Case study:
'Got away lightly': Barclays CEO fined $1.1m aftertrying to expose whistleblower
Barclays' chief executive officer Jes Staley was fined 642,430pounds ($1.1 million) by British regulators for his attempts touncover a whistleblower.
"Mr. Staley breached the standard of care required and expectedof a chief executive in a way that risked undermining confidence inBarclays' whistle-blowing procedures," Mark Steward, executivedirector of enforcement and market oversight at the FinancialConduct Authority, said in an emailed statement Friday.
"Whistleblowers play a vital role in exposing poor practice andmisconduct in the financial services sector."
The fine is the third-biggest ever imposed by the FCA on anindividual. Last month, the regulator indicated it would stop shortof the more serious accusation of acting with a lack of integrity,which would have cost Staley his job. Compliance professionals weresplit on whether Staley, who retains the support of his board, gotaway with the equivalent of a slap on the wrist.
"In terms of the level of the fine, he did indeed get awaylightly," said Tom Kirchmaier, professor of governance atCopenhagen Business School.
"He would have known that this is very much not what is expectedfrom a CEO, and so the fine is not much more than a very lightwarning."
The fine is equivalent to about 15 percent of his reported 2016compensation, according to data compiled by Bloomberg. Barclays, ina separate statement, said it cut Staley's 2016 bonus by 500,000pounds. "I have consistently acknowledged that my personalinvolvement in this matter was inappropriate," Staley said.
The FCA and Prudential Regulation Authority also said Barclays'swhistle-blowing systems and controls will be subject to "enhancedmonitoring and scrutiny," the first time such measures have beenimposed on a financial firm.
The scandal has been the first test of the FCA's Senior Managersand Certification Regime, which requires officials to be directlyaccountable for misconduct on their watch. Regulators have placedwhistle-blowing, and the protection of those raising the alarm, atthe heart of efforts to avoid misconduct and scandals since thefinancial crisis.
"A CEO should set an example for the firm's employees. Clearly,Mr. Staley has failed in this regard," said Nicky Morgan, a UKlawmaker and chair of Parliament's Treasury Committee, whichfrequently grills financial industry leaders after scandals. "Inour next evidence session with the FCA, we'll ask why it believesthat the fines are appropriate."
The whistle-blowing controversy dates back to June 2016, whenBarclays's board received an anonymous letter raising concernsabout the recruitment of one of Staley's former colleagues atJPMorgan Chase, Tim Main. The contact flagged issues of a personalnature regarding Main and Staley's role in dealing with thoseconcerns at JPMorgan.
After learning about the matter, Staley twice attempted toidentify the whistle-blower, despite being informed that it wasinappropriate for him to do so. Barclays's own investigation hadfound Staley "honestly, but mistakenly, believed" his actions werepermitted.
Staley agreed to settle at an early stage of the investigation,qualifying for a 30 percent reduction to the combined FCA and PRAfine, the regulators said.
Using the news article provided below as a base, and referringto other appropriate literature, discuss
and critically evaluate the following:
1. Determine the facts of the case. Who is awhistleblower?
2. Identify and discuss why the Barclays CEO was trying to exposewhistleblower.
3. Describe an accounting theory that may help to explain the CEO’sconduct leading to the whistleblowing. Critically link that theorywith CEO’sbehaviour.
4. Using a second accounting theory, explain how your chosen theorymay apply to whistleblowing. How is this theory related towhistleblowerbehavior
5. Using a third accounting theory, explain theregulator’s quest to make the CEO accountable.
6. Compare, contrast and critically evaluate thethree theories you have chosen.
