UNETHICAL BEHAVIOR BY A STAR EMPLOYEE
Background
It had been another long and sleepless night, not at all whatRobbie expected when he became chief executive officer of the banktwo years ago. His wife, Beth, had noticed that something seemed tobe bothering him. "What is it, honey?"
"I was thinking about how good life was a couple of years ago,"Robbie answered. "I was the CEO of a small, local, financialinstitution with seven offices and about fifty employees. Assetswere less than $500 million. The challenging operational systems,such as asset/liability management and information technology, wereoutsourced to another bank. The truth of the matter was I didn'thave to work too hard and there were few difficult decisions. I hadplenty of time to promote myself as the successor to the retiringCEO of the much larger bank that provided the support systems to myold bank. You know what I mean, Beth. You used to be a banker."
Now Robbie was the CEO of a bank with operations in more thantwelve states, 1,000 locations and more than 4,500 employees. Only300 of these employees were at the main office. Assets were inexcess of $10 billion and growing rapidly. Robbie was responsiblefor a highly complex environment he really didn't know much about.The support of the bank's two executive vice presidents, especiallyMark, was what saved him from bad decisions, and, at the same time,caused him sleepless nights.
A Difficult Key Employee
Mark had been one of the finalists to replace the retiring CEO,having worked his way up in the financial and lending areas of thebank. Everyone agreed that his intellectual abilities were strong,as was his vision for the future direction of the bank. Mark wasalso strong willed and determined to implement his vision no matterwhat the obstacles. He had been the dominant manager in the bankbefore Robbie arrived, and continued in this role after Robbie washired.
"Why do you think Mark wasn't selected for the top job?" Bethasked. Robbie believed Mark's biggest problem was a total absenceof tact combined with a volatile temper. Mark was fond of tellingpeople how stupid they were when he was irate about something.Worse, Mark didn't distinguish between clerical employees,managers, customers or even members of the board of directors.
In addition, there was Liz, Sarah, Leslie and possibly others.Mark had sexual relationships with these employees and didn'ttrouble himself to attempt to be discreet. The affairs were carriedout during work hours, at bank functions and while travelingextensively throughout the country at bank expense. The total costwas easily in excess of six figures, all of which hit the bank'sincome statement as legitimate bank expenses.
Worse, these three employees were so inept at their assignedresponsibilities that it was clear they were being retained forsexual favors. This brought the total cost up to more than $250,000per year.
Liz was a high school graduate who had worked as a secretary ata small law firm before coming to work at the bank. She was marriedto a plumber, lived in a small town not too far from the mainoffice of the bank, and hadn't been exposed to extensive travel orexpensive hotels and meals. Her sexual relationship with Markdidn't take long to develop and it had continued for at least sixyears.
Liz's life at the bank was excellent. She was deeply fearedbecause of her relationship with Mark, and was frequently rude toother employees and managers at all levels. Liz had told Robbie offtwice since he became CEO, and neither experience had beenpleasant. She went to conferences throughout the country with Mark,which were designed for financial executives, not secretaries. Lizspent her time shopping rather than attending the programs, anyway,though. She was included in the bank's senior management bonusprogram, the only clerical employee on the list, over the protestsof many other managers. During the bank's internal educationprograms, which were usually held at resort locations, Liz wasoften at the pool, where she was easily seen by other employees ontheir way to attend training sessions.
Liz steadily progressed up the management ladder despite manygrim exit interviews with her former employees, who complainedabout the way they had been treated. Not only was she extremelyunpleasant to work for, she also lacked even basic knowledge aboutthe functional activities she managed. She reported directly toMark, who approved her travel plans and expenses as legitimate bankexpenses.
Robbie shook his head and told Beth, "Liz is a real managementproblem and an excellent example of fraudulent use of bank funds. Ireally don't know what to do about her."
"And what about Sarah?" Beth asked. Sarah was employed as asenior financial manager at the bank. She met Mark at conferencesout of town when Liz wasn't able to attend.
