CEO dismissals for unethical behavior jumped 36% in the last four years
In 2016, 18 CEO’s from the world’s 2,500 largest public companies, were forced to resign because they did something unethical. 18’s not a very big number but it’s bigger than it’s ever been before.
According PwC’s CEO Success study, CEO dismissals for ethical lapses rose 36% in the last four years vs the prior four years. This includes incidents of fraud, bribery, insider trading, sexual indiscretions, and lying.
It’s interesting to note that the percentage is even higher when you hone in on only the largest companies in the world. And it’s higher among CEO’s who have been with a company more than six years.
What’s happening? Are today’s CEO’s less ethical than they were a few years ago, or is something else causing the rise in forced resignations.
PwC thinks it’s more about a change in climate than a change in people. They pin the rise on several trends that are making it harder for CEO’s to escape a public flogging.
First, is the fact that the public is a lot less forgiving than they used to be. CEO trust is at an all-time low. In the past, we put our blind trust in our leaders but those days are gone. Not only are we more suspicious, we’re also less likely to forgive and forget when we learn of a CEO’s indiscretions.
Another big issue is the 24/7 news cycle and the rise of citizen journalism and social justice warriors. A slip that might have been caught and fixed before anyone was the wiser is now a viral video with a hashtag on Twitter in a matter of minutes. Once the mistake hits the fan, CEO’s often jump to explain themselves publicly, when they should be closing ranks. This leads to a second round of finger pointing that inevitably makes things worse.
Third, is the increase in digital communications, social media and automatic data storage. In 1954, it was your word against your boss’s word. In 2017, there’s a digital paper trail including emails, conversations recorded on a mobile phone, copies of hard drive deleted documents in the cloud, and Facebook confessionals.
Really, it’s a wonder any CEO gets away with even the slightest misstep in the modern world.
But let’s get back to the original question; are CEO’s less ethical than they were? Could be. We tend to think of leaders making unethical choices out of greed. They cut corners that lead to safety issues or they shave a little off the top to line their pockets. But it wasn’t financial gain that led to the most recent lapses; it was social pressure.
Today’s top companies are being asked to hit impossible goals in sales, production and customer service. When a leader is failing, through no fault of his own, he might feel the need to cross the line for the good of the company. Who’s going to notice a slight tweak in those emissions reports? So the ground beef is a day or two past the code – it’s still good to eat, right? And those sexual harassment complaints? You could fire those responsible but that’s going to lead to a loss of productivity. Who has time for that?
We’re all so very good at justifying our actions.
Here’s the problem, saying you did the wrong thing for the right reason isn’t going to protect you or your company when the world finds out. Yes, it’s tough to stand up at a board meeting and say that your exciting new product doesn’t actually work. But it’s a lot tougher to face a news camera and admit that you repeatedly lied in order to keep the money coming in.
Before you write this post off with a breezy, “that would never happen to me”, remember that we all handle pressure differently, and while you may have the strength to battle on, the people who work under you might not have as strong a moral compass.
Protect your company by carefully monitoring incentive-based goals, encouraging communication at all levels, and investigating all allegations of misconduct. And, above all else, always strive to do the right thing because the world is literally watching.
