This morning’s denouement in the Gallagher lawsuit was dramatic in reversing the expectation that Ardonagh would have to pay money to its bitter rival for everyday breaches involving a number of staff hires.
Some millions went in the opposite direction to that which most observers probably anticipated.
And that result will clearly be embarrassing to Gallagher given the lengths it has gone to with this lawsuit.
Gallagher will also struggle to shake the perception that it pursued this case not out of a level-headed sense of business advantage, but partially owing to an animus – referenced in the court case – between group CEO Pat Gallagher and his former protégé, the now Ardonagh CEO David Ross.
At a minimum, the company’s decision to pursue this suit has to be called into question given the material it knew would become public during discovery. The cold logic of business and maximising shareholder value would have seen this settled behind closed doors.
But as much as it vindicates Ardonagh and undermines Gallagher, the legal judgment here is really the sideshow.
The right and proper focus now is the conduct of Gallagher’s London leadership team, and the company’s culture.
Discovery showed that Simon Matson, then Alesco CEO and since promoted to CEO of Gallagher in the UK, described Nawaf Hasan as a “fat complicated Arab” in a message after the executive resigned, with Alesco COO Gary Lashmar adding “and a very greedy one”.
Commercial director Vyvienne Wade talked about “72 virgins” waiting for Hasan in heaven, which the judge described as a “wholly gratuitous” and “in context grossly insulting” reference to Hasan’s Muslim faith.
The management team, including Matson, described Hasan as a “c**t” – with the same language reserved for others who resigned.
Mr Justice Freedman concluded that Hasan was “the subject of abusive and racist comments”.
Elsewhere he said that there was a culture “of being part of the team or nothing”. Matson said that James Brewins was “dead to [him]” after resigning, with Gerard Maginn “demonised” on news of his departure.
The management culture is portrayed as highly aggressive, with the judge comparing it to “fanatical” football supporters, where a player is “vilified and demeaned” for leaving.
The judge was also highly critical of Matson, who he said was “a particularly partisan witness who leapt to positions which were unmeasured and who was quick to anger”. He added that Matson wanted to go to war with Ross and wanted to “crush” him.
There is further criticism relating to his tendency to suspect or allege things – including bribery and corruption – without being able to produce evidence.
All told, the revelations from the court case about the management culture at Gallagher in the UK are devastating.
The judgment paints a picture of a toxic management culture of racism, abuse and aggression.
The London insurance market has just passed through an incredibly difficult period following Bloomberg’s exposé on sexual misconduct and the Lloyd’s culture survey.
Lloyd’s CEO John Neal has said that everyone in the Lloyd’s market must act with integrity, be respectful and always speak up – standards which he said will apply to “accredited brokers”.
“If you take the extreme view of ignoring them, there will not be a place for you in the market.”
The Financial Conduct Authority (FCA) has also been crystal clear on the importance of culture and the Senior Managers & Certification Regime, which comes into force for brokers in December, will raise the bar again.
With the case ongoing, we have been circumspect in our use of language to date.
But with this information in the public domain, we think that Gallagher must now acknowledge that it has a culture problem in London.
Group management at Gallagher must move energetically to address this. It should consider appointing an independent third party to conduct a review.
But it must also acknowledge that this is not an issue that can be fully and appropriately tackled without a change in leadership.
If Gallagher does not act itself, and decisively, it risks having the decision taken out of its hands. It is hard to see that the FCA and Lloyd’s will stand idly by in the current climate – if they do it will prove that their comments on culture were hollow.