Unethical CEOs Under Fire

Unethical CEOs are not getting away with abuses of power as much as they used to before. That according to a study by Strategy& on CEO accountability. PWC’s Strategy& reports that CEOs involved in fraud, bribery, insider trading, environmental disasters, inflated resumes, and sexual indiscretions are being shown the door more often. In fact, firings for ethical lapses have been rising as a percentage of all CEO successions. Dismissals for ethical lapses rose 36 percent from 3.9 percent of all successions in 2007–11 to 5.3 percent in 2012–16 worldwide.  The increase was more dramatic in North America and Western Europe where dismissals for ethical lapses rose from 4.6 percent of all successions in 2007–11 to 7.8 percent in 2012–16, a 68 percent increase.

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Is the number of Unethical CEOs on the Rise?

Of course, the increase raises the question whether more unethical CEOs are acting badly; whether more CEOs are simply being held accountable for bad behavior; or some combination of the two. (While more bad CEOs are being shown the door, it turns out most good employees are actively looking for their next jobs.  See Most Workers Want to Leave. )

Strategy& reports:

First, the public has become more suspicious, more critical, and less forgiving of corporate misbehavior. Second, governance and regulation in many countries have become both more proactive and more punitive. Third, more companies are pursuing growth in emerging markets where ethical risks are heightened, and more companies are relying on extended global supply chains that increase counterparty risks. Fourth, the rise of digital communications has exposed companies and the executives who oversee them to more risk than ever before. Finally, the 24/7 news cycle and the proliferation of media in the 21st century publicizes and amplifies negative information in real time.

A digital paper trail and being caught on video is resulting in a greater degree of accountability by CEOs. In the end, the rise is the result of risk mitigation. CEOs who wish to avoid ethical must not only talk the talk but also walk the walk. Their behavior must be beyond reproach and they must respond immediately to any whiff of misconduct. In addition, the CEOs must institute the processes and controls needed to maintain what Strategy& calls a culture of integrity.

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