The effectiveness of the Securities and Exchange Commission is undermined by low employee morale, poor internal communication, and the lack of proper systems to monitor employee performance and promotions, according to a new report issued by a federal watchdog.   

The Dodd-Frank Wall Street Reform and Consumer Protection Act mandated that the Government Accountability Office report on the SEC's personnel management. Last week, it issued that report and the news wasn't good for the agency. It found that the SEC's “organizational culture is not constructive and could hinder its ability to effectively fulfill its mission.”

For its investigation, GAO surveyed SEC employees and senior management (with 78 and 74 percent response rates, respectively) to gather views on organizational culture and personnel management practices. It also spoke with former employees, the SEC Inspector General, representatives of the employees' union, financial industry associations, consulting firms, and academics. As of Sept. 30, 2012, the SEC employed 3,829 staff.

“Many current and former SEC employees cited low morale, distrust of management, and the compartmentalized, hierarchical, and risk-averse nature of the organization,” the report says, adding that “improving communication and collaboration within the SEC is critical to its effectiveness.”

According to those who provided written survey comments, morale is low for various reasons, including a lack of effective leadership and communication and dissatisfaction with the current performance management system and opportunities for promotion.

When asked whether there is an atmosphere of trust at SEC, many disagreed (40 percent of non-supervisory staff and about 30 percent of supervisory staff). An “adverse working relationship” between the union and management may have contributed to the level of distrust between staff and upper management, the report suggests.

Current and former staff described SEC's culture as “siloed,” with work compartmentalized in each division with little communication, collaboration, or movement occurring between divisions. At least one-third of non-supervisory staff and supervisors said that in the past 12 months they had not contacted staff in other divisions (except for Enforcement) to coordinate activities or seek expert advice. Roughly 21 percent of non-supervisory staff said communication between other divisions on work-related matters is not encouraged.

More than half of staff and 62 percent of senior officers agreed that the fear of public scandals may contribute to a culture of risk aversion at the SEC. Some remarked that recent enforcement failures and related, sustained criticism from members of Congress and the public, contributed to an “unwillingness to take risks and innovate.” Nearly half of staff agreed that fear of being wrong has made senior officers reluctant to take a stand on important issues. Added layers of review, because of these fears, has decreased efficiency and slowed decision making, they said.

Among the GAO's recommendations were implementing an “Evidence-Based Performance Management System” that includes individual development plans for all employees, improving performance review systems and incentive programs, and instituting a better process for supervisors to deal with poor performance.  A workforce plan should address gaps between current and future workforce needs, and the SEC should develop a comprehensive management succession program, the report says.

Topics