Breach of Leadership Trust

Several issues seemed to hit the newspapers and airwaves at the same time this week. They have been brewing for years, but having them all highlighted this week brought home the fact we need our leaders to be deserving of our trust. Unfortunately, this message is falling on many deaf ears. Earlier this year, I wrote a post called “When Leaders Let you Down.” This highlighted the issue, but also spoke about leaders making poor decisions that led to people’s lives being affected. Today, I want to focus on this breach of trust.

The one getting most of the headlines is the detailed report looking into what the leaders at  Penn State knew and when they knew it regarding the sexual predatory activities of former coach Jerry Sandusky, who has been convicted of ten counts of sexual molestation with minors. Per the report, it turns out the University President and other leaders, including Coach Joe Paterno, knew of his misdeeds dating back to 1998 and did not follow through with any decisive action. This is three years before the incident that was witnessed by one of the coaches in the shower. It also turns out there was a culture where junior employees did not feel they could raise a concern due to the feared reaction of leadership. More time has been spent talking about Paterno’s failure to act and what appears to be his role in preventing action given his career of coaching and teaching in the right way. Like many, I have always had respect for Paterno, but this episode is truly a breach of trust and broke many hearts. Yet, I find the most fault with the University President. His lack of stewardship on this issue has cost many young boys who were molested later and will ultimately cost his university tens of millions of dollars in justifiable lawsuits.

Another university, Florida A&M also was in the news. As everyone knows by now, the marching band which is renowned for their prowess and numbers, had a hurtful hazing process where a member of the band walked a gauntlet on the band bus in the dark, while fellow band members would hit the “hazee” until he walked the entire length of the bus. A drum major died from a recent episode. The University President resigned this week after getting a “vote of no confidence” from the Board of Trustees. Apparently, the President was aware of the hazing process, but also was aware a number of the band members did not qualify as students and should not have been marching in the first place. In other words, parents of band members were unaware their children were marching with non-students.

As a parent of three, with one at college and one about to go this fall, I cannot tell you how upsetting these two activities are. I do not expect my child to go off to college and die or be raped due to the lack of stewardship at the University level. I do recognize incidents happen, the worst of which is the Virginia Tech shooting, but for leaders and adults to know that activities are occurring and fail to do something about it is unforgivable. We are looking to them to protect our children and young adults and provide a safe environment as they grow and learn. The monetary losses these universities will experience will be severe, but they will not make up for the transgressions which occurred on their watch. The Catholic Church has still not fully learned that lesson and won’t until more Priests and Bishops wind up in jail, where they belong. Some of the FAMU and Penn State leaders may join them.

If that were not enough, we had even more Bank leadership travails. I have written a couple of times about the breach of trust by banks, which used to be the most trusted of groups. JP Morgan Chase has updated their estimate of the trading losses at $5.8 Billion and it may climb to $7 Billion. Initially, it was estimated at $800 Million and was increased to $2 Billion back in April. Yet, equally troubling is several bank employees misled their bosses about the losses writing them down to smaller amounts. This may amount to fraud. While the leaders are reacting to this news, we seem to have a culture in the financial organizations that starts at the top that it is OK to push envelopes and not be accountable. Leaders have to set the tone and lead by example. We have to be prudent risk takers, but not foolish ones. And, if someone is taking inappropriate risks, we need to highlight the activities and take remedial action.

If that were not enough Barclays Bank in London continues to be under fire for the efforts in manipulating interest rates on loans between banks. The CEO resigned after being discovered, but apparently this practice was first identified as far back as 2007 by the US Federal Reserve. By my math, that is five years ago, so someone in leadership should have put a stop to this after it became known. Since nothing was done, the CEO should be held accountable. And, if anyone wonders why we need financial regulation or any regulation for that matter, I would point to these two stories. And, I did not even mention two banks settling lawsuits this past week on mortgage fraud issues.

These four stories highlight the need we all have to trust our leaders to do the right thing. Issues do happen outside their control, but how they react to them is so very important. And, they must insist on an environment where people will not cut corners or feel threatened if they raise an issue. The Penn State, FAMU and Barclays presidents knew problems were occurring and they failed to act. To me, once you know something criminal is (or might be) occurring, then your failure to act is also criminal. But, even if it was not criminal and was an ethical issue, addressing these issues is also important.

Yet, the leaders need to create an environment where issues can be raised and that is where JP Morgan Chase failed. Following the financial meltdown in 2008 which was caused by chasing profits at the expense of prudent risk management, steps should have been taken to prevent the risky trades that were made in the magnitude they were made. While they have reacted to the mistakes so far, I question their failure to pick up their game after helping bring down the financial industry and cause the global recession we are in. In other words, “did you not learn anything?”

Let me close by saying the positions are bigger than the incumbents. Whether it is CEO, University President, Priest, Minister, Teacher, Principal, Coach, Congressman, Senator, Governor or President, when the incumbent dishonors the position, then they need to be held accountable. Going further, the role of a leadership position has a duty to honor the trust we have placed in that position. There is a duty to the customers, employees and shareholders (or stakeholders) to do the right thing. When they breach that trust, it is a disservice to many that will echo for a long time.

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7 thoughts on “Breach of Leadership Trust

  1. Great post, and we fundamentally agree on all points. I do hold Paterno more responsible at Penn State, however. After a meeting with two top school administrators and himself, he called the next day to say he would talk to Sandusky, that was the more “Humane thing to do.” Then the abuses continued for 8+ more years. Paterno shut down the investigation, then kept his eyes firmly closed while Sandusky continued to abuse the kids. Paterno had a strange definition of Humane.

    Personally, I think his statue should be removed, and if the football program is adversely affected, so much the better. Your excellent piece is about responsibility and consequences. It will be interesting to see where responsibility and consequences lie in the priority scale in how this plays out at Penn State.

  2. Excellent post. You are so right – there is an incredible failure of leadership in so many areas lately. When you put them all together like that, it is a pretty bleak picture. Thanks for connecting all the dots.

  3. You never seem to miss! This is very well done. You are right to link these episodes together and look at the larger issue. But I don’t see how we can “trust in our leadership” when it continues to let us down. We need to choose leaders who are trustworthy and the Catch 22 is that we won’t know if they are until they have been chosen and in place for a number of years. So we must rely on hope in the end.
    (I did a blog or two on the Paterno scandal. There was never a question he knew exactly what was going on during the entire time. No man with the amount of power that man had over that football program and in that University could not have known. The University should erase all signs that the man ever was there.)

    • Thanks Hugh. For someone who prepared others for life and for what-if outcomes in a football game, you would think he would have asked himself, if we don’t address this, what will happen? I see this as a mirror image on a targeted scale of what has transpired in the Catholic Church. Ironically, there is a huge case in Philadelphia going on at the same time.

  4. Note to Readers: While I wrote this post over three years ago, it remains relevant today. Volkswagen has severely harmed their brand and the losses will be far more than the penalties and recall/ repair costs. They damaged their reputation which had been a paragon of excellence. Now, future buyers won’t trust them. They may have hurt a generation of buyers. The US VW president testified yesterday in front of Congress. It is hard to fathom VW leaders did not know this was happening.

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