Bank of America's Corporate Culture Crisis: Part 1 – A Case Study in Failure | Thomas Fox – Compliance Evangelist

Compliance professionals are constantly trying to understand how systemic problems within the corporate hierarchy can have serious consequences. The recent revelations about the ongoing problems with corporate culture at Bank of America (BoA) are a stark reminder of the critical role compliance plays in protecting employees and the company.

This week I will examine BoA's failures in terms of corporate culture from a variety of perspectives formulated by the Everything Compliance group including Karen Woody, Jonathan Armstrong, Matt Kelly, Karen Moore and Jonathan Marks. This investigation includes the failure of internal controls, failures of the board and senior management, culture failures among highly motivated, self-selecting employees and the cultural miasma that is BoA from a perspective from across the pond. The full Everything Compliance episode will be published on Thursday, 29 August.

In Part 1, we set the stage and then delve into the factors contributing to BoA’s toxic culture, the impact on compliance officers, and the lessons we can learn to prevent similar problems in your organizations.

Bank of America is under intense scrutiny following a series of harrowing articles published in the Wall Street Journal (WSJ) denouncing a toxic work culture in its investment banking division. This culture of overwork had tragic consequences, including the death of junior banker Leo Lukenas, who had worked over 100 hours a week until his untimely death. Worryingly, this is not an isolated case. A similar incident occurred in 2013 when an intern, Moritz Erhardt, working in Bank of America's London office, also died after working excessive hours. Despite promises of reforms, these practices have continued, suggesting deep-rooted problems in the company's culture.

One of the main problems is the discrepancy between the intentions of senior management and the actions of middle management. While BoA's top managers have expressed concern for the welfare of their junior bankers and issued policies limiting overtime, middle managers have often circumvented these rules. Instead of enforcing the 80-hour week cap, they have instructed employees to report fewer hours, thereby ignoring internal controls and perpetuating an atmosphere of exploitation.

This phenomenon is not just a BoA problem; it is a stark example of how middle managers can sabotage well-intentioned company policies. It underscores the importance of effective communication and alignment between all levels of management.

A glaring problem in this case is the failure of internal controls. In today's technologically advanced age, middle management should have been more responsive to BoA's manual control system for recording working hours. Automated systems for recording working hours could have prevented such blatant disregard for policies. In addition, adequate internal audits and personnel oversight were lacking. This highlights the need for robust, automated internal controls and regular audits for compliance professionals to ensure compliance with company policies.

Another critical aspect discussed is the culture of retaliation against employees who try to report overwork or seek help. In some cases, employees have been punished for following the rules, for example by being forced to work on holidays or receiving criticism from their managers. This toxic environment discourages whistleblowers and perpetuates the vicious cycle of abuse.

To address this issue, compliance officers must create a culture where employees feel safe to voice their opinions without fear of reprisal. Senior management must impose real consequences for middle managers who violate policies and ensure consistent disciplinary action to reinforce the importance of compliance.

The long-term consequences of such a dysfunctional culture are severe. Junior employees who are trained in an environment where rules are routinely ignored may carry that attitude into their future roles, potentially spreading unethical practices throughout the industry. It is important for compliance professionals to address the issues directly and cultivate an ethical culture that will produce trustworthy leaders in the future.

The Bank of America situation is a sobering case study in the importance of comprehensive compliance programs and the need for alignment at all levels of management. By understanding and addressing the root causes of such culture failures, we can better protect our organizations and create an environment that prioritizes ethical behavior and employee well-being. As compliance professionals, we must ensure that the lessons learned from the Bank of America crisis are not ignored and that we remain vigilant in building and maintaining robust compliance frameworks.

Let's hope that in a decade we don't see this problem again at BoA or anywhere else. Instead, all compliance professionals should strive for systemic improvements that prevent such tragedies and promote a healthier, more ethical corporate culture.

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