"Beth, let me tell you about a couple of situations involvingMark and Sarah. During a small break-out session at one conference,Sarah and Mark sat in the back of the room and talked about howdrunk they had been when they were together the night before. Theconversation was easily heard by everyone in the room. At anotherconference, Mark told the person in charge of the meeting he had toleave for the bank's main office immediately due to an emergency.Within a minute, Sarah told the same person she had an officeemergency and would be working in her hotel room for the afternoon.When the training class took a break several hours later and movedoutside to enjoy the beautiful weather, the hotel valet was justdelivering Mark's car to him. Mark laughed and said he had waitedmore than two hours for the valet to retrieve his car from thehotel garage. The employees who heard the explanation weren'tnearly as stupid as Mark thought they were. Can you imagine thishappening at the old bank, Beth?"
And then there was Leslie. She was the bank's most senior femaleofficer. She had previously had sexual relationships with both Markand William, the bank's other executive vice president, and wasthus "double-protected." She reported to William and managed thebank's public relations area. Robbie had received many complaintsabout Leslie's work, even from the bank's customers. Leslie alsohad a habit of failing to complete performance appraisals on timeor authorize the salary increases that went with the reviews. Shewas often more than a year late with these and her employees hadreached the point of mutiny. The salary increases were so faroverdue the employees' retirement contributions and 401(k) matcheswere understated. This control weakness had been reported to theaudit committee twice, and each time Robbie told them the problemhad been corrected. He knew it continued to exist, but holdingLeslie accountable would mean conflict with both Mark and William.Still, one of Leslie's employees had written a letter of complaintto one of the bank's directors and it could prove troublesome.
"I don't know how much longer I can cover for her, Beth."
"That sounds like a real mess, Robbie."
The Dilemma
Robbie started thinking about the general auditor, who had beenwith the bank for nearly ten years. The auditor had receivednothing but praise from the retiring CEO, the external auditors andthe regulators. His credibility and stature with the auditcommittee and the board of directors were excellent.
The auditor, Fred, had talked with Robbie twice about the use ofbank resources to facilitate Mark's sexual relationships. Fredpointed to bank regulations, the Financial Institutions ReformRecovery and Enforcement Act, the bank's internal policies andemployee perceptions as support for preventing the use of bankfunds to pay for sexual relationships. He also commented at lengthon the use of promotions as rewards for Liz, Sarah and Leslie inspite of their well-known lack of qualifications and ability. Thebank's clerical employees and managers believed the only reasonthese three employees remained employed was to provide sexualfavors and companionship during business travel. Fred concluded themeeting by saying, "There isn't any gray area on this one Robbie.Using bank funds and resources in this manner is plain oldfraud."
The human resources director was also highly regarded by thebank's board. Sam had talked with Robbie on several occasionsregarding complaints about the sexual relationships and theexceedingly favorable treatment extended to Liz, Sarah and Leslie.It was clear to other female employees the surest way to win apromotion wasn't through excellent job performance; it was throughsex--if you were relatively young and attractive. "I'm veryconcerned about the possible legal implications," Sam told Robbie,"as well as the example being set for our employees, to say nothingof the improper use of bank funds."
"How are you going to handle this, Robbie?" Beth asked, when hehad explained it all.
"I'm not exactly sure yet. Please listen to what I've beenthinking."
Robbie was having sleepless nights because he knew that Fred andSam were right on target in their assessments of the situation. ButRobbie also knew Mark would most likely seek other employment ifquestioned about his relationships, and without Mark, Robbie's daysas CEO might be numbered. Only Mark was capable of managing thebank to the earnings records that had been achieved recently. Markhad also been able to convince the board to greatly increasesalaries and bonuses for the CEO and two executive vicepresidents.
Mark and William were close personal friends and Robbie hadtalked with William about the situation. William reinforcedRobbie's conclusion that Mark would leave the bank if approachedabout his relationships and agreed the bank's financial resultswould not be nearly as strong without Mark. "Robbie, Mark's ego istoo strong to be dragged through the mud over these women. He'dleave for sure," William said.
Robbie told William that he had decided to ignore Mark's"personal behavior" and hope that it would soon be forgotten.
