Corporate Boards Are No Longer Afraid to Say a CEO Was Fired
(Bloomberg) -- If recent history is any guide, Leslie Moonves won’t have to wait long to know if he still has a future at CBS Corp.
Boards are acting more quickly than ever to fire executives accused of misconduct, and they’re more likely to be clear about the reasons, according to two new studies. CBS’s board was meeting Monday, and thus far independent directors have expressed support for the 68-year-old chief executive officer, who was accused of sexual harassment by six women in an article published in The New Yorker.
In the article, Moonves acknowledged making unwanted advances decades ago, but said he never used his position to harm anyone’s career. He joins at least 468 high-profile executives and employees who have been accused of harassment or other wrongdoing during the last 18 months, according to a tally updated daily by crisis-consultant Temin & Co.
The time between the first public report of an executive’s alleged misdeeds and a company announcement of a subsequent dismissal is down to just over two weeks on average this year, compared with six weeks last year, according to Temin. The company said it analyzed the firing of 240 people, and that the gap has narrowed each month this year.
"Boards are putting tighter boundaries around what is acceptable and what behavior is unacceptable, acting on that and making it more public," said Bryan Tayan, a researcher for the Corporate Governance Research Initiative at the Stanford University Graduate School of Business.
The current examples, he said, are very much tied to sexual misconduct and “office workplace culture,” related to the #MeToo movement, triggered by sexual assault allegations against film producer Harvey Weinstein. Other sorts of misconduct, such as financial mismanagement or company performance, don’t seem to be showing similar increases.
Moreover, companies are getting bolder about saying why a CEO is leaving. Of the executives who left Russell 3000 companies this year, eight have been ousted with a specific reference to misconduct, compared with one in all of 2017, according to a separate analysis by Exechange.com, a group which tracks CEO departures.
The web site’s founder is Daniel Schauber, an editor at German finance newspaper Borsen-Zeitung who became frustrated with corporate-speak when it came to reporting about a CEO who was "stepping down." Schauber developed a system that scores executive departures on a scale of 0, where they clearly left of their own volition, to 10, where they were clearly fired.
The average score on his scale has been greater than a 5 for eight months in a row, he said.
"It seems to be something like a snowball effect," he said, citing an increase in explicit board language in the last year.
Which is not to say there aren’t still executives citing vague reasons for leaving. Schauber contends that of companies in the Russell 3000 which saw a CEO depart in the past two years, there were 36 examples where the reasons cited were nebulous at best.
In the case of Moonves, the CBS board was to discuss him at a regularly scheduled board meeting Monday, according to people familiar with the company’s plans.
CBS’s independent directors have already said they plan to probe the claims leveled in the article, so it’s possible there won’t be any resolution to the matter for some time.
According to Michael Adams, a professor at Indiana University who teaches a class on language in management, the increasing clarity with which companies announce executive departures is a tectonic shift in corporate culture.
“The fact that people are suddenly being honest is the unexpected thing,” Adams said.
For its analysis, Temin & Co. reviewed examples of people accused of personal misconduct over the last 18 to 20 months. Many of them were CEOs, but it also included actors, media personalities and other celebrities -- anyone with at least seven media reports about the allegations.
The data showed a spike of firings in October and November, but the rate of dismissals has since declined, which raises the question of whether the seemingly lower tolerance for malfeasance will stick.
"If scrutiny is lessened, will there be recidivism?" Temin president and founder Davia Temin asked. "The other question is, how hard-baked are these trends? After all, the behavior has been going on since caveman days."
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