Moonves Pay Punishment Caps Year of CEO Naming and Shaming
(Bloomberg) -- CBS Corp.’s decision to fire Chief Executive Officer Les Moonves and strip him of a $120 million payout caps an unprecedented year for naming-and-shaming in the corner office.
Corporate boards dispensed with genteel euphemisms, such as “pursuing other interests” or “spending time with their families,” to call out CEO misbehavior at companies that included Intel Corp., Wynn Resorts Ltd. and Lululemon Athletica Inc. All told, in at least a dozen U.S. departures this year, companies directly accused the CEO of misconduct unrelated to financial performance, sometimes going so far as to describe harassment or other sexual misdeeds. Nor was the phenomenon confined to America.
The firestorm of accusations against Hollywood producer Harvey Weinstein in late 2017 spread from entertainment and media across other areas of business and government in the U.S. and abroad. With the backing of social media, women came forward with both new and old allegations that boiled over in Europe and India, as well. Corporate boards, sports teams, nonprofits and other organizations have become increasingly willing to call out misdeeds and part ways with offenders. Weinstein has denied any wrongdoing.
“Definitely, transparency has increased, especially regarding CEO cases,” said Daniel Schauber, whose Exechange.com counted the 12 instances where boards specified misconduct among more than 200 CEOs who left their jobs at Russell 3000 companies this year. “This simply did not exist in 2017.”
In a sign the trend isn’t slowing, on Thursday the CEO of U.S. electronics company Kemet Corp., Per-Olof Loof, resigned after an investigation into a consensual personal relationship between him and an employee. Loof won’t receive any severance benefits, the company said.
Moonves stepped down in September in the wake of a dozen complaints of sexual harassment. CBS commissioned two law firms to determine if he should receive $120 million in severance. The board announced Monday that he violated company policy and didn’t comply with an internal probe. Moonves has denied wrongdoing and complained through his lawyer about the public nature of the probe and accusations.
Corporate boards have been quicker to take action in 2018, now often announcing a CEO’s departure at the same time the misconduct was disclosed, said Davia Temin, founder of crisis consultancy Temin & Co. in New York. In October and November of last year, there were an average of 40 days between the first accusations and a firing. That has shrunk to almost zero now, she said, citing her database.
“As corporate boards have seen that the MeToo movement isn’t going to go away, they are beginning to realize through public pressure that misbehavior is not going to be allowed,” she said.
Temin’s company keeps a running tally of reports of noteworthy people accused of misconduct related to harassment and other associated misbehavior. That list now totals more than 1,000 individuals, including 67 CEOs, all men, who have been accused over the last three years. Of those, only 12 have kept their jobs, Temin found. Most of the allegations have come since the Weinstein affair.
Among the accusations of misconduct tracked by Temin & Co., 210 were made outside of the U.S., including 60 in Europe. In April, WPP Plc’s founder and CEO Martin Sorrell resigned after he was accused of personal misconduct and misuse of company assets. More recently, the founder of Ted Baker Plc, Ray Kelvin, has taken a leave of absence as the board investigates complaints from employees that he gave them unwanted hugs, while British retail tycoon and Topshop owner Philip Green was alleged in October to have used legal agreements and payments to hide accusations of sexual harassment, racist abuse and bullying.
Sorrell and Green have denied any wrongdoing. Kelvin said in a statement this month the allegations were upsetting and he supports a full investigation.
More than 80 individuals were accused of harassment as MeToo also swept through India in recent months, Temin found. The men accused were primarily in government and entertainment, not CEOs of large companies. In Asia more broadly, one of the few CEOs to come under fire was JD.com Inc.’s Chinese founder Richard Liu, who was arrested after an allegation of harassment in the U.S. He was released without charge and the company said he was cleared of misconduct.
As we head into 2019 one thing is clear, according to Mary Macleod, a partner at executive search firm Korn Ferry in London: Driving out misconduct remains a top priority for business.
“Clients are asking more about reputational issues like this because leadership behavior is one of the biggest risks to their business,” said Macleod. “This is a global issue and has now become the accepted norm. It isn’t going away any time soon.”
©2018 Bloomberg L.P.