Opinion

Could Barclays CEO Jes Staley's fine actually discourage whistleblowers?

5 min read

27 June 2018

There has been significant debate around the Financial Conduct Authority (FCA) and Prudential Regulation Authority's (PRA) decision to fine Barclays chief executive Jes Staley £642,430, for his attempts to trace the identity of a whistleblower.

In addition to the FCA/PRA fine, Staley has had £500,000 of his bonus clawed back by Barclays. The bank has avoided any sanction, however, the regulators have stated that it will need to tighten whistleblowing systems and annually report back to the watchdogs.

Why Staley got fined

Staley tried to track down a whistleblower after a letter was sent to the board in 2016 raising concerns about Tim Main being recruited as head of Barclays’ financial institutions group in New York. Main previously worked with Staley at JP Morgan.

Some may argue that Staley’s punishment is wholly inadequate, given his seniority and the seriousness of his actions. As stated by Mark Steward, the FCA’s executive director, Staley “breached the standard of care required and expected of a chief executive in a way that risked undermining confidence in Barclays’ whistleblowing procedures”.

Irrespective of his behaviour, Staley maintained the backing of Barclays’ shareholders and therefore no further action has been taken in respect of his position at the bank, to the disappointment of many.

Ramifications of the decision

The FCA and PRA took the view that Staley failed to act with due skill, care and diligence, stating that he should have identified that:

1. He had a conflict of interest in relation to the whistleblower’s letter and needed to maintain an appropriate distance from the investigation;
2. There was a risk that he would not be able to exercise impartial judgment with regard to how Barclays should respond; and
3. It was important that the compliance team kept control of the investigation process once the complaint had been made.

Arguably, a company as large and well established as Barclays would be expected to set a precedent in respect of attitude towards whistleblowing and it is therefore particularly shocking that Barclays’ own chief executive acted in this way, presumably completely to the contrary of the bank’s policies and procedures.

Impact on whistleblowing culture

Nowadays, whilst most medium to large companies actively encourage individuals to raise concerns as soon as possible, the fear of repercussions often acts as a deterrent for individuals considering blowing the whistle.

The repercussions can be wide-ranging, be it the impact on the individual’s career, ostracism by their peers or sometimes even the impact on their health and personal life.

It is critical that companies embed a pro-whistleblowing culture, particularly amongst those holding senior positions, who are expected to set an example to those junior to them.

Whilst the action taken against Staley is a step in the right direction, by publicising and making an example of his wrongdoing, this was the first case the regulators had brought under the Senior Managers Regime, which came into effect in March 2016.

As such, it may be considered that the decision did not set the bar high enough in respect of penalising individuals for committing such acts of misconduct. It therefore failed to provide a sufficient level of protection for whistleblowers.

There is every possibility that this decision might deter whistleblowers from coming forward in future, for example, if they take the view that, in future, senior executives acting in this way will be able to just pay a fine (the sum of which is a mere fraction of what they earn in total), without any further action being taken.

Employers ought to take the impact of this decision into account when implementing, reviewing and enforcing whistleblowing policies, ensuring that staff undergo regular training on the importance of raising, and encouraging colleagues to raise, any genuine concerns in a timely manner, without the fear of retaliation.

Through individuals raising such concerns, this will in fact also benefit companies in the long term, as these disclosures may assist with highlighting and ironing out any issues that the company may not otherwise be aware of.

It is important for employers to strengthen accountability, particularly in view of the Barclays case, providing further incentive for whistleblowers to make relevant disclosures.

Chris Cook is partner and head of employment and data protection at SA Law