Don’t rely on the FCA to stamp out toxic workplace culture
City bosses shouldn’t wait for the FCA to stamp out toxic workplace behaviour, writes Lucy McNulty in today’s Notebook
The Financial Conduct Authority is due to outline its plans to push City bosses to clamp down on toxic workplace behaviour this month. Compliance chiefs aren’t holding their breath.
After all, this long-anticipated guidance on non-financial misconduct has been delayed twice before as the watchdog grapples with a near-impossible challenge: how best to codify a nebulous issue in pursuit of its commitment to bolster City culture while also responding to political pressure to simplify rulemaking.
The FCA boss Nikhil Rathi has already downplayed the scope of the regulator’s plans. “What can be categorised as non-financial misconduct is quite broad,” he told the Following the Rules podcast in January. “I don’t think we could realistically give completely precise rules for everything.”
The regulator will certainly be keen to avoid a repeat of the backlash it received in response to its efforts to bolster diversity and inclusion in financial services, alongside the Prudential Regulation Authority. Then, complaints of regulatory overreach so jarred with government calls for a reduction in businesses’ compliance burden, the regulators ultimately scrapped their D&I push altogether.
To be sure, the political pressure to wind back regulation generally is increasingly hard to ignore. The FCA may yet row back from its ambitions to track companies’ non-financial misconduct more closely or at the very least rein in its goals amidst this regulatory retreat.
But it would be a mistake for companies to do the same. Regardless of how far the FCA goes to police non-financial misconduct, the case for taking toxic workplace behaviour seriously should not be driven solely by regulation because it’s also a commercial issue.
Allowing toxic behaviour to fester at work undermines employee morale, weakens decision making and increases reputational risk.
The most forward-thinking companies already know this. They’re strengthening their reporting mechanisms, rethinking surveillance programmes, making workplace culture part of the board agenda and ensuring HR, compliance and legal teams work together.
These steps shouldn’t be seen as regulatory box-ticking. They’re simply good business.
Compliance execs need a seat at the table
Company boards have a problem, governance expert Vera Cherepanova has said. Too many are sidelining their ethics and compliance executives from boardroom discussions. The result? Substandard oversight of business practices and poor decision making.
“Compliance is in the boardroom only when they need to put out the fire,” Cherepanova recently told Following the Rules. “We’re not invited at the moment decisions are taken, and this is where the whole thing starts to go wrong.”
Cherepanova heads Boards of the Future, a non-profit that campaigns to give ethics and compliance professionals a more influential voice in the boardroom.
Sher argues it is these back-office professionals who could help to foresee problems with a company’s strategy, if only they were invited to discussions around such objectives before they were set in stone.
Too often, board members overlook the importance of non-financial expertise and think compliance and ethics professionals lack the strategic nous for the top table.
And yet, according to Cherepanova, there’s “a whole pool of senior ethics and compliance officers who… have matured into perfect board material”. But they’re rarely given a seat at the table.
Rathi’s chance to modernise the FCA
When Nikhil Rathi was reappointed to lead the FCA for another five-year term it marked a milestone moment for the watchdog that few remarked upon. For the first time in its 12-year history, the FCA is under repeat leadership. In fact, no CEO before Rathi served more than four years. So Rathi’s reappointment is a rare moment of stability at the much-harangued regulator. His tenure to date has been defined more by crisis management than attempts to modernise the FCA. Now’s his chance to change that.
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This new podcast from Dr Chris and Dr Xand van Tulleken, the twin doctors behind the popular children’s show Operation Ouch! and various other health documentaries, aims to cut through the noise on common health concerns from sleep and diet to everyday aches and pains. I stumbled across an episode on sleep when feeling particularly deprived of it and braced for the usual unachievable advice on getting an uninterrupted eight hours. But instead came away with new ideas on sleep management and a resolve to worry less about getting enough of it. Episodes on the importance of willpower are similarly thoughtful and practical. So, if you like health advice that is relatable and surprisingly funny, this is worth your time.
Lucy McNulty is editor of Following the Rules podcast