Boards are Starting to Get It

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By Adam Turteltaub
adam.turteltaub@corporatecompliance.org

In the last few weeks, there have been a dizzying number of CEO departures not for financial malfeasance, disappointing performance or major legal issues.  Instead, they have left because of violations of the company’s code of conduct.  Papa John’s, Texas Instruments, Intel and Clarks all saw their CEOs exit the building.

Each departure, I would argue, is a sign that Boards are increasingly aware of the importance of compliance, ethics and setting the right tone at the top.  Decades ago, maybe even a few years ago, some of the offending behavior might have been tolerated or led to a quiet slap on the wrist.  Not anymore.

In each case, the CEO wasn’t given a pass.  The company’s values were the company’s values, no matter if you stood behind a counter in a store, or on an assembly line or in the C-Suite.

As painful as this has been for these companies and the individuals involved, it’s a sign of a significant change in business, and it carries with it two powerful messages.

First, for each company in which the CEO left, employees heard probably the strongest tone at the top that they have ever heard in their careers.  An email from the CEO or Board chair talking about the company’s values speaks strongly.  A termination of a company leader shouts:  we take this seriously.  If anyone was wondering if the company means all that stuff in the code of conduct, they don’t anymore.

Second, for the rest of the business community the message is clear:  boards are recognizing that you can’t look the other way at misconduct from anyone.  They have to act and are acting, and, increasingly, it’s going to be hard for boards who don’t act to justify their own behavior.

And, as a corollary, board members need to ensure that they fully understand what the compliance and ethics program is, what the risks are, and how to support the program, especially when there is an issue involving top management.

Once that happens, we’ll likely have fewer weeks filled with CEO departures.

5 COMMENTS

  1. Wow, what a relevant and enjoyable article to read. I love seeing this increase in business accountability. Initiatives that encourage board members to support the compliance plan shows their employees that the Code of Conduct is a valued structure that is meant for everyone.. clinic workers, c-suit, and the board members themselves. I can see it also being a way for organizations to gain empowerment and build morale at the same time. Thank you for sharing.

  2. While there are many differences in the sports world, there are similarities as well. Just in the past year or so: The leaders of USA Gymnastics and the USOC, the Presidents at Penn State and Michigan State, the owner of the Charlotte NFL Team, and the beat goes on. Good article, Adam.

  3. Spot on, Adam. I did a quick search before the Ethics session of the last Academy in Amsterdam and was astonished at how many CEOs and SVPs had been dismissed for unspecified behaviour inconsistent with the Code of Conduct. Every CECO should be having a private conversation with the CEO so they understand the bar has been reset.

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