Article originally published in the Philadelphia Business Journal on March 12, 2018
The reputation of the Human Resource department at some organizations has been damaged of late due to their reaction/inaction to employee-reported incidents of wrongdoing. This undermines the trust that employees should have in HR, the company’s CEO and its board of directors.
One role of HR is to protect employees from wrongdoing by their boss or other employees. Another role is to help defend the organization from employee lawsuits. Is HR a friend or foe of employees? It depends on the situation.
The tone at the top and corporate culture that governs an organization’s behavior are both set by the CEO and driven by HR and all the leaders within the company. It is up to the board of directors to hold the CEO accountable for tone, culture, values and ethics. If the board fails in these responsibilities, the reputation of the organization is threatened.
Organizations recently in the news that turned a blind eye to sexual harassment are Fox News and the Weinstein Company, to name two. Where were the HR departments and the boards at these companies? Did they not think protection of their employees and others from the company’s CEO was important?
Under former CEO Travis Kalanick, Uber’s reputation was damaged when engineer Susan Fowler went public in a blog she wrote on Feb. 19, 2017 accusing the company of tolerating a culture of sexual harassment. Fowler described the lack of support by HR that she and many other women experienced when they reported sexual harassment by their bosses. Many women decided to leave the company rather than work in a toxic environment.
No organization can afford to develop a reputation where female employees are not respected. Due to this and other accusations of wrongdoing, it was two major investors, and not the Uber board, who told Kalanick he needed to step down from the position of CEO. Why didn’t the Uber board remove Kalanick?
Wells Fargo’s reputation was seriously damaged due to the scandal that rocked the bank during the fourth quarter of 2016 when it became public that, since 2011, employees within the retail banking business created as many as 3.5 million fraudulent accounts to meet management-imposed sales quotas of the bank’s incentive compensation program.
Establishing fraudulent accounts is bad enough. In a Sept. 21, 2016 CNN Money article, Matt Egan writes that the news organization spoke with a number of Wells Fargo employees who were fired, allegedly for reporting unethical practices to HR and the bank’s ethics hotline.
Quoting Eagan’s article, “One former Wells Fargo human resources official even said the bank had a method in place to retaliate against tipsters. He said that Wells Fargo would find ways to fire employees ‘in retaliation for shining light’ on sales issues. It could be as simple as monitoring the employee to find a fault, like showing up a few minutes late on several occasions.”
These fraudulent practices occurred under the watch of former Wells Fargo CEO John Stumpf, who was forced to step down in October 2016. He was replaced as CEO by Tim Sloan, who was previously COO of the bank.
In a March 18, 2017 interview, Sloan was asked by CNN anchor Poppy Harlow: “Almost half a dozen Wells Fargo workers told CNN Money that they were fired after they called the bank’s confidential ethics hotline. … What was your personal reaction when you heard some of this?”
Sloan responded, “One instance of retaliation from my perspective is one too many. It’s completely unacceptable … I think about employees that had a concern, that were uncomfortable going to their manager or didn’t bring it up to our Human Resources group and instead called the ethics line. In doing that, if they were retaliated doing that, that’s completely unacceptable to me.”
Perhaps these employees didn’t report their concerns to HR because they didn’t trust it, and as it turns out, for good reason.
It is a common board governance practice for hotline reports to go to the audit committee of the board. Whenever the committee receives a hotline report of wrongdoing, management or an outside law firm is charged with investigating it. It goes without saying that the hotline reporter would not face retaliation.
Did the Wells Fargo audit committee receive the ethics hotline reports? What subsequent actions did it take? Did HR know these employees were being terminated, or did they play a role in the terminations? Why did the board tolerate such a toxic corporate culture at Wells Fargo?
Human Resources can serve an important role by being a listener, counselor and problem solver when issues with a boss arise. By serving as a sounding board for employee complaints, they often defuse concerns and prevent them from becoming major issues.
The HR department adds significant value when its staff is trusted by the organization’s employees. How is the HR department viewed in your organization?
Stan Silverman is founder and CEO of Silverman Leadership. He is a speaker, advisor and nationally syndicated writer on leadership, entrepreneurship and corporate governance. Silverman earned a Bachelor of Science degree in chemical engineering and an MBA degree from Drexel University. He is also an alumnus of the Advanced Management Program at the Harvard Business School. He can be reached at Stan@SilvermanLeadership.com.