eComms Surveillance & Compliance for Financial Services
During a recent conversation with Shield’s CBO, Eran Noam, I asked him about the most interesting thing he recently heard from a prospect. After about 17 seconds, I stopped him and said, “wait, this has to go on “Work.”, so here’s Eran’s first (and not last) guest contribution:
What keeps the board awake at night? Sure, there are the “usual suspects” like missed earnings, The Great Resignation, a dwindling supply chain, and so on, but other matters are keeping the Board awake at night. Anyone at the helm of a company founded around the words and actions of a celebrity figure likely doesn’t need any caffeine to keep them alert all night. One wrong move or just one offensive Tweet is all that it takes to attract the ire of the super woke Twitterverse and the hammer of Cancel Culture. Market manipulation can be straightforward to control, monitor, and stop. Personal conduct, however, is another matter – it’s non-trivial to manage.
Social media is getting tougher to navigate. Half of Linkedin’s nearly one billion users are using it similarly to how they use Facebook and post intimately personal posts. And then you’ve got TikTok, recently overtaking Google as the most valued and utilized website in the world. Is a dancing CEO okay? What about all the behavior that only a select few see, like taking bribes, disclosing material information, behaving poorly in adult entertainment venues, sexually harassing staff, or making inappropriate racial slurs? Monitoring for that type of non-compliance is a lot tougher, but it’s where Shield has invested to make our technology applicable even more broadly.
Despite this consternation for executives and Board members, most fears around misconduct can potentially be squelched with sophisticated compliance surveillance technology. But what about the bank senior executive who sends a wink and a peach emoji to the new intern? THAT is the stuff of nightmares; personal misconduct is the new fear that keeps the Board awake at night.
The SEC used to keep a running list of all the CEOs charged with the resultant enforcement actions. Oddly enough, they’ve stopped refreshing the list yet the examples continue to roll in. Examples of market abuse abound; it’s simply a matter of who gets caught – and when.
However, examples of personal misconduct are starting to enter the spotlight with greater frequency. And they’re high-profile examples from companies that you’ve actually heard of. In 2018, Intel CEO, Brian Krzanich, was forced to resign after a “past consensual relationship” with a low-level Intel employee was made public. One year later, McDonald’s CEO, Steve Easterbrook was publicly ousted and disgraced for the same misconduct. Easterbrook was sexting with a junior staff member and then sued by his former employer for concealing evidence and then forced to repay $105 million in stocks and cash awarded from the settlement. Last week, CNN’s CEO, Jeff Zucker resigned after failing to disclose a consensual relationship with a key lieutenant.
It’s the non-consensual behaviors that are a lot more disturbing. Activision CEO, Bobby Kotick, reportedly knew – for years – about sexual misconduct within the company. The gaming industry is notorious for sexual harassment and violence directed toward women. The challenge is that much of it is targeted online where people can behave badly hiding behind the anonymity of an avatar, often with their IP address carefully camouflaged. Flagrant (and public) examples of sexually inappropriate behaviors are less common.
Bringing the examples closer to home, Edward Shin, the former CEO of a Pennsylvania Bank, was arrested for taking bribes and siphoning SBA-awarded loans. Perhaps William B. Harrison, Jr., the former CEO and current Chairman of the Board for JPMorgan Chase was having a little trouble sleeping when he caught wind of the executive team’s blatant disregard for compliance. WhatsApp became the preferred yet unapproved default channel for correspondence – on personal devices – despite policies that clearly mandated otherwise. As a result, the behemoth darling of Wall Street was crushed with a whopping $200 Million fine from the SEC – and rumors are that the regulatory authorities are still hunting for more violations, like inappropriate language and nuanced innuendo. Tougher to detect, for sure, but not impossible. In fact, we’re doing it today.
So, the rhetorical question remains open and unanswered. Should Board members be concerned and laying awake at night? Perhaps they could simply consider investing in a tech solution that monitors personal misconduct so that they can get a good night’s rest.