Are today’s CEOs less ethical, or is the public just holding business leaders to greater accountability?
A recent study by global consulting giant
PricewaterhouseCoopers found that between 2012 and 2016, 5.3% of CEOs globally had been forcefully removed due to ethical lapses.
This represents a 36-percent increase from the figure between 2007-2011, when there was forced turnover of 3.9% of CEOs.
The study included CEOs of large and small companies who are being let go as a result of workplace indiscretions including sexual impropriety, insider trading, bloated resumes and fraud.
BRIC nations, Western Europe, Canada and the United States saw the sharpest increases; in these areas, long-serving CEOs or those at the helm of big business faced the highest risk.
It has not always been this way, the study found. In the 20th century, the most grievous ethical mistakes would hardly warrant CEO removal.
“In the late 20th century, even the most serious, large scale, and widely publicized cases of corporate misbehaviour rarely led to dismissal of the CEO,” wrote PwC staff Kristin Rivera and Per-Ola Karlsson in Strategy& this summer.
Financial penalties were low and media attention was limited.
In the past 15 years, however, a confluence of factors has led to a sea change. Corporations find that they are in a pressure cooker when it comes to monitoring the behavior – rather, misbehavior – of their top executives.
- Because of the 2007-2008 recession, public opinion has been more suspicious, more critical and less forgiving of corporate misbehavior.
- Corporate excesses can actually influence regulatory and legislative action, such that people now have zero tolerance for unethical behavior of those in the C-suite.
- Many companies are expecting growth in emerging markets, raising the stakes
- Digital communications provides and makes accessible irrefutable evidence of misconduct; and
- The 24/7 news cycle allows the quick and wide spread of information about executives’ unethical behavior.
The numbers may be disheartening, but over the long term this may actually improve the low public perception of corporate morality, Rivera and Karlsson said. Yanking out the bad apples will likely show that misbehaving CEOs are the exception rather than the rule.
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