Truth-Telling and Fools

Who tells you the truth?

King Lear and his Fool. Artist: Ary Scheffer. Source: Folger Library

No one wants to hear bad news. That’s why accountants and finance professionals are often so unpopular. A leader may have grand visions for the future filled with growth and opportunity—but his finance people tell him he doesn’t have the money to pay for it. Good leaders listen to counsel; bad leaders shoot the messenger, surrounding themselves with toadies and sycophants.

Eventually, these leaders overreach. They try to do something beyond their resources, and don’t learn of their errors until it’s too late. It’s important for companies to have systems in place where bad news can be safely conveyed to senior management before mistakes become so ingrained into the system that drastic steps are needed to correct them.

Wells Fargo reportedly had an ethics hotline where employees could report their concerns. But many employees were fired shortly after they spoke out about sending out debit cards or enrolling customers in online banking without their permission. Whistleblowers are supposed to be protected by law from retaliation. But Wells would then closely monitor the tipster and fire them for some other offense, like showing up late to work.

Now Wells is facing hundreds of millions in fines, and the stock has lost over $20 billion in market value. If the charges of retaliation prove to be true, senior executives could face criminal charges. And the brand has been seriously damaged. Why would anyone trust these people?

Many of Shakespeare’s lead characters attack those who bring them bad news—especially just before they fall. Cleopatra, Macbeth, Henry IV—they all threaten to kill the messenger. Ironically, it was the king’s “fool” who was often the most frank. Fools are the ones who have little to lose—and so they may be the only ones who are willing to tell the truth.

If we want to avoid becoming the main characters in our own tragedies, we need to have a culture that encourages people to speak the truth to those in power. A prophet may have no honor in his own country. But we have to see the world as it is—not how we’d like it to be.

Douglas R. Tengdin, CFA

Chief Investment Officer

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