Oversight of Culture Transformation Efforts

Today the Board rejected on a 3-2 vote a proposal offered by Vice Chairman Hill, and which I supported, to enhance the Board’s oversight of the FDIC’s work to fix the significant problems in its workplace culture.

Before getting to the merits, it is worth some emphasis that the Chairman decided over the Vice Chairman’s and my objections that the Board would consider this matter in a meeting that was closed to the public. There was no legal requirement that the meeting be closed to the public. Instead, this meeting was closed simply to deny the public the benefit of understanding why a Board majority continues to protect the status quo.

This is a status quo that certainly should not be protected. According to a recent poll by the union representing FDIC employees, 68 percent of FDIC employees have no confidence in the Chairman or the executive team’s ability to correct the FDIC environment. Part of that is because Cleary Gottlieb’s recently completed independent review of the FDIC’s workplace found allegations of interpersonal misconduct by the Chairman, some of which were corroborated by contemporaneous Teams messages. Part of that is because that Cleary Gottlieb’s review also identified allegations of misconduct by senior executives who currently have prominent roles in the work to address the FDIC’s workplace culture problems. And part of that is because the FDIC’s employees have seen few, if any, held accountable for the wrongdoing identified through that independent review.

By announcing his intent to resign once a successor is confirmed, the Chairman himself has acknowledged he is not the right person to lead culture transformation. Yet, more than four months later, the Chairman still continues to oversee the day-to-day operations of the FDIC, including its efforts to fix its workplace culture.

The Board should not acquiesce in this state of affairs. A different approach to governance during this transition period is especially necessary to the extent it might be quite some time before we have new management at the FDIC. To that end, Vice Chairman Hill’s proposal would have shifted management of the FDIC’s efforts to fix its workplace culture problems from the Chairman to a committee of non-management members of the Board or their deputies.

Tasking a committee with responsibility for culture transformation would have enhanced the credibility and moral authority of the effort. Tasking a committee with responsibility for culture transformation also would have freed us of the legacies of the past, and the associated conflicts of interest, that impede our ability to ensure actual accountability for past misconduct¹ and that cause FDIC employees to doubt our commitment to culture change. Tasking a committee with responsibility for culture transformation also would have situated the Board to take on a more appropriate, albeit temporary, role during this transition period. It is deeply unfortunate that the Board majority continues to oppose commonsense steps to achieve actual accountability and drive meaningful change.

Instead the Board continues to fall back on half measures that give the appearance, but not the reality, of action. Over Vice Chairman Hill’s and my objections, the Board asked the newly selected transformation monitor to offer its views on the Board’s role in overseeing the work to fix the FDIC’s workplace culture problems. The tried and true “review and study.” 

During our Board debate, I pressed the Board majority to add to its directive a target date by which the transformation monitor should provide its views. The Board majority declined to do so. I expect that it’ll be quite some time before the Board receives those views—although I do hope I’m wrong about that.

One last point: the Chairman has suggested that the absence of a recommendation in Cleary Gottlieb’s report that the Chairman should resign is somehow an endorsement of his continued leadership. This misunderstands the scope of Cleary Gottlieb’s mandate. As was made clear with the release of Cleary Gottlieb’s report:

It is beyond the pale to somehow construe Cleary Gottlieb’s report as supporting the current state of affairs on the Board.