Morgan Stanley has landed smack in the crosshairs of the #MeToo movement.
The bank failed to act on knowledge that one of its top financial advisers had allegedly harassed and beaten women over many years. As a consequence, the bank has taken a reputational hit.
What got the investment bank in this mess is a trap endemic to many industries, including banking: looking the other way when top performers misbehave. Too often, the way many Wall Street firms resolve sexual harassment involves protecting the perpetrators and the firm. Though settlements are paid, the men who engaged in the behavior or the men who were in positions to have taken action tend to go unpunished. But looking the other way ultimately erodes trust in the industry.
In the case of Morgan Stanley, the bank gave Douglas Greenberg, a successful broker and a member of the bank’s elite “Chairman’s Club,” a pass for too long. The bank missed multiple opportunities to challenge him for a documented history of aggressively threatening former wives and girlfriends. A New York Times investigation found pervasive knowledge by others at the bank of Greenberg’s bad behavior for years. And yet, he reportedly kept on advising and kept on threatening women outside of the bank with abuse. The bank only fired him in April — after the NYT report came out.
The bank fell smack into the trap of giving Greenberg the iconic status of “rainmaker” since he obviously drove in significant revenue from his clients over the years. There is an erroneous, but unspoken, tendency to overlook the bad behavior of high-performing producers. They’re a protected species. Another case in point: When Omeed Malik left Bank of America under a dark cloud of allegations regarding unwanted sexual advances and other inappropriate conduct, the departure was initially handled quietly. It wasn't until women involved in the case saw a news report where there was an inference that his B of A departure was amicable that they marshaled their resources and leaked the “real” reason.
Rainmakers bring strong talent and organizational influence. Their work is believed to contribute to a disproportionate amount of revenue compared to peers. In their own ways, they are exceptionally gifted, often groundbreaking in their approaches and perhaps even personally charismatic. But they are rarely angels. Out of fear of alienating rainmakers, the C-suite and other high-ranking leaders too often become blind to the ways rainmakers are given a free pass. They are often exempt from the formal rules, policies and codes of conduct required of everyone else.
How could Morgan Stanley have responded more appropriately? I’ll never forget one dramatic example I personally witnessed of how banks can effectively deal with errant top performers. While it goes back to the 1990s, and the lesson is little known decades later, it still serves as the model for taking action. Citibank’s former CEO, John Reed, made a daring move to rein in a dozen errant rainmakers, despite their power to bring hundred-million-dollar deals to the bank. The problem: Their behavior was abusive to anyone who worked with them. Reed gave them a stern warning and offered executive coaching.
Their behavior did not change, so he gave them a second warning. The rainmakers assumed that their value to the bank guaranteed their immunity, since nothing consequential had ever happened when they broke code-of-conduct rules before. But they were proven wrong. When they still failed to respond, Reed fired them all. This made a powerful statement about the lengths he was willing to go to enforce civil behavior and change the informal, emergent norms that were out of step with Citi’s formal rules.
Organizations of all stripes can ill afford to allow rainmakers a pass on behavioral guidelines, regardless of their perceived “worth.” Ultimately, they can become your biggest liability. Examples across multiple fields include James Levine, Matt Lauer, John Lasseter, James Toback and, most recently, Steve Wynn: All had histories of abuse that the rumor mill had already communicated to the world.
If Morgan Stanley is, as it claims, truly “committed to providing a safe and professional work environment,” and to taking “appropriate action based on the facts of the matter,” then the first red flags of Greenberg’s behavior, and the subsequent law enforcement charges, should have motivated the bank to take action much earlier.
This is also true for other top performers in the banking industry: Bad behavior affects everyone from C-level executives to employees to customers. Financial firms should be asking whether their rainmakers are modeling the behavior they expect to see from everyone in their organization. If not, banks need to take strong action that calls them to account before they also wind up in the spotlight. Whether positive or negative, the behavior of the brand is the brand.
These errant behaviors should neither define nor stereotype an entire industry or the men of power in them. But the spotlight will inevitably shine brighter unless bad behavior is checked, corrective actions are transparent and the public sees a genuine effort to reshape business practices. This is not merely a public relations problem — it is a #MeToo reckoning for finance.