There is a growing desire to hold individuals accountable for the outcomes of toxic cultures. But how do you do that in a way that’s fair and sustainable?
In May this year, seven former executives at France Télécom went on trial for ‘moral harassment’. Prosecutors argued they should be held criminally liable for the suicides of 19 employees, the attempted suicide of 12 and the psychological harm experienced by eight others. The decision is due in December. If convicted, each executive faces up to a year in jail and EU$ 15,000 (about AU$24,500) in fines.
Not surprisingly, there is anger at the executives. The surprising thing is that a mechanism exists for holding them accountable. The prosecutors are not arguing that the defendants caused the suicides, but that the company’s method of personnel management put some employees at increased risk. If the executives go to prison, it won’t be for direct harassment, it will be for the culture they oversaw.
Culture is often described as the character of a workplace, or “how people do things”. It’s simple to grasp, but easy to ignore. It doesn’t help that the way some people talk about culture brings the word “vibe” to mind.
Because culture is environmental, and companies can have sub-cultures within discrete teams, how do you decide responsibility? If it’s always leadership, is it just the CEO, or also the board and the C-suite? And should people be held accountable by their organisation, by regulators or by the courts?
Crucial to these questions is the mitigating role of context. Negative outcomes often arise from a combination of business circumstances and individual decisions.
France Télécom was privatised in 2004. The transition away from the public sector is never easy, but the company also found itself dealing with technological disruptions to its industry – particularly the introduction of ADSL and the growing use of mobile phones. To adjust to the digital revolution, CEO Didier Lombard decided the company needed to get rid of 20 per cent of its workforce (about 22,000 workers) and restructure.
But there was a major hurdle. A lot of its staff remained civil servants, which made them difficult to fire from a legal perspective. And, in a time when the unemployment rate was growing (from 7.2 per cent to 9.5 in the 2008-09 period the suicides happened), they were also very reluctant to quit.
Prosecutors alleged the workaround instigated by Lombard, his director of operations, Louis-Pierre Wenès, and his head of HR, Olivier Barberot, was to make life so miserable for some staff that they would choose to resign (the other four executives are on trial for complicity).
The methods they stand accused of fostering include arbitrary demotions, relocating workers multiple times in relatively short periods (forcing some away from their families), and poor treatment such as micromanagement and bullying.
“I’ll get people to leave one way or another, either through the window or the door.”
– Didier Lombard, former CEO, France Télécom
The testimony of family and victims revealed how simple work changes can operate as cruel and unusual punishment. One technician, who mostly worked solo, was moved into a sales position and given no training. A day before he took his own life, he worked 12 hours with only a single break.
Many who died by suicide left notes blaming the company. Some ended their lives in the workplace, in front of their colleagues.
In an internal company document from 2006, published years later by daily newspaper Le Parisien, Lombard is quoted as saying: “I’ll get people to leave one way or another, either through the window or the door.”
The impression the above information gives (“these people are guilty”) is the one dominating most of the media coverage. But the defence of the executives is so ordinary that, for better or worse, it’s readily accepted in other cases where company reorganisations hurt employees.
Essentially, it’s that redundancies are an unfortunate fact of life and in a large company (France Télécom had 130,000 workers) the executives can’t possibly be held accountable for each individual’s suffering. Of the tens of thousands of people hurt by the restructure, hundreds complained to the court.
Though one of the executives on trial admitted the company failed to look after its most vulnerable workers, this was not an admission of guilt so much as a statement of regret that not everybody could be helped.
The defence also argued Lombard’s incendiary statement about staff cuts was a gaffe. His lawyers argued he was “clumsy” – while still CEO he also referred to the deaths as a “suicide fad” – but that he had saved the company. They said it wasn’t leadership, but a difficult restructure that led to the “malaise” which caused the suicides.
Reading from a letter, Lombard told the court he felt “sincere and profound sadness that this situation involuntarily contributed to the fragility of some, to the point that they carried out this irreparable act”. He further testified that the restructure was crucial and that if he wasn’t in charge, the outcome would have been the same or worse. Lombard insists there was a Werther effect – the media coverage of early suicides caused copycat suicides.
In one exchange, Wenés told the magistrate he was not responsible for harmful changes in workers’ schedules and he was unaware of the suicides as they were “dealt with locally”.
Though France is known for its worker-friendly laws, the trial is a test case. Nothing like this has been attempted before. Critics have warned that if the executives are found guilty, it will hurt the country’s economy, as more executives from blue-chip companies will be taken to court for harms outside of their control.
