Leadership vacuum

CEOs of large and small companies alike are increasingly being let go as a result of workplace indiscretions, including sexual impropriety, insider trading, bloated resumes and fraud.

A recent study from PwC on CEO success found that forced turnovers of chief executives due to ethical lapses rose by 36 per cent in the period 2012-2016 over 2007-2011. The sharpest increases came from BRIC nations, Western Europe, Canada and the United States. Within those groups, long-serving CEOs and those heading larger companies were at greatest risk.

“In the late 20th century, even the most serious, large scale, and widely publicized cases of corporate misbehaviour rarely led to dismissal of the CEO,” wrote PwC staff Kristin Rivera and Per-Ola Karlsson in Strategy& this summer. Financial penalties were low and media attention was limited.

Today, CEOs ensnarled in major conflicts are often fired abruptly by boards of directors while facing skyrocketing penalties and the ceaseless gaze of news and social media.

Rather than suggesting CEOs are behaving more unethically today than in the past, Rivera and Karlsson argue that many global companies are pushing into markets where the risks of corruption and poor government oversight are higher. The 24/7 news cycle and the rise of social media, meanwhile, have made it easier for a public already suspicious of CEO honesty to identify corporate wrongdoing and demand that companies take action.

Yet a rise in the number of CEOs fired for ethical breaches may, in a perverse way, help boost low public perception of corporate morality over time, Rivera and Karlsson noted. Building integrity into the business ecosystem is essential, but punishing bad apples may demonstrate to the public that unacceptable behaviour from a minority of CEOs hasn’t spoiled the barrel.

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