In light of the fallout at Wells Fargo & Co., bankers say C-suites should prioritize personal relationships up and down the company to foster a culture of transparency and integrity. At S&P Global Market Intelligence's Big Decisions in Banking Conference, a number of bankers said that while financials are important, intangible management of human capital can be just as important.
John Kanas, the former head of BankUnited Inc. and a number of other banks during his long career, said that CEOs should develop personal relationships with all stakeholders in an organization, from the top to bottom. He said he used to come into work the Friday after Thanksgiving to demonstrate solidarity with all the other employees that had to work. With investors and board members, Kanas said it is critical that a CEO maintain a good relationship with everyone, recalling a story from his time at North Fork Bancorp where the trust of a key investor saved his job.
"Enough with the PowerPoints," Kanas said.
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To avoid a pressure-cooker environment, such as the one at Wells Fargo where employees were pressed to open fake accounts, Kanas said it's important to encourage dissent and disagreement. He noted that CFOs, in particular, often feel scared to deliver bad news to a CEO.
In an industry where M&A remains active, bankers are also being reminded of the importance of strategically thinking about personnel in the event of a merger. Josh Carter, a principal at PricewaterhouseCoopers, said that although employee retention is not considered in the financials of an M&A deal, banks need to think about being effective in communicating and executing on employee integration. Rash personnel management, such as cutting a large number of credit officers to save on payrolls, could lead to harsh consequences, such as local competitors poaching those officers and taking all of their clients with them.
David Provost, president and CEO of Chemical Financial Corp., said that while a company sometimes can't avoid letting go of employees, the best a bank can do is treat those employees well in case the company can, at some point in time, rehire them.
"It's a small world," Provost said. "You want to have a lot of friends out there."
Crowe Horwath's Mark Walztoni said there's also the "flight risk" of a C-suite executive leaving an acquired company. A C-suite executive from an acquired company could voluntarily exit the company if the new combined entity hosts a corporate culture or a management structure that the executive finds uncomfortable. Although a retention agreement might work, bankers at the conference seemed to agree that communicating an integration plan early in the merger process is helpful.
"The best swimmers leave the boat first," Walztoni warned.