Supporters counter that the restructure went beyond the pale. The harassment was systemic, they say. The victims who took their own lives had their very identities attacked. A culture that supported them – that they relied on – was poisoned. As a plaintiff’s lawyer argued, “These companies were considered family… to be mistreated by one is extremely transgressive.”
The case is a vivid realisation of the difficulty of holding individuals accountable for culture. There are so many factors to consider. Not the least of which is the chosen timeframe. Because the company’s problems did not end immediately.
In March 2011, still under a cloud of controversy, Lombard left the company completely. During the first three months of 2014, 10 employees of Orange (France Télécom changed its name in 2013) took their own lives. In the whole previous year, 11 staff had suicided.
As The Guardian reported at the time, a statement from the company’s own mental health monitoring group said staff were suffering due to unrealistic demands, unhealthy competition and the threat of redundancies. “Also, what we are seeing among mid-level directors is a return to old and brutal methods of management,” the group said in its report.
Lombard is not charged with the legacy of his culture. Just the tragedies of 2008-9. Nor have the mid-level directors from 2014 been charged with moral harassment. Is that fair? If not, why not? If individuals are to be held accountable for culture, the method needs to be sustainable. Because culture isn’t a single act. It’s a long-term reality.
Turning to Australia, there is almost no chance a similar trial could happen here.
Though some states have laws where leadership can be held criminally liable for a workplace death, they usually focus on a specific incident around workplace health and safety (WHS). For example, under Queensland’s new industrial manslaughter law, a Brisbane director was sentenced to a year in jail and fined $1 million for the death of a roofer on an unsafe worksite (the conviction was later quashed and a retrial ordered).
“We don’t really have legislation here that looks at people being culpable for actions over a period of time, as you see with bullying or culture, at least from a criminal perspective,” says Sean Sullivan, special counsel at Hall & Wilcox.
“You often see workers’ compensation cases where someone’s been subjected to bullying over a period of time. They’ll bring a claim for a psychiatric illness that they’ve suffered as a result of that behaviour. But that will be then covered by the workers’ compensation insurer of the company, rather than the company being held liable itself.”
Sullivan says those cases are not focused on culture even if they are looking at conduct over a period of time.
It would be hard to apply an industrial manslaughter law to a suicide. It is theoretically possible, but a criminal case that tried to tie a culture to such a death would face challenges. “The various industrial manslaughter and workplace and safety laws impose a higher onus of proof, compared to the civil situation,” says Sullivan. This is a challenge for the prosecution, because suicides are multifactorial. Social causes exist alongside personality and cognitive causes.
“It makes it hard to draw a sufficiently strong link between the person’s suicide and the conduct of the workplace. Having said that, I have seen a number of cases over the years where you think, ‘That would’ve been a major factor’. But to prove that in a criminal prosecution, it’d be a bit harder.”
Victoria created a law that made serious bullying a criminal offence after a particularly egregious case of workplace bullying. ‘Brodie’s law’, as it is widely known, is named after Brodie Panlock, a nineteen-year-old who took her own life after 15 months working at a cafe. While there she had what has been described as an unhealthy relationship with her manager. He and other workers bullied Brodie with name calling, physical humiliation and physical abuse. At one point she was told to take rat poison.
In a civil case, the company that owned the cafe was ordered to pay a fine of $220,000 for failing to provide and maintain a safe working environment. But Brodie’s law, which carries a maximum penalty of 10 years imprisonment, does not apply to people who are indirectly responsible. To be prosecuted you at the very least need to have directed the bullying. Overseeing a toxic culture would most likely not be enough to prosecute.
On the possibility of regulatory oversight, Sullivan says it would be incredibly expensive and difficult. It’s not like surveying a worksite for physical safety issues. You can’t lie about a missing guard rail. But there’s nothing more common than lying about the boss who holds your career in their hands.
“Often you’ll find that there’s one toxic person who’s unfortunately allowed to infect the rest of the business. And, especially if they’re up at the top, it can be very hard for an external authority to come in and try and find them. Because everyone is going to say everything’s perfect and wonderful.”
Where Sullivan does see some scope for Australian courts to impact culture is where companies fall afoul of discrimination laws. He gives the example of a “boy’s club” company that systematically treats women differently to men with regards to recruitment, career progression and so on.
But, outside of that, there is no law that can hold organisations accountable. Currently, the closest local analogue to the French law of moral harassment is bullying. But there are significant differences.
“I don’t think stricter laws or regulations are going to address cultural issues. You cannot regulate for every occurrence, or every cultural development.”
– Vanessa Pigrum, CEO, Cranlana Centre for Ethical Leadership
Firstly, the French law allows an employer be held liable for the actions of the perpetrator, even if they have penalised the perpetrator. The absence of fault does not exempt a company from liability. Secondly, the French law does not require malicious intent. Finally, some management methods, if used repetitively, could be considered as moral harassment. This last feature was crucial to the prosecution of the France Télécom executives.
