Karen B. Peetz, president of BNY Mellon, is no stranger to crises of confidence. She served as a member of Penn State’s Board of Trustees and later as the board’s chairwoman when the university had to deal with the child sex abuse scandal of its storied football team led by longtime coach Joe Paterno. “Somebody had to step up and say we accept responsibility,” she told attendees of the SIFMA Annual Meeting Tuesday.
Peetz sees parallels between Penn State’s scandal and the state of the financial markets industry. While BNY Mellon was not directly involved in the activity that led to the financial crisis, the bank had “protesters marching on our building … handing out leaflets that said we are corrupting the world,” she said. Five years after the crisis hit, the industry is still dealing with the fallout.
“We lost the trust of the investing public, of the taxpayers, of the regulators,” Peetz said. “It’s our shared challenge to restore that trust.”
Peetz offered four ways the industry can overcome its crisis of confidence:
Embrace diversity. Research has shown diversified organizations are better at risk management, innovation and sales growth than organizations run by people with the same backgrounds, Peetz noted. “It’s about sustainability and achieving a competitive edge,” she said. While chair of Penn State’s Board of Trustees, she helped add representation from students, faculty and staff to the board.
Foster healthy dissent. The industry needs to re-think its definition of teamwork and strive for “constructive friction,” Peetz said. She suggested an openness to new ideas and criticism can help financial companies identify opportunities for improvement.
Strengthen focus on the client. Peetz recommended continually looking for ways to align a firm’s interests with clients as the best way to rebuild trust. Also, “treat your regulator as your best client,” she said. She noted that a good working relationship with regulators benefits everyone involved.
Move past denial. “Get over it and get your organization to deal with it,” Peetz said. As chair Penn State’s Board of Trustees, she helped the university face its scandal head on, implement reforms outlined by an independent review and enhance its risk management and compliance capabilities. At BNY Mellon, she promoted cultural change by bolstering a credit training program to improve risk management across the company. “We have to prove ourselves worthy of trust,” she said.