More CEOs were dismissed for ethical lapses than for financial performance or board struggles last year. Out of 89 forced CEO departures from the world’s 2,500 largest publicly traded companies, 39% were due to ethical misconduct, according to a study by Strategy&, a consulting arm of PwC.
It was the first time in the study’s 19-year history that ethical lapses were the leading cause of CEO dismissals. Ten years ago, 52 percent of forced exits were linked to financial performance, 35 percent to board conflicts and just 10 percent to misconduct.
Some of the major companies that forced out their top executives due to accusations of ethical misconduct include CBS, Barnes & Noble, Lululemon and Intel.
No Tolerance for Misconduct
CEOs are not necessarily less ethical than in the past, the study’s authors say. Instead, they point to an increase in public scrutiny, aggressive regulators, activist investors and sexual harassment allegations due to the #MeToo movement. In addition, corporate boards increasingly espouse a zero-tolerance policy toward executive misconduct.
“Boards feel they have to hold their CEOs accountable to the code of conduct in the same way they would with employees,” Bill George, a senior fellow at Harvard Business School and former chief executive of Medtronic, told The Washington Post. “There’s a strong feeling from boards they have to do it.”
How Corporate Communicators Can Promote Ethical Business Behavior
Corporations and their CEOs might avoid such predicaments with greater involvement of public relations experts. PR pros can serve as a moral compass for organizations and can lead efforts to promote high ethical standards of top executives and the entire organization. Some steps:
Review the ethics policy and training. Re-examine and update ethical compliance policies and programs, particularly for those relying heavily on employees to report misconduct. Communicate the importance of the ethics policies through regular training seminars, the organization’s internal newsletter or intranet, and other communications vehicles. Determine how other organizations are training employees in ethical behavior and adopt their best approaches. As the company evolves, review and adjust the ethics training programs.
Examine whistleblower programs. Examine the level, frequency, and type of reports received through the company whistleblower hotline. Testing, sometimes with the help of analytics or other tools, can help discern reasonable levels of reporting and false positives, so that anomalous reports are more easily identified and more quickly investigated.
Survey employees. Annual employee surveys on ethical standards and behaviors and exit interviews can lead to better informed updates to standards language, employee training and communications. Survey questions on the company’s Intranet or after employee meetings can prompt fresh and relevant data that uncovers shifts in employee attitudes. Monitor key metrics on employee engagement, recruitment and retention on a communications dashboard, recommends Katie Paine, CEO of Paine Publishing LLC.
Seek advanced tools. Consider cognitive solutions to identify anomalous employee behaviors and advanced analytics to identify third-party patterns. “The learnings from culture risk detection systems can help enhance the information leadership teams use to make decisions around ethics compliance policies and procedures,” advises Carey Oven, a Deloitte Risk and Financial Advisory partner, Deloitte & Touche LLP
Review third-parties. Perform background checks on third parties at least annually. Leveraging everything from annual third-party surveys to social media analytics of suppliers can help organizations understand with whom they’re doing business, Oven says. Media monitoring can also uncover vendor attitudes toward ethical business behavior.
Bottom Line: In a growing trend, more CEOs are being forced out due to ethical lapses. Corporate communicators can help avoid such scandals with greater involvement at the C-suite level. Greater emphasis on ethics standards, employee input and advanced monitoring tools can prioritize and promote ethics throughout the organization.
William J. Comcowich founded and served as CEO of CyberAlert LLC, the predecessor of Glean.info. He is currently serving as Interim CEO and member of the Board of Directors. Glean.info provides customized media monitoring, media measurement and analytics solutions across all types of traditional and social media.