But it’s not just the lack of a specific law. Australia, the UK and the US all have an adversarial system of justice that reacts to something that occurs and determines fault. France, and much of the rest of Europe, has an inquisitorial system.
“We wait until something has happened and then everyone picks a side and they fight over it. Over there the judges take a much more active role in investigating and wanting to get into the root cause,” says Sullivan.
But is the legal system even the right route to hold people accountable? “I don’t think stricter laws or regulations are going to address cultural issues,” says Vanessa Pigrum, CEO of the not-for-profit Cranlana Centre for Ethical Leadership. “You cannot regulate for every occurrence, or every cultural development.”
Court of public opinion
There are other ways to hold individuals accountable for the cultures they oversee. What was the Hayne Royal Commission into misconduct in the financial sector if not a shaming of various leaders for the cultures they oversaw? It looked at everything from governance structures to remuneration.
But just like the trial in France, there are doubts about the commission. It took years of parliamentary back-and-forth to get the go-ahead, and its main outcomes were that public shaming and a series of recommendations. Such limited accountability, that requires such a bitter political fight, is not sustainable.
In his final report, commissioner Kenneth Hayne made clear he was grappling with how he could possibly prevent future misconduct. “Much more often than not, the conduct now condemned was contrary to law. Passing some new law to say, again, ‘Do not do that’, would add an extra layer of legal complexity to an already complex regulatory regime.”
He concludes that something more grand than punishing instances of misbehaviour is required. “Culture, governance and remuneration. Each of those words can provoke a torrent of clichés. Each can provoke serious debate about definition. But there is no other vocabulary available to discuss issues that lie at the centre of what has happened in Australia’s financial services entities.”
“Culture, governance and remuneration… there is no other vocabulary available to discuss issues that lie at the centre of what has happened in Australia’s financial services entities.”
– Justice Kenneth Hayne
The government has promised to implement all his recommendations by the end of 2020, but there are real questions about whether that will be enough. As senior lecturers at RMIT, Andrew Linden and Warren Staples, wrote for The Conversation, for the past 30 years Australia’s financial sector has had a 10-15 year cycle. It involves “public inquiries followed by reports, then (sometimes) trials, then books, then almost everyone forgetting (except for those personally scarred), only for problems to resurface later.”
They believe that Hayne didn’t address systemic issues and they argue that the report’s “impact will be generational rather than permanent” and its recommendations are a “a patchwork of measures that if implemented will over time be eaten away – and at some point will be dismantled – because the rationale for their adoption will be forgotten”.
The lecturers argue for improved oversight via two-tiered boards (one management, one supervisory) and employee directors (staff-elected board members, which are often a feature of a supervisory board).
“If all the information that the board is seeing is coming from one or two points of contact – the CEO, COO or CFO – then they are getting a very filtered view,” says Pigrum.
But she is also hopeful that things like royal commissions will accelerate a movement she already sees happening, where organisations get better at holding themselves accountable.
A less dramatic method to create sustainable cultural accountability would be to bring it down to the level of the profession. If accountants can face a disciplinary process for complaints against their bookkeeping, why can’t a similar thing happen for culture?
Though it’s commonly said that the responsibility for culture lies with leadership, a typical role for HR is to help the C-suite understand and shape it. Despite this, during the Hayne royal commission no HR professional was made responsible. Ensuring there is a professional and ethical standard HR practitioners have to attain and maintain would give them more credibility (and therefore responsibility) to be a culture partner. Also, raising the profile of the culture partner would have the benefit of raising the profile of culture in general.
But for such a thing to happen, there needs to be a desire for it outside of the profession itself. Empowering HR with certification is a goal of the Australian HR Institute, which owns this website. However, there is evidence that there is a wider appetite for it.
Recent research from InSync and AHRI surveyed over 900 Australian professionals, from frontline workers to CEOs. It found 78 per cent of non-HR professionals either agreed or strongly agreed that HR practitioners should be held accountable against a standard. And 69 per cent agreed or strongly agreed that the professional body for HR practitioners should hold members accountable to that standard.
Of course, HR certification is not a total solution. The certification of accountants has hardly eliminated malpractice. Also, for all the reasons stated above, a dodgy culture is far harder to assess than dodgy books. The risk of this for practitioners is that they would be held accountable for cultures they may not be empowered to do much about. But, given the upside for their professional standing, perhaps that’s a risk worth taking.
Business case for virtue
There’s an argument to be made that since culture is organisational, accountability should be managed internally. Both Sullivan and Pigrum, while believing it had shortcomings, said this was the most sustainable model. But how hopeful should we be that organisations will hold their own people to a standard?
The efforts of commercial enterprises to ‘do the right thing’ by staff, customers and the world is captured by the term corporate social responsibility (CSR). It generally comes in two forms. The first is when it’s done for its own sake (think a business leader who acts on a personal moral belief), and the second is doing so because it’s good for the bottom line. An argument for the latter is that companies that care about CSR will outperform and outlast companies that don’t. They will be more attractive to customers and job seekers, and avoid regulatory and reputational risks.
Perhaps the most important thing to know about the business case for doing the right thing is that its popularity with business leaders predates the global financial crisis.
In his 2005 book The Market for Virtue: The Potential and Limits of Corporate Social Responsibility, professor in business ethics David Vogel outlines just how popular. He refers to a 2002 PwC survey that found “70 per cent of global chief executives believe that CSR is vital to their companies’ profitability” and a Fortune magazine survey that found “91 percent of CEOs believe CSR management creates shareholder value”.
But the GFC showed that despite its popularity, businesses did not put CSR at their core. The reason is straightforward. “Why should we expect investments in CSR to consistently create shareholder value when virtually no other business investments or strategies do so?” writes Vogel.
To be blunt, expecting businesses to hold themselves accountable is not a sustainable strategy.
Those who argue that CSR has a strong business case usually put forward examples of thriving responsible companies as proof. But examples of the opposite also exist. Uber is a prominent one. As written about in the September edition of HRM, the transportation giant is currently in the middle of a cultural overhaul after a series of scandals in 2017. But its meteoric rise was not impeded by its risky business behaviour, or the harassment and discrimination many said was endemic in the company.
It could be argued that if Uber cared more about culture, its rise would have been more impressive and it would not have suffered the same setbacks. But this hypothetical cuts both ways. As Vogel writes, “Although CSR may not make firms any less profitable, it is possible that some more responsible firms might be even more profitable if they were less responsible.”
To be blunt, expecting businesses to hold themselves accountable is not a sustainable strategy. Because CSR is not a guarantee of success, it can all too easily become a box ticking exercise for businesses. The financial firms excoriated by Hayne still have on their websites the annual reports to shareholders from the years they misbehaved. In each there is a section on sustainability that highlights its importance to the business.
For example, the Commonwealth Bank’s 2014 report addresses employee engagement and inclusion, its initiatives designed to prevent financial crime and deliver financial wellbeing to Australians of all walks, and how the bank managed risks related to sustainability.
Five years on, CBA’s bill for cleaning up its scandals and for compensating the customers it has wronged is over $2 billion and counting.
No single method
In February this year, ANZ CEO Shayne Elliot released a statement saying the company would not take a compliance approach to the finance royal commission report. It would follow its recommendations and its “spirit”. He acknowledged the cultural changes “will take several years”. In March, a CBA press release announced the bank is ”implementing the royal commission recommendations with full transparency to the community”.
Even if all this action turns out to be short-lived, it shows how CSR is reinforced by regulatory pressure. The business case for doing the right thing is a lot more compelling when the risks are more visible.
Indeed, considering culture has so many contributing factors, it makes a lot of sense that an ‘all of the above’ approach to accountability would be the best way forward. That would mean the introduction of targeted laws, more regulatory oversight of culture, the testing of different board and governance structures, more effective professional accountability for HR, and further efforts to make the business case for CSR more compelling.
But the most important effort will be further education of all people about the nature of culture. Because what isn’t in doubt is its central importance to work.
Returning to France, the trial of executives isn’t the only tragedy to make international news in 2019. At the time of writing, 64 French police officers have suicided this year, more than have been killed in the line of duty.
“Given the situation today, 2019 could be the worst in the last 30 years.”
Denis Jacob, Alternative Police CFDT union
“Given the situation today, 2019 could be the worst in the last 30 years,” Denis Jacob, head of the Alternative Police CFDT union, told the Associated Press. Overwork, the stress caused by dealing with the Yellow Vest movement, and a culture that doesn’t allow openness and vulnerability have all been blamed. A 2018 parliamentary inquiry suggested poor living and working quarters and a fixation on arrest rates could also be factors.
In April, interior minister Christophe Castaner, who has jurisdiction over the national police, announced a prevention plan. He is the third consecutive minister to do so.
So yes, making individuals accountable for culture is worth pursuing. But we shouldn’t forget that there might never be a definitive method for doing so. Culture is about how people interact with each other. And there’s nothing more complicated than that.
This is an edited version of a story that appeared in the October 2019 edition of HRM magazine.