Does it seem that there have been more news stories recently about CEOs being fired for scandals and ethics violations? That’s because it’s true! A recent study by Success&, a part of the PwC network, found that dismissals of CEOs for ethical lapses more than doubled in the 2012-2016 study period over the previous five-year period.
Here are the top five CEO ethics firings in recent years:
1. No one will be surprised to see Travis Kalanick, co-founder of Uber, as No. 1 on the list. His forced resignation played out on the front pages and video feeds of every major news organization. The ride-sharing company has had a tumultuous year, with accusations of widespread sexual harassment and discrimination, a lawsuit alleging intellectual property theft from Google’s self-driving car project, and claims an executive improperly accessed confidential medical records of a woman who was raped by a driver.
Also throw in a report about a secret and likely illegal program called “Greyball,” used by Uber to evade government regulatory investigation, and a viral video showing Kalanick aggressively belittling one of the company’s drivers. And that’s just the past year. Not only was Kalanick forced to resign by shareholders following a brief leave of absence, but his departure was preceded by the departure of the COO/President of Ridesharing, the CFO, the General Counsel, the Sr. Vice President of Engineering and 10 other top executives, leaving the tempest-tossed company with little leadership.
2. Wells Fargo CEO John Stumpf was forced to resign after news broke that Wells Fargo Bank paid $185 million in fines to settle a state and federal investigation into fraudulent banking practices. The bank had opened more than 1.5 million fake accounts and filed 500,000 credit card applications without customers’ knowledge or permission. Despite fighting to tamp down the scandal and testifying before Congress, calls for Stumpf’s resignation grew. By the time he stepped down, the bank’s stock had lost over 11% of its value in just a few short weeks, and it was facing a class action lawsuit by customers who were victims of the bank’s fraudulent practices.
Investigators say Stumpf’s “eight is great” mantra – pushing associates to provide that many Wells Fargo products to each customer – helped create a high pressure environment where associates would do anything to meet unrealistic sales quotas.
3. Roger Ailes (FOX News and Fox Television Group) was forced to leave the network he founded when Gretchen Carlson, a top new host, filed a lawsuit claiming that Ailes not only sexually harassed her, but also retaliated against her by refusing to renew her contract after she rebuffed his advances. Although he initially denied the claims, Ailes had to resign when at least six other women stepped forward publicly to say Ailes also had harassed them.
After his resignation and later death, the scandal and cover-up of a culture of sexual harassment continued, causing the loss of millions of dollars in advertisement revenue and ultimately forcing the resignation of the network’s biggest personality, Bill O’Reilly.
4. Parker Conrad, founder of Zenefits, resigned as CEO in 2016 after numerous regulatory violations in several states came to light. One would think a company selling HR management and compliance software as a service would handle compliance better, but it seems that the company used unlicensed brokers to sell Zenefits’ health insurance products (the company’s main revenue source) in the state of Washington. An investigation also found that sales executives were using a browser patch to systemically cheat on California’s insurance licensing exams; the macro was designed by Conrad.
5. Miki Agrawal, one of the founders of THINX – a company selling underwear designed for women’s periods – was accused of sexual harassment by the company’s female public communications director. Other claims of misconduct included Agrawal’s taking meetings while on the toilet, and stripping and changing clothes in her glass-walled office. Worse, a news article reported that the multi-million dollar start-up underpaid its mostly-female employees, and Agrawal berated those who advocated for higher wages.
Rather than hire an HR professional to resolve the problems, she appointed two “Culture Queens,” who had no HR experience and were not provided any additional training. Instead, they acted as go-betweens to Agrawal, who still made all the decisions. Agrawal stepped down as CEO, but remains with the company as its “SHE-eo.”
What Should HR Do?
Experts say there may not actually be more unethical behavior than in the past. Instead, increased government regulations, zero-tolerance and expectations of higher standards by boards, the ability to put digital recordings on social media, and a 24/7 hour news cycle ensuring the rapid dissemination of negative news when well-known CEOs behave badly, mean that executives are more likely to be fired for ethical lapses.
HR is in a good position to help companies reduce the risk of these misdeeds and ensure that any violations are handled properly and effectively. Here are some steps that HR should take:
1. Create an organizational culture that is values-driven by establishing an ethics program. It’s not enough just to comply with the law; companies should focus on trying to do the right things. That means following the spirit and not just the letter of the law. An ethics program puts all the pieces in place to help employees operate in an ethical manner.
2. Be clear on what is acceptable conduct. The company should have a written code of conduct that clearly communicates its emphasis on high standards of ethics and on overall compliance with applicable laws and regulations.
3. Make sure that employees know how to report improper behavior. Also be clear that employees will be protected from retaliation when they report misconduct.
4. Know how to conduct an internal ethics investigation. Whether they are tasked with conducting an ethics investigation or – more likely if a top executive is being investigated – are assisting an outside attorney or investigator, HR professionals should know the steps to take, what should and should not be done, how to document properly, and what records to preserve.
A strong and knowledgeable HR function is a key player in creating and maintaining an ethical business environment in the organization. If that had been the case at the companies in our list, five CEOs might still have their jobs today.
What steps has your company taken to ensure ethical behavior? What other things can HR do to help executives make ethical business choices?