Too often CEOs’ personal misconduct leads to their ousting and plunges organizations into crisis often ending with the demise of the company. “For decades, the main reason chief executives were ousted from their jobs was the firm’s financial performance. In 2018, that all changed. Misconduct and ethical lapses occurring in the #MeToo era are now the biggest driver behind a chief executive falling from the top”, according to this article published in 2019.
A few days ago Jonathan Hemus shared a post on LinkedIn on the importance of preparing for “reputational crises” linked to CEOs’ personal misconduct. A straw poll conducted during a conference organized by his company Insignia – Crisis Management Consultancy showed that 68% of organizations in the room had never exercised such a scenario.
In an article published in this WE’s Financial Times edition appropriately titled “Sex, lies and magical thinking about CEO behavior” Brooke Masters writes: “last year, fully half of the forced CEO departures among the 3,000 largest U.S. companies were due to personal misconduct, up from 14 percent in 2017, according to the Conference Board”.
One of the most interesting aspects of the matter relates in my view to “culture” both in terms of “national” and “corporate” cultures. Perhaps not surprisingly this is addressed in a second FT article “How Bernard Looney’s career at BP unravelled“.
Some, Brooke writes, argue that the ousting of BP CEO Bernard Looney this past week is due to a new wave of Anglo-American Puritanism. Which, I add, should not come as a surprise in the era of religious fundamentalism. Brooke however argues this misses the point, the BP executive “lost his job not because of sex but because of lies”. Which, in the era of surveillance and ubiquitous devices brings to my mind “Sex, lies and videotapes”.
Brooke concludes that perhaps the nature of the CEO job “makes some occupants vulnerable to magical thinking, both about what they are entitled to do and what they can get away with”.
This is most probably true but, above all, I would also argue that “culture” – especially when thinking of events of a “sexual nature” – plays a key role in the perception of the misconduct and in the ousting of CEOs.
Recent events involving Mr. Rubiales the head of the Spanish women’s soccer federation and the team’s coach clearly exemplify this.
The impact of misbehavior on corporate reputation is significant and long-lasting according to an interesting article published back in 2016 by the HBR. All things considered, no lessons appear to have been learned. Hence the need to exercise such a scenario.