More CEOs Are Being Fired for Ethical Matters Today Than Ever Before
A new study found that CEO firings due to ethical lapses has increased 36 percent over the past five years.
From Wells Fargo's firing of John Stumpf to Fox's dismissal of the late Roger Ailes, we’ve seen a number of business scandals roll out recently.
While the position of CEO is often associated with high pay, excellent benefits, a large social network and private jets -- it comes with much more than that. The pressures of being a CEO are at a high today, and from public opinion to government regulation, nearly every aspect of being top executive is under close surveillance.
So it’s no surprise that the number of CEOs being fired for ethical lapses is increasing. The 2016 CEO Success Study, conducted by Strategy&, a network of PwC, found that CEO dismissals for ethical lapses have increased by a whopping 36 percent over the past five years. Analyzing CEO successions at 2,500 of the world’s largest companies, the study uncovered this increase in ethical lapses, which include bribery, sexual indiscretions, fraud, insider trading and negligence that leads to environmental disasters.
Between 2007 and 2011, 3.9 percent of all successions were due to ethical lapses. However, this number increased for the next studied time frame -- between 2012 and 2016, when 5.3 percent of CEO turnovers were due to a breach in ethics.
Comparing data from companies in the U.S., Canada, western Europe and the BRIC region, the study found that while the U.S. and Canada had the lowest numbers of firings for ethical matters, they did have one of the most dramatic increases over time. Only 1.6 percent of CEO firings were due to ethical lapses in the U.S. and Canada between 2007 and 2011, however this increased by nearly 102 percent, and between 2011 and 2016 3.3 percent of all CEO successions were related to poor ethics. In western Europe, this number increased from 4.2 percent to 5.9 percent, and in BRIC countries from 3.6 percent to 8.8 percent.
However, the study notes that the increase in CEO firings does not necessarily translate to an increase in corporate misbehavior and rather, companies are holding executives up to higher ethical standards. The report identifies five trends shaping CEO accountability, including public opinion, governance and regulation, business operating environment, digital communications and the 24/7 news cycle.
Unsurprisingly, after the 2007-08 financial crisis, trust in large corporations has declined. According to the 2017 Edelman Trust Barometer, only 37 percent of people consider CEOs credible today. And with companies going global and operating on larger scales, bribery and corruption have been areas of concern in global supply chains and business processes. In addition, with advancements in technology, digital communication such as text messaging, email and social media has made it easier for people to obtain digital records and share them.