday lives, they cannot empathize with them. The FT reported that participants in the town hall meeting where KPMG UK chairman Bill Michael told employees to ‘stop complaining’ related “they were disappointed by Michael’s suggestion that staff needed to stop complaining and work harder. This message was particularly badly received after a staff poll at the beginning of the meeting showed a high percentage of consultants said they were struggling to cope during the pandemic.”
Comments by KPMG employees included, ““Over 50 per cent of us on this call have just said we are either ‘hanging in there’ [or] ‘drained’. I’m left incredibly unimpressed by the comments from our leadership.” Another said: “Many junior employees . . .[have been] unable to see loved ones for ages and living in cramped quarters. Where is the empathy from leadership?” People are struggling with serious mental health issues and having our leadership tell us to shut up and pull ourselves up by our bootstraps is heartbreaking.”
What does all this mean for the compliance professional? Unfortunately, it means quite a bit and most of it not good. A successful compliance program derives in large part of employee trust around institutional fairness and institutional justice. If your CEO is saying ‘stop complaining’ this will go a long way towards destroying any sense of fairness at your organization. This will directly impact the quality of institutional justice because employees will know their voices will not be heard even if they speak up. Worse with that type of attitude by senior management towards its employees, senior management who do receive any type of speak up, whistleblower report or even someone raising their hand will most probably be labeled as a “complainer” or even better a “whiner”. Think about that for the effectiveness of your compliance program.
It always bears repeating that “strategy eats culture for breakfast [and lunch and dinner] every time.” If you have a culture as broken as KPMG UK, you have a series problem. If you have a CEO such as KPMG UK chairman Bill Michael, it might be time to start looking for another job. For, although he apologized for his remarks, you can bet your bottom dollar (or perhaps £) that his attitude towards those who work for KPMG (or not) will not change.
Perhaps Michael should have simply been blunter; ‘The beatings will continue until morale improves’.
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© Thomas R. Fox, 2021