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Next Up to Reform Culture: Deutsche Bank

Matt Kelly | October 21, 2015

Observers of the financial news might have seen the item earlier this week that Deutsche Bank is reshuffling its senior managers. Observers of the compliance news might want to take note of it too.

This white-collar culling is the first big personnel move under DB’s new co-CEO, John Cryan. It’s also long overdue. Germany’s top financial regulator, BaFin, had been giving Deutsche Bank the side eye for years, as the firm seemed to find itself in one scandal after another while facing complaints that it had become too big to prosper. So when Cryan arrived three months ago, everyone knew the inevitable would come. It came on Sunday.

In the immediate, Cryan’s cleaning is admirable because he really has set a new tone at the top for Deutsche Bank. All executives shown the door were associates of his predecessor as co-CEO, Anshu Jain. Most also had a habit of turning up in conversations the bank had with BaFin, never a good thing for upward career mobility. (The Financial Times has a more in-depth look at who was fired for what misconduct; suffice to say a who’s who of misconduct at DB does indeed deserve its own full article.)

The bank also announced a substantial restructuring away from the blended structure Jain had encouraged with his other co-CEO, Jürgen Fitschen. Fitschen will step down next May, finally giving Cryan the sole authority he sorely needs.

Various voices who follow banking say Cryan’s new lieutenants were selected because they worry as much about risk management and compliance as they do about profits. So now that Cryan has passed the first test for a new CEO—brooming out hold-over executives mired in old controversies—he and his new team must pass the second, harder test of demonstrating their sincerity to rank-and-file employees. Let’s wish him well and see how he does, because if he fails to win the support of employees for good compliance, eventually he will be in the same predicament as Jain and Fitschen, and meet the same fate.

But that’s not what really interests me today. What really caught my eye was a line mentioned in passing in another press report, about what Cryan wants to achieve with all these changes—to repair a “corporate culture that lets problems fester.”

And that got me thinking: why do some corporate cultures let problems fester, anyway?

I suspect all companies, even small ones, let specific problems fester—a somewhat annoying employee who abuses work-from-home privileges, for example, and leaves others grumbling and wondering why Jones gets away with it. We’ve all seen one-off problems that managers ignore, either because they are too busy or the employee is too useful or lord knows what reason. At every of any size, many problems arise and some problems linger.

Still, that’s not the same thing that dogged Deutsche Bank. It had a culture of letting problems take root and lingering. What’s that about?

What it’s about, I fear, is that large organizations—large publicly traded companies particularly, and large publicly traded financial firms above all—have become so beholden to financial expectations that all other cultural flaws are smoothed over in that quest for profits. Some of those cultural flaws might be illegal, such as fixing interest rates or ignoring money laundering or bribing governments for business. That happens. The pursuit of profits and excessive compensation leads the leaders of many companies to ignore problems that might cost them money.

Now that Cryan has passed the first test for a new CEO—brooming out hold-over executives mired in old controversies—he and his new team must pass the second, harder test of demonstrating their sincerity to rank-and-file employees.

But I want to be clear that the problems of flawed culture transcend illegality. Because as I sat there pondering Deutsche Bank, asking myself, “What leads a corporate culture to let problems fester?” my mind flashed to a very different example—another deeply flawed culture that lets problems fester, where nobody has broken the law.

My mind flashed to Amazon.com.

Don’t forget that one of the biggest business stories of 2015 will be the portrayal of Amazon in the New York Times, which painted Amazon as a miserable place to work. The company burns through employees, blue-collar and white-collar alike, in its quest to deliver that latest whatever-you-need to your doorstep, just a bit faster than last time. The New York Times article generated more reader comments than any other NYT story in history. I wrote about the implications of Amazon behavior on culture, and got a flood of comments too. The essence of Amazon’s brutal pace touches a nerve in Working America. With a cattle prod.

So there is a parallel here. Deutsche Bank’s culture ended up violating the law because financial firms are more heavily regulated and their behavior can cause more damage—but both Deutsche Bank and Amazon alike have a culture that lets pernicious behaviors take root and become incredibly difficult to eradicate. Why? How?

The size and complexity of modern organizations has much to do with the problem, I’m sure. Perhaps others can solve the puzzle more effectively than me. For now, however, I wish Cryan at Deutsche Bank the best as he tries to rally a team that can convince DB’s 99,000 employees that, yes, this time the culture will take proper behavior, and prudent business practices, seriously.

Because as his predecessors at Deutsche Bank and his contemporaries at Amazon and so many other companies show, that’s really hard to do.

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Matt Kelly has been editor of Compliance Week for 10 years. He will step down from that role at the end of this year. You can find him on LinkedIn at www.LinkedIn.com/in/mkelly1971 or on GoogleTalk at MattCompliance@gmail.com