Can Speak-Up Culture Go Too Far?

Compliance professionals talk all the time about the importance of a rigorous corporate culture and tone at the top—but rarely do we see such a vivid example of those two items like we did earlier this month thanks to the management spat at Bridgewater Associates, a huge hedge fund in bucolic Connecticut. Compliance officers couldn’t ask for something more thought-provoking.

The spat itself followed the usual story arc for the hedge fund world: Bridgewater founder and hugely successful co-CEO Ray Dalio grooms heir apparent Greg Jensen; Jensen grumbles about the overall direction of firm under Dalio; disagreement gets published in financial press; everyone at Bridgewater says oh no, it’s all a misunderstanding, we’re working things out and everything will be fine.

That sort of stuff happens at hedge funds, especially when you are the largest hedge fund in the world (which Bridgewater is), and your founder is the most successful fund manager ever (which Dalio has been). What’s interesting for compliance officers is how the spat came to pass, and whether the corporate culture Dalio fostered at Bridgewater helped, hindered, or even caused this tempest in a gold-rimmed teacup.

The root of the problem apparently goes back to the culture Dalio has nurtured at Bridgewater since he founded the firm in 1975: a culture that favors, in his words, “radical transparency.” Dalio even enshrined that doctrine, and the rest of his thoughts on effective corporate culture, in a series of management principles he published in 2011. If you are a compliance professional who thinks about compliance seriously, they are worth reading.

Principle 6 is the key here: “Be radically transparent. Record almost all meetings and share them with all relevant people.” Bridgewater actually does this, and the allegation is that Jensen discussed his misgivings about Dalio with other employees privately, rather than bring them to Dalio directly. (One assumes he also failed to record these gossip sessions and upload them to the central archive. So that’s poor records retention to boot.) Dalio heard about the gossip second-hand, considered it a violation of the firm’s culture, and the power struggle/not power struggle ensued.

All this raises the question of whether your corporate culture can have too much transparency. After all, the compliance fundamentalists out there always talk about the importance of a strong tone at the top and a “speak up” culture. Without question, Bridgewater has all three in spades. And it’s hard to argue that Dalio’s approach doesn’t work, when you look at Bridgewater’s huge success over the years.

Still—something about Principle 6 strikes me as (no pun intended) a bridge too far. Ditto for Principle 5: “Have integrity and demand it from others. Never say anything about a person you wouldn’t say to them directly, and don’t try people without accusing them to their face.” Take-no-prisoners honesty may work in decision-making about investment strategies, but it ignores the reality of how misconduct festers in an organization, and how word of misconduct gets out. You need anonymous channels to report managers who may be doing something wrong. Senior executives have to appreciate that managers can strong-arm subordinates into dishonest actions.

Perhaps the quants and financial whiz-kids at Bridgewater don’t have to worry much about finding new jobs, but many others in many industries worry about job security all the time. Compliance officers and corporate cultures have to respect that reality. So when the boss starts talking up radical transparency or zero tolerance for dishonesty, he (or she) can also set himself up for lower-level employees to keep quiet when things go amiss. That speaks to the wisdom of another principle compliance officers should keep in mind, “All things in moderation.”


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