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Speeches, Statements & Testimonies

Remarks by Jonathan McKernan, Director, FDIC Board of Directors on "Oversight of the FDIC's Failed Leadership and Toxic Workplace Culture" before the Committee on Financial Services, United States House of Representatives

Chairman McHenry, Ranking Member Waters, and Members of the Committee, I am here as a co-chair of the Special Review Committee that oversaw Cleary Gottlieb’s review of the FDIC’s workplace culture.

To the FDIC employees who might be watching today: Cleary’s report establishes that you have been heard. The report makes clear that what happened to you was real and totally unacceptable. I hope the report puts us on a path to change. I hope also accountability—actual accountability—won’t be too far off.

I’d like also to convey my respects and appreciation to Director Hsu for the constructive and non-partisan way in which he approached the review. I think this review was a good example of how the FDIC Board can and should work.

In my year and a half at the FDIC, I have developed a strong attachment to the FDIC’s staff and our shared mission. Overseeing the review, I learned of a different side to the FDIC.

That was a jarring experience. I know most had a similar experience reading Cleary’s report. 

Cleary’s report is a painful read. The report documents sexual harassment and other misconduct at the FDIC of a scale and nature that shock the conscience. 1 The report describes a “good ol’ boys” club that is “patriarchal” and “misogynistic.” 2

The report makes clear there has been a widespread and credible fear of retaliation that deters victims from reporting misconduct. 3 The report also makes clear that there has been a failure to hold wrongdoers accountable when actually reported. 4

The report describes how these dynamics compound upon each other, fueling a cycle of deepening fear and distrust among employees, especially women and underrepresented groups.

It is also the case that almost all of the FDIC’s staff are good people, solid public servants, deeply committed to a mission that is central to the success of our country.

Reconciling that with the Cleary report comes down to a question of leadership.

An organization can prioritize protecting employees. It can strive to root out wrongdoers and make an example of them.

Or an organization can prioritize protecting itself. It can strive to brush wrongdoers under the rug, move them around or even promote them, all with an aim of avoiding the bad publicity, litigation, time, and expense of disciplining wrongdoers.

The FDIC too often chooses the second path. That choice isn’t driven by policies, procedures, or training. That choice is driven by values. And values are set by our leaders.

Thank you, and I look forward to your questions.

  • 1

    “Over 500 individuals bravely reported into our hotline, often painfully and emotionally recounting experiences of sexual harassment, discrimination, and other interpersonal misconduct that they have suffered at the FDIC.” Cleary Report at 1. “97 individuals reported 145 separate incidents of sexual assaults, unwelcome sexual advances, unwanted touching and attention, and other verbal and physical conduct of a sexual nature, as well as the pursuit of romantic relationships with subordinates; 91 additional individuals reported 141 separate incidents of gender or sexuality-based discrimination that did not fall into the sexual harassment-related categories above; 187 individuals reported 320 separate incidents of workplace bullying, threats, and other verbal abuse; and 191 individuals reported 295 separate incidents of other forms of discrimination . . . .” Id. at 115. The sheer number of the reports is all the more shocking if one acknowledges that these 500+ reports are only a fraction of the incidents of misconduct at the FDIC. Victims are understandably reluctant to relive the sexual harassment and other misconduct they suffered; there were practical difficulties in soliciting reports from former FDIC employees; and FDIC employees widely feared retaliation even in reporting to the hotline. See Id. at 13 n. 42 (“A number of former employees we reached out to did not respond and others noted that they would prefer not to speak to us out of concern that their current professional circumstances might be negatively impacted.”); id. at 4 (“That this much fear exists, even in reporting anonymously to an independent law firm, indicates that there are likely many others who have not reported and remain fearful of reporting misconduct they have experienced at the FDIC.”).

  • 2

    “These incidents, and many others like them, did not occur in a vacuum. They arose within a workplace culture that is ‘misogynistic,’ ‘patriarchal,’ ‘insular,’ and ‘outdated’—a ‘good ol’ boys’ club where favoritism is common, wagons are circled around managers, and senior executives with well-known reputations for pursuing romantic relations with subordinates enjoy long careers without any apparent consequence.” Id. at 2.

  • 3

    “[F]ear of retaliation at the FDIC remains real and widespread.” Id. at 4. One root cause of the workplace culture issues is “[a] deep-seated and credible fear of retaliation that has prevented employees from raising and reporting issues of workplace misconduct internally.” Id. at 4; see also id. at 147 (“[O]ne of the most prevalent and consistently reported concerns expressed by FDIC employees was fear of retaliation.”). FDIC employees have said that “when complaints are made, managers ‘close ranks’ and work to protect themselves instead of taking concerns seriously.” Id. at 99. Following this “circling of the wagons,” “forms of retaliation people fear ranged from being made to travel or travel more often, receiving bad evaluations, to getting reassigned or having bonuses withheld, to failing to be promoted or being fired, or management would simply ‘mak[e] your life miserable.’” Id. at 100 (footnotes omitted; alteration in original). An employee who filed a complaint was told by her supervisor “[y]ou dug your own grave, and now you need to lay in it. . . I’m done with you.” Id. at 147 (alterations in the original). As another employee put it, “[e]veryone knew if you spoke out you would get a bullseye on [your] back.” Id. at 147.

  • 4

    Another root cause of the workplace culture issues is “[a] failure over time to hold wrongdoers accountable in a way that is transparent to employees, with wrongdoers being moved around, even promoted, and not disciplined in any meaningful or perceivable way.” Id. at 4; see also id. at 145 (“The FDIC suffers from a failure to hold employees accountable for misconduct . . . as well as a widespread perception within the agency that wrongdoers are not held to account.”). Of the 92 harassment complaints made through the FDIC’s Anti-Harassment Program from 2015 to 2023, none resulted in a removal or reduction in grade or pay. Id. at 3. Only two resulted in suspensions, and only two resulted in letters of reprimand. Id. Twelve resulted in other slaps on the wrist (e.g., counseling, warnings, or trainings). See Id. The remaining 76 led to no discipline at all. Id. Executives and managers with well-known reputations for misconduct and romantic relationships with subordinates have enjoyed promotions and long careers without consequence. Id. at 145 (“[O]ur review has revealed a number of examples over the years of FDIC managers who had been involved in interpersonal misconduct with impunity . . . .”); id. (“[T]here have been a number of FDIC executives, including former Regional Directors, who had well-known reputations for pursuing and having relationships with FDIC employees, including subordinates, but went on to long careers within the FDIC, moving around and rising to senior levels without consequence.”). As an executive explained, wrongdoers can expect that the FDIC will simply “pay, promote, or move them.” Id. at 2–3; see also id. at 145 (“Indeed, a number of these individuals were promoted and moved among different divisions and regions, creating the impression that workplace misconduct is not only condoned, but allowed to spread around the organization.”). “This actual and perceived failure to hold individuals accountable has had a number of negative consequences, including a view among employees that certain types of misconduct is condoned and that there is no point (especially when weighed against the risks) in reporting bad behavior.” Id. at 145; see also id. at 147 (“When an organization does not firmly and consistently hold those involved in workplace misconduct accountable, it undermines the culture, sows doubt in the integrity of its processes, and stifles the reporting of misconduct that is a necessary part of improving workplace culture.”). That in turn leads to less reporting, “creating a cycle of even less accountability.” Id. at 145.

Last Updated: June 20, 2024