Several months later, William's new girlfriend, also an employeeat the bank, received a very poor performance appraisal. Susie wasin danger of being terminated soon unless her performance improveddramatically. William quickly transferred his secretary to anotherarea and put Susie in the position. Her new office was a few feetfrom Robbie's office and he noticed she only worked about 20 hoursper week rather than full-time. Although the bank did not allowchildren of employees in the building, Susie's three children werein her office when she was there. She used a couple of other bankemployees to help her kids with their schoolwork, and Susie spentmost of her time planning field trips and working on other schoolfunctions.
Susie and William took two hour lunch breaks together every dayand traveled together frequently. At company functions, they atefood from each other's plates in front of bank employees. Susiewielded power in William's name and became feared.
William and Susie worked late often. An hour or so after thebank closed, they would leave the bank together and get inWilliam's car. A couple of hours later, the car would return to thebank, Susie would get out and head for home in her own car. Thebank's second shift of security personnel enjoyed watching this ontheir cameras and it became widely known through the bank'sgrapevine.
Since Robbie had seemingly condoned Mark's behavior, it appearedthat William thought he had permission to become completelyindiscreet about Susie. Now more trouble was on the horizon.
Fred, the auditor, and Sam, the HR director, had agreed to giveRobbie time to end bank funding for the relationships. Robbie hadtalked with each of them twice about Mark's importance to the bank,and he asked for their patience to give him time to straightenthings out. He promised Fred and Sam they would see changes overtime implemented in such a way that no one would lose face. He didchange Liz's reporting relationship away from Mark to the chieffinancial officer. But that was the only change he had made afterseveral months.
Fred and Sam had talked with him again, but Robbie was firm inhis decision. "I don't plan any further corrective action because Ifear losing Mark. The risk of losing a star performer is too great,especially since it's simply based on personal indiscretions." BothFred and Sam were asked to cover up the situations with Mark andWilliam for the good of the bank and to ignore the regulatory,legal and policy violations. Robbie had closed the meeting bysaying he was confidant things would work out for the best, and heappreciated their support.
When Beth heard the entire sorry tale, she was worried. "Robbie,we're in trouble, aren't we?"
In your discussion comment on thefollowing:
Is Markâs behavior unethical or fraudulent?
Should Mark be terminated?
Should Leslie be terminated?
What is your opinion in regard to how Robbie handled thissituation?
UNETHICAL BEHAVIOR BY A STAR EMPLOYEE
Background
It had been another long and sleepless night, not at all whatRobbie expected when he became chief executive officer of the banktwo years ago. His wife, Beth, had noticed that something seemed tobe bothering him. "What is it, honey?"
"I was thinking about how good life was a couple of years ago,"Robbie answered. "I was the CEO of a small, local, financialinstitution with seven offices and about fifty employees. Assetswere less than $500 million. The challenging operational systems,such as asset/liability management and information technology, wereoutsourced to another bank. The truth of the matter was I didn'thave to work too hard and there were few difficult decisions. I hadplenty of time to promote myself as the successor to the retiringCEO of the much larger bank that provided the support systems to myold bank. You know what I mean, Beth. You used to be a banker."
Now Robbie was the CEO of a bank with operations in more thantwelve states, 1,000 locations and more than 4,500 employees. Only300 of these employees were at the main office. Assets were inexcess of $10 billion and growing rapidly. Robbie was responsiblefor a highly complex environment he really didn't know much about.The support of the bank's two executive vice presidents, especiallyMark, was what saved him from bad decisions, and, at the same time,caused him sleepless nights.
A Difficult Key Employee
Mark had been one of the finalists to replace the retiring CEO,having worked his way up in the financial and lending areas of thebank. Everyone agreed that his intellectual abilities were strong,as was his vision for the future direction of the bank. Mark wasalso strong willed and determined to implement his vision no matterwhat the obstacles. He had been the dominant manager in the bankbefore Robbie arrived, and continued in this role after Robbie washired.
"Why do you think Mark wasn't selected for the top job?" Bethasked. Robbie believed Mark's biggest problem was a total absenceof tact combined with a volatile temper. Mark was fond of tellingpeople how stupid they were when he was irate about something.Worse, Mark didn't distinguish between clerical employees,managers, customers or even members of the board of directors.
In addition, there was Liz, Sarah, Leslie and possibly others.Mark had sexual relationships with these employees and didn'ttrouble himself to attempt to be discreet. The affairs were carriedout during work hours, at bank functions and while travelingextensively throughout the country at bank expense. The total costwas easily in excess of six figures, all of which hit the bank'sincome statement as legitimate bank expenses.
Worse, these three employees were so inept at their assignedresponsibilities that it was clear they were being retained forsexual favors. This brought the total cost up to more than $250,000per year.
Liz was a high school graduate who had worked as a secretary ata small law firm before coming to work at the bank. She was marriedto a plumber, lived in a small town not too far from the mainoffice of the bank, and hadn't been exposed to extensive travel orexpensive hotels and meals. Her sexual relationship with Markdidn't take long to develop and it had continued for at least sixyears.
Liz's life at the bank was excellent. She was deeply fearedbecause of her relationship with Mark, and was frequently rude toother employees and managers at all levels. Liz had told Robbie offtwice since he became CEO, and neither experience had beenpleasant. She went to conferences throughout the country with Mark,which were designed for financial executives, not secretaries. Lizspent her time shopping rather than attending the programs, anyway,though. She was included in the bank's senior management bonusprogram, the only clerical employee on the list, over the protestsof many other managers. During the bank's internal educationprograms, which were usually held at resort locations, Liz wasoften at the pool, where she was easily seen by other employees ontheir way to attend training sessions.
Liz steadily progressed up the management ladder despite manygrim exit interviews with her former employees, who complainedabout the way they had been treated. Not only was she extremelyunpleasant to work for, she also lacked even basic knowledge aboutthe functional activities she managed. She reported directly toMark, who approved her travel plans and expenses as legitimate bankexpenses.
Robbie shook his head and told Beth, "Liz is a real managementproblem and an excellent example of fraudulent use of bank funds. Ireally don't know what to do about her."
"And what about Sarah?" Beth asked. Sarah was employed as asenior financial manager at the bank. She met Mark at conferencesout of town when Liz wasn't able to attend.
"Beth, let me tell you about a couple of situations involvingMark and Sarah. During a small break-out session at one conference,Sarah and Mark sat in the back of the room and talked about howdrunk they had been when they were together the night before. Theconversation was easily heard by everyone in the room. At anotherconference, Mark told the person in charge of the meeting he had toleave for the bank's main office immediately due to an emergency.Within a minute, Sarah told the same person she had an officeemergency and would be working in her hotel room for the afternoon.When the training class took a break several hours later and movedoutside to enjoy the beautiful weather, the hotel valet was justdelivering Mark's car to him. Mark laughed and said he had waitedmore than two hours for the valet to retrieve his car from thehotel garage. The employees who heard the explanation weren'tnearly as stupid as Mark thought they were. Can you imagine thishappening at the old bank, Beth?"
And then there was Leslie. She was the bank's most senior femaleofficer. She had previously had sexual relationships with both Markand William, the bank's other executive vice president, and wasthus "double-protected." She reported to William and managed thebank's public relations area. Robbie had received many complaintsabout Leslie's work, even from the bank's customers. Leslie alsohad a habit of failing to complete performance appraisals on timeor authorize the salary increases that went with the reviews. Shewas often more than a year late with these and her employees hadreached the point of mutiny. The salary increases were so faroverdue the employees' retirement contributions and 401(k) matcheswere understated. This control weakness had been reported to theaudit committee twice, and each time Robbie told them the problemhad been corrected. He knew it continued to exist, but holdingLeslie accountable would mean conflict with both Mark and William.Still, one of Leslie's employees had written a letter of complaintto one of the bank's directors and it could prove troublesome.
"I don't know how much longer I can cover for her, Beth."
"That sounds like a real mess, Robbie."
The Dilemma
Robbie started thinking about the general auditor, who had beenwith the bank for nearly ten years. The auditor had receivednothing but praise from the retiring CEO, the external auditors andthe regulators. His credibility and stature with the auditcommittee and the board of directors were excellent.
The auditor, Fred, had talked with Robbie twice about the use ofbank resources to facilitate Mark's sexual relationships. Fredpointed to bank regulations, the Financial Institutions ReformRecovery and Enforcement Act, the bank's internal policies andemployee perceptions as support for preventing the use of bankfunds to pay for sexual relationships. He also commented at lengthon the use of promotions as rewards for Liz, Sarah and Leslie inspite of their well-known lack of qualifications and ability. Thebank's clerical employees and managers believed the only reasonthese three employees remained employed was to provide sexualfavors and companionship during business travel. Fred concluded themeeting by saying, "There isn't any gray area on this one Robbie.Using bank funds and resources in this manner is plain oldfraud."
The human resources director was also highly regarded by thebank's board. Sam had talked with Robbie on several occasionsregarding complaints about the sexual relationships and theexceedingly favorable treatment extended to Liz, Sarah and Leslie.It was clear to other female employees the surest way to win apromotion wasn't through excellent job performance; it was throughsex--if you were relatively young and attractive. "I'm veryconcerned about the possible legal implications," Sam told Robbie,"as well as the example being set for our employees, to say nothingof the improper use of bank funds."
"How are you going to handle this, Robbie?" Beth asked, when hehad explained it all.
"I'm not exactly sure yet. Please listen to what I've beenthinking."
Robbie was having sleepless nights because he knew that Fred andSam were right on target in their assessments of the situation. ButRobbie also knew Mark would most likely seek other employment ifquestioned about his relationships, and without Mark, Robbie's daysas CEO might be numbered. Only Mark was capable of managing thebank to the earnings records that had been achieved recently. Markhad also been able to convince the board to greatly increasesalaries and bonuses for the CEO and two executive vicepresidents.
Mark and William were close personal friends and Robbie hadtalked with William about the situation. William reinforcedRobbie's conclusion that Mark would leave the bank if approachedabout his relationships and agreed the bank's financial resultswould not be nearly as strong without Mark. "Robbie, Mark's ego istoo strong to be dragged through the mud over these women. He'dleave for sure," William said.
Robbie told William that he had decided to ignore Mark's"personal behavior" and hope that it would soon be forgotten.
Several months later, William's new girlfriend, also an employeeat the bank, received a very poor performance appraisal. Susie wasin danger of being terminated soon unless her performance improveddramatically. William quickly transferred his secretary to anotherarea and put Susie in the position. Her new office was a few feetfrom Robbie's office and he noticed she only worked about 20 hoursper week rather than full-time. Although the bank did not allowchildren of employees in the building, Susie's three children werein her office when she was there. She used a couple of other bankemployees to help her kids with their schoolwork, and Susie spentmost of her time planning field trips and working on other schoolfunctions.
Susie and William took two hour lunch breaks together every dayand traveled together frequently. At company functions, they atefood from each other's plates in front of bank employees. Susiewielded power in William's name and became feared.
William and Susie worked late often. An hour or so after thebank closed, they would leave the bank together and get inWilliam's car. A couple of hours later, the car would return to thebank, Susie would get out and head for home in her own car. Thebank's second shift of security personnel enjoyed watching this ontheir cameras and it became widely known through the bank'sgrapevine.
Since Robbie had seemingly condoned Mark's behavior, it appearedthat William thought he had permission to become completelyindiscreet about Susie. Now more trouble was on the horizon.
Fred, the auditor, and Sam, the HR director, had agreed to giveRobbie time to end bank funding for the relationships. Robbie hadtalked with each of them twice about Mark's importance to the bank,and he asked for their patience to give him time to straightenthings out. He promised Fred and Sam they would see changes overtime implemented in such a way that no one would lose face. He didchange Liz's reporting relationship away from Mark to the chieffinancial officer. But that was the only change he had made afterseveral months.
Fred and Sam had talked with him again, but Robbie was firm inhis decision. "I don't plan any further corrective action because Ifear losing Mark. The risk of losing a star performer is too great,especially since it's simply based on personal indiscretions." BothFred and Sam were asked to cover up the situations with Mark andWilliam for the good of the bank and to ignore the regulatory,legal and policy violations. Robbie had closed the meeting bysaying he was confidant things would work out for the best, and heappreciated their support.
When Beth heard the entire sorry tale, she was worried. "Robbie,we're in trouble, aren't we?"
In your discussion comment on thefollowing:
Is Markâs behavior unethical or fraudulent?
Should Mark be terminated?
Should Leslie be terminated?
What is your opinion in regard to how Robbie handled thissituation?
