‘Massive failure of governance’: Leadership lessons as Odey AM closes

Firm is closing following allegations of sexual harassment by its founder

The workplace environment allowed to persist at Odey Asset Management has been described as a “massive failure of governance”, as the business closes following a wave of sexual harassment allegations against its founder and CEO Crispin Odey.

A culture of silence in financial services about sexual misconduct is thought to have allowed such alleged abuses to continue at Odey AM for 30 years. They only came to light when 13 women came forward to expose the behaviour of the hedge fund manager to the Financial Times newspaper five months ago. Since then seven more women have made accusations against Odey. He denies many of the claims.

Following the allegations, the firm, which 64-year-old Odey founded in 1991, announced on its website on Tuesday (31 October): “Odey Asset Management, including Brook Asset Management and Odey Wealth, will be closing. Fund managers and funds have moved to new asset managers.”

Leading asset managers who have responsible investment chiefs in place have declined to address the governance situation at Odey Asset Management following news of its impending closure.

Heads of stewardship and sustainable and responsible investing at Fidelity International, Schroders, Credit Suisse, Amundi, and Robeco all declined to comment on the role of governance at the firm. Pictet, Rathbones, and M&G didn’t reply to a request for comment.

The head of global industry standards at the CFA Institute, which “aims to promote standards in ethics, education, and professional excellence in the global investment services industry”, also chose not to comment on the issue, as did wealth manager AJ Bell.

‘Massive failure of governance’

One investment professional who would speak out, Gemma Woodward, head of responsible investment at Quilter Cheviot Investment Management, and ESG Clarity EU committee member, says “looking at the Odey situation [you] see very clearly that there was a massive failure of governance”.

“To the extent that people were ignoring the issue and did not think that Odey’s behaviour could or would be addressed and therefore the focus was on changing other behaviour.”

According to reports, Odey was allowed to act as he wished in the office and women were told to change their behaviour to avoid him, for example by not sharing a lift with him and instead taking the stairs, and not being in a room alone with the hedge fund manager.

“In any governance structure that works there are, or should be, checks and balances in place – the CEO, chair, senior independent director, and so on – so that no-one is omnipotent,” Woodward says.

“This may be more of an issue with a ‘star’ who has set up shop and therefore dictates the culture and a structure that makes it harder to challenge them.”

The purpose of the corporation, the role and makeup of boards of directors, and the compensation and oversight of top executives have emerged as core issues in companies’ corporate governance structures, according to analytics firm S&P Global.

Karin Pasha-Huizinga, responsible investment officer at Colesco, a private credit specialist, says good governance “is more an enabler and boundary condition and not a goal in itself, [unlike the E and S in ESG]”.

To limit the kind of excesses reported at Odey, companies must “make sure you have sufficient countervailing power, so nobody can get the impression they are God”, she says.

Have a gender diverse top: conversations change when teams are better mixed. And set the right tone and culture at the top. Culture is everything,” Pasha-Huizinga adds.

FCA conduct rule expansion

The Financial Conduct Authority’s (FCA) current consultation on Diversity and Inclusion (CP23/20) addresses non-financial misconduct, and reflects a desire to capture and evaluate more in-depth information about an individual’s behaviour. 

For example, the FCA is proposing to widen the scope of their conduct rules to include serious cases of bullying and harassment within a firm. 

The consultation’s proposals also suggest that the ‘fit and proper’ test will consider serious misconduct, such as sexual or racially motivated offences, both inside and outside the workplace. 

Peter Swabey, policy and research director at the Chartered Governance Institute UK and Ireland (CGI), says the Odey AM case is one “of unacceptable behaviour on the part of an individual”.

“Senior leaders are not only accountable to the board, but must also set an example for other employees. When leadership goes wrong and behaviour is not up to scratch, there is a knock-on effect on the people and attitudes throughout an organisation,” Swabey adds.

Governance “functions as a framework for better decision-making”, according to the CGI.

“Whether those decisions are made on a collective or individual basis, they should be made in the best interests of the organisation, and in an informed manner, without being swayed by personal interests,” Swabey says.

“One dominant personality can interfere with the decision-making framework that good governance seeks to provide.”

The FCA has opened probes into both Odey AM and its founder.