Post #MeToo, There’s No Hiding Offensive Conduct

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Of all industries, it happened to be public relations. The boss of Teneo Holdings LLC this week quit the consultancy firm he co-founded after revelations he got drunk and acted inappropriately at a charity event. The episode underscores how the unacceptable behavior of powerful leaders is nowadays likely to hit the public domain when once it might have stayed secret. There are also implications for the governance of entrepreneurial firms backed by private equity.

Declan Kelly was the driving force behind Teneo, a highly successful disruptor in its field. Armed with political savvy and influence, he started the firm in 2011 with a small but high-quality roster of U.S. clients reputedly paying far higher fees than the industry average. This grew into a global multi-disciplinary advisory shop, diversifying its offering through organic expansion and acquisitions.

Allegations of misconduct by Kelly were reported by the Financial Times on June 24 and relate to a concert in early May in support of Global Citizen, an organization fighting extreme poverty. Kelly subsequently left the charity’s board. Teneo told the newspaper he “became inebriated and behaved inappropriately towards some women and men at the event,” adding that he deeply regretted his actions and had apologized to those he had offended.

Kelly stood down from Teneo on Tuesday, saying he had made “an inadvertent, public and embarrassing mistake.”

He did the right thing by taking responsibility. His actions undermined his credibility as a leader and adviser, and threatened Teneo’s ability to attract and retain talent. General Motors Co., