Lack of ethical integrity sees CEOs ousted in increasing numbers

18 July 2017 Consultancy.uk

CEOs worldwide are increasingly being fired because of unethical behaviour. The percentage forced to pack their briefcase over the past few years has risen by 36%, according to research by Strategy&.

The annually produced ‘CEO Success Study’, which was published by Strategy& – the Strategy arm of PwC’s Consulting Practice – explores the phenomenon of CEO successions across 2,500 of the largest listed companies in the world. The study revealed UK CEOs now have an average five year life-cycle, before jittery share-holders seek new blood – partly due to increased public scrutiny of corporate behaviour. Consistent with trends in five of the last year years, the median length of service at the top for the biggest 300 British businesses has shrunk to 4.8 years, down 73% from 2010’s high of 8.3 years.

Globally meanwhile, the survey shows that company boards continue to improve when it comes to appointing appropriate CEOs, managing the company and planning a smooth succession process. Over the past decade, the number of forced redundancies has fallen sharply among the 2,500 largest companies, 31.1% to 20.3% between 2012 and 2016. However, the number of CEOs who had to leave for an ethical misconduct has risen sharply in the last five years, both globally and in the three major regions where the 2,500 largest listed companies are located - the North America, Western Europe, and the BRIC countries (Brazil, Russia, India and China). According to researchers, unethical behaviour is relate to cases where the CEO or other executives are blamed for a scandal or maladministration, such as fraud, bribery, insider trading, environmental disasters, incorrect CVs and sexual harassment.

CEO Turnover by Region

The largest increase in CEOs forced out due to unethical behaviour is seen in companies in the BRIC region, where the proportion of redundancies due to ethical misconduct has more than doubled from 3.6% to 8.8%. But there was also a significant increase in Western Europe (from 4.2% to 5.9%), and especially in North America (from 1.6% to 3.3%). Worldwide, the proportion of people fired due to unethical behaviour grew from 3.9% to 5.3%.

The main reason for the increase in ethically motivated redundancies is pressure from key stakeholders and the wider public, both of whom have become increasingly critical. According to the researchers, the 2008 financial crisis and its aftermath did not only lead to a huge dent in public confidence in the banking sector, but also in general confidence in CEOs as such. The increase is also partly due to the tightening of legislation and regulations that followed the crisis; and, in addition, many companies in the US and beyond introduced a zero tolerance policy on unethical behaviour. Digital communication meanwhile has also made organisations more accountable, as they are automatically stored in a system beyond the individual’s control, often offering concrete evidence of maladministration.

Wrong-doing

“Our data cannot show — and perhaps no data could — whether there’s more wrongdoing at large corporations today than in the past. However, we doubt that’s the case, based on our own experience working with hundreds of companies over many years,” said Per-Ola Karlsson, Partner and leader of Strategy&’s organisation and leadership practice for PwC Middle East. “Over the last 15 years, five trends have resulted in boards of directors, investors, governments, customers, and the media holding CEOs to a far higher level of accountability for ethical lapses than in the past.”

The bigger they are - The size of companies and dismissals for unethical behaviour

Other executives have also become increasingly at risk of losing their jobs due to unethical acts further down the corporate hierarchy. A good example is Uber, where over the past few months more than 20 employees have had to clear their desks because of sexual harassment. The increased rate of firing is also due to today's razor sharp 24/7 reporting, which spreads bad press on a firm in no time, along with the constant instantaneous live-feeds of social media platforms like Twitter and Facebook.

While Strategic&’s research suggests that CEOs are increasingly engaging in misconduct, an earlier study by Stanford University shows that there is still a lot of inconsistency when it comes to how companies punish CEOs for unethical behaviour. In 58% of cases of unethical behaviour, the CEO was ultimately fired for their behaviour. Only when there was clear financial misconduct, dismissal followed in all cases. In all other forms of unethical behaviour, there appears to be situations in which the person remained. Even with regard to employees who make themselves look better by lying on their resume, opinions appear to differ within the various boards about appropriate repercussions.

DeAnne Aguirre, a Principal with PwC US concluded, “In the meantime, CEOs need to lead by example on a personal and organisational level and strive to build and maintain a true culture of integrity.”

The rate of Chief Executive Officer sackings over ethics has reached such a level that a new executive programme from Rotterdam School of Management Erasmus University (RSM) has been launched. The university hopes to take advantage of increasing business anxiety regarding the ethical lapses of future CEOs by pledging to help organisations to train their leaders how not to breach protocol, and to build and maintain a broader ethical culture in their companies.

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Why leaders must balance technical expertise with soft skills

17 April 2019 Consultancy.uk

Soft skills matter in the workplace just as much as technical expertise, writes Samantha Caine, Managing Director of Business Linked Teams.

For too long technical expertise has been seen as the marker of a strong candidate for development into a sales or leadership position. Sales and leadership candidates are tasked with demonstrating a diverse and wide-ranging set of technical skills, yet their aptitude in these technical skills or ‘hard skills’ cannot signify great leadership potential. This is why a healthy balance of soft skills and technical ability is required. 

So what exactly is the difference between technical skills and soft skills? In engineering, it’s crucial to demonstrate knowledge of physics as well as a strong grasp on mathematical equations. Yet, in any industry, it’s important for leaders to be able to interact with other people effectively with soft skills like communication, empathy and adaptability. 

Business Linked Team’s 2018 study into internal leadership development revealed that 69% of large organisations are prioritising the identification and development of future leaders from within the workforce. As more and more organisations begin to invest in sales or leadership development within their existing workforces, more focus needs to be placed on ensuring the right soft skills are in place. 

With those soft skills in place throughout the workforce, the business will benefit from a wider pool of potential leaders developing under their noses, and it should be the same where sales candidates are concerned. 

It’s not just about easier access to ideal candidates for these positions without the rigmarole of recruiting from outside of the organisation. The leadership development study also found that 89% of HR decision makers say succession planning has become a top priority. Those currently serving in leadership positions can’t lead forever and the same goes for those generating sales for the business.

Why leaders must balance technical expertise with soft skills

From people leaving for new opportunities or retirement, to people simply stepping aside to focus on other areas of the business, successful leaders and salespeople require experienced and capable successors that will be ready and able to confidently step into their shoes and pick up the mantle without the business experiencing any lapse in performance.

Soft skills make stronger candidates

When it comes to the soft skills required, a strong leader must be able to manage through clear communication and effective time management, coaching and goal setting. They must be able to demonstrate empathy and empower their teams to be successful, productive and fully engaged. And beyond simply giving direction, they must also be able to take direction from those above them and cascade the business strategy down through their teams. 

A strong sales candidate must possess the ability to communicate value to the customer, negotiate well and protect margin or the ability to increase the scope of a particular sales opportunity. 

With the relevant soft skills in place, the business will benefit from increased productivity, greater agility against changing market conditions and greater transparency. In turn, this will provide visibility on issues and inefficiencies while removing opportunity for miscommunication. All of this can transform the culture of a department, improving employee satisfaction and reducing staff turnover. 

Ultimately, developing leadership or sales candidates will require the business to strike the right balance between technical skills and soft skills, and this requires an effective and sustained learning journey.

A balanced learning journey

Facilitating and supporting the development of leadership and sales is best achieved by establishing training groups. By cultivating training groups, businesses are creating talent pools that will inspire and support each other on the learning journey. However, personal goals and learning objectives must be defined for each individual based on their own existing skillsets and the skills that each individual needs to develop. 

With the emergence of e-learning, businesses recognise the value of online-based learning activities, yet many make the mistake of opting for one-size-fits-all solutions which are solely focused on self-study. A development solution will only deliver true return on investment if it combines e-learning activities with group learning activities that provide opportunity for shared experiences and support.

A blended learning solution that combines self-study and face-to-face group learning activities will aid strong development of the talent pool through shared experiences. Through these shared experiences, those undergoing the training will organically develop a support network that supports the development of the group as much as it supports the development of each individual. 

The blended learning approach is supported by one of the seven principles of human learning that socially supported interactions aid the individual development of expertise, metacognitive skills, and formation of the learner’s sense of self. The strongest opportunities for development can be unlocked by blending workshops with online activities such as virtual sessions, peer coaching, self-study, online games and business simulations. But it’s crucial to provide a blend of one-to-one and group sessions too.

Beyond delivering a better learning outcome for the employee, the blended learning approach allows organisations to adapt their training quickly and easily to shifting business demands in an ever-changing landscape.