What the High Rate of CEO Turnover Teaches Executives About Ethics

According to the latest PwC CEO Success study, more CEOs were dismissed in the last calendar year for ethical lapses than for financial performance or conflicts with the board. Allow this finding to sink in for a moment: more CEOs – successful leaders with broad responsibilities and, for the most part, years of experience – are being removed for ethical, rather than business performance, reasons.

More CEOs – successful leaders with broad responsibilities and, for the most part, years of experience – are being removed for ethical, rather than business performance, reasons. 

Before commenting more on this somewhat surprising finding, it should be noted that the majority of CEO turnover tracked in the study was due to planned and carefully coordinated departures. Nonetheless, ethics-related issues represent a growing cause of CEO turnover. This begs the question: What has changed? Why is this happening now?   

The PwC study offers some explanation; it suggests both societal and governance influences, including “more aggressive intervention by regulatory and law enforcement authorities.” It also highlights the growing momentum behind the #MeToo movement, supported in part by “zero-tolerance” stances adopted by Boards of Directors. 

Read More: Transparency & Trust: The Underlying Themes of Top 10 Ethics & Compliance Trends

One thing we know for sure: bad behavior continues to exist at all levels within organizations. But for perhaps the first time, Boards are recognizing the reputational and financial impacts of bad behavior, particularly when it happens at the top or is ignored by those in leadership positions.

In this time of hyper transparency fueled by social media and 24/7 news cycles, very little can happen behind an opaque corporate curtain. Pair this with a heightened sense of social responsibility, and you have a workplace that is increasingly sensitive to even the semblance of unethical behavior.

Make Integrity Part of Your Brand

So what can we learn from this new development? One takeaway is that CEOs must demonstrate what ethical behavior looks like within their organization and model that behavior consistently. CEOs must hold themselves to the highest of ethical standards and expect the same of their leadership teams. In addition, they can never let performance come before ethics, or they risk damaging both personal and corporate integrity. Integrity is a positive driver of the CEO’s personal brand, and from a societal perspective, it is a critical component of the corporate brand.   

The PwC study reminds us that CEO turnover due to ethical lapses is still somewhat rare, but also informs us that it is a growing phenomenon. This study is a stark reminder that in the increasingly transparent world in which we operate as corporate executives, it’s not just where we are going that matters, but also how we get there.

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