Credit Suisse: The Ultimate Business Case For Transformational Leadership Development?

Blackberry. Nokia. The UK Government. Kanye West (Ye).

They are all great business cases for why real leadership development, that transforms how leaders sense, feel, think, and act—as opposed to management 'training' rebranded as leadership development—so often makes the difference between corporate failure (whether underperformance, legal troubles, or bankruptcy) and long-term success in our complex and relentless changing world.

One can tell a huge amount about a company’s leadership culture by how they treat ‘vendors’, especially those working on creativity and innovation and the supposed ‘soft’ skills like empathy, empowerment, and ethics. 

We “lucky few” are people with no vertical power in the system. We cannot award leaders a promotion or more pay. We do not whisper to the CEO on the golf course about how to cut costs and acquire companies. We don’t promise ridiculous profits (without purpose or morality, that is). We can only show up and share insights, ideas, and inspiration enlivened by on our own purpose and maturity as leaders of leaders.

I have a few tales to share from the frontlines of leadership advisory.

I met with the CMO of Blackberry in 2001. My then biz partner and I shared with him that our proprietary innovation research into the "connected worker" was throwing up emerging insights that people did not want to be contactable by their bosses outside work hours or have their phone be owned and controlled by their company. He was not interested.

Failures are caused by flawed mindsets that throw off a company’s perception of reality And delusional attitudes that keep this inaccurate reality in place. Professor Finkelstein, Why Smart Executives Fail

In 2004, an actual client, Nokia, was unbelievably hard to work with while we designed and led a breakthrough innovation program for them to invent the future of tech retail. Insights were ignored. Challenges to assumptions rejected. Terms and conditions were onerous and punishing. At the time, they had 40% market share and seemed, like Asterix, indomitable.

More recently, and without my personal experience, the British government is paying billions in extra interest on loans because of their leadership incompetence. This is sucking up much-needed resources that could pay junior doctors and teachers sufficiently. The price differential on UK bonds has been dubbed the “moron risk premium" by economist Dario Perkins.

Kayne, who made a flurry of wildly anti-semitic remarks unprompted, claims to have lost $2 billion in 24 hours as brands like Adidas walked away from him.

All of these epic fails—that cost many people their livelihoods and shareholders their investments—would have been preventable by leaders who proactively developed, evolved, and expanded their empathy, morality, creativity, and consciousness. Yet the average brand manager at Unilever has more leadership development invested in them than national politicians.

Yet perhaps the Ultimate Business Case for why invest in leadership development is such a great lever of success is Credit Suisse, who have presided over an astonishing destruction in value ($80B market cap in 2006 to $3B sale this week), the loss of an august, century-old brand, and perhaps triggering our entire banking system to collapse simply because their leaders could not run a bank with integrity.

In 2019, it was revealed that the COO hired private investigators to spy on high-level employees. The private investigator also mysteriously "took his own life," the bank reported.

Last year, a whistleblower leaked details of over 30,000 customer accounts detailing "the hidden wealth of clients involved in torture, drug trafficking, money laundering, corruption and other serious crimes."

Even after countless scandals, fines, and investigations over the best part of a decade, Credit Suisse's leadership still could not manage to do their business or report on the business they do, with honesty and accuracy.

A class action lawsuit accuses the bank of making “materially false and misleading statements” in its 2021 annual report. Last week, Credit Suisse itself admitted it had “material weaknesses” in its compliance procedures which may have resulted in “misstatements” of financial results.

WTF? Could their 50,000+ staff really not tell how much money they made or lost (and how)? Surely this is management 101.

In the last few months, customers withdrew hundreds of billions of dollars from the bank. Then the Swiss government stated they would inject c.$50 billion into the bank even as the share price bombed. Even that was not enough. UBS was asked to step in and buy the company for chump change, given the bank is in the list of the largest banks that all pose a systemic risk to the global financial system.

Now Credit Suisse's "CoCo" bondholders are discussing whether to sue because of the terms of its fire-sale to UBS, its bigger competitor. It looks like these people will lose $17 billion for supporting the bank, which upends global precedent in which bondholders are paid back to normal shareholders during liquidation or acquisition events.

This disruption could make AT1 bondholders of other banks sell up, bringing more bank runs and global instability which always impacts us citizens poorly. Even in corporate death throws, Credit Suisse is doing the wrong thing.

None of this was inevitable. Credit Suisse had ample time, money, resources, and warnings to change course. That it did not is entirely down to its senior leaders.

You guessed it, I met one of them a few years back on the recommendation of a mutual connection. This senior leader appeared dismissive and arrogant, like they could barely be bothered to attend the meeting. Yet it is likely that they merely treated me as they treat their minions (and, likely as not, as they too had been treated by even more senior leaders.)

This kind of cultural deep code is what runs a company, no matter how good the strategy, restructure, write off, turnaround plan, or acquisition. Culture eats constant management restructures, like those seen at Credit Suisse, and government-mandated fire sales to UBS, for breakfast, lunch, dinner, (and midnight snacks.)

When a business has so many brushes with the law, breaks so many rules, has so many ethical and moral (‘compliance’) scandals, is fined repeatedly by government regulators, and sees customers and employees leaving in droves… it usually indicates a culture that is profoundly corroded and corrosive.

What is so awful about companies deemed to be "too big to fail," is that taxpayers end up propping up corroded and corrosive cultures. We saw this happen during the 2008 crisis when bankers got richer as millions lost their jobs and their homes because governments bailed out the bank (to the tune of half a trillion dollars, according to MIT Sloan). Only one person went to jail.

Until bankers have more to lose themselves, collapses like SVB and Credit Suisse will keep happening Natacha Postel-Vinay

When governments step in—even if they need to, in order to protect an unfit for purpose, but seemingly still essential, finance system—leaders don't learn their lessons. Cultures don't have to transform. The medicine is left unmetabolized. The Chairperson of Credit Suisse said last week: " We have strong capital ratios, a strong balance sheet. We already took the medicine.”

Company cultures like this repeatedly choose and incentivize talent precisely because they attempt to cheat and game the system for profit... even as they promise improvements in compliance, reporting, and behavior. Such cultures don’t change very much through processes, restructures, or new owners.

Corroded and corrosive cultures change only through the slow and messy (yet utterly enlivening and empowering) process of transforming the leaders who walk and talk the values and behaviors the company desires. Without transforming these leaders, process changes or purchases are highly unlikely to lead to radically more creative mindsets and ethical behaviors. 

This is why leadership (and the trust, innovation, and transformation it unlocks) is the only strategic lever of competitive advantage in your complete control. Yet, according to a PwC report, "nearly 40% of CEOs think their company will no longer be economically viable a decade from now, if it continues on its current path."

It is only when Boards see investment in leadership development to be as important as spending on executive pay packages and share buybacks, that organization will take full responsibility for their own survival, and potential flourishing, in the crisis-hit world we find ourselves in.

For truly transformational leaders know that there are no excuses for immoral behavior, no point in blaming "difficult market conditions" when they have the power to innovate their way out of any difficulty, and no limit to new ideas and adaptive responses possible to even the toughest of challenges.

Find out more about my work to transform leaders and leadership cultures at Switch On Leadership.