The saga of Wirecard, the now infamous German payment processing company that collapsed four years ago, continues to plumb new depths with reports in the Financial Times that its fugitive former COO Jan Marsalek may have used the company as a shadow financial network to facilitate a vast Russian operation to spy on European citizens.
The downfall of Wirecard initially centred on allegations of widespread accounting irregularities, with the first concern flagged as far back as 2008. Much has been written since about how the company’s poor corporate culture allowed ethical and compliance failures to remain unchecked for years.
While Wirecard is an extreme example of the impact that a toxic corporate culture can have on an organisation, it also illustrates how it can be symptomatic of far more serious underlying issues, and why it is such a red flag for major stakeholders.
In some ways, corporate culture is an intangible asset that is hard to define and even harder to measure; yet in the asset management industry it has become a key factor in how asset owners select the asset managers they choose to invest with. Indeed, in some respects it appears to play a bigger role than even investment performance.
Our latest 2024 JPES Partners Asset Owner Study found that 97% of asset owners (across pension schemes, charities, insurers, wealth managers and platforms) believe demonstrating a positive corporate culture is a key part of their selection criteria of asset managers. Yet, the same study showed that 84% of the asset owners surveyed felt that managers fell short in this regard.
Understanding and defining a corporate culture is inherently subjective as it can be perceived differently by individuals in an organisation. It’s for this reason that any attempt to define it must be an inclusive process in itself. It must start from the top and have the buy-in at a C-suite level; but it can’t just be defined by leadership – it needs to involve and include the views of the wider organisation.
The Thinking Ahead Institute has produced much content in recent years on how asset managers, and indeed asset owners themselves, can start to analyse and measure their own culture, looking at factors such as openness, clarity and consistency by leaders of organisations. Factors it seems that were missing at Wirecard.
A positive corporate culture instils confidence in investors that their interests are aligned with those of the asset manager. Indeed, it implies that the organisation may also have more effective risk management procedures and robust governance.
JPES Partners is hosting a seminar later this month and will be publishing a report on how asset managers can better understand and define their own corporate culture, what this means for consultant and client relations teams and how they can more effectively demonstrate this to external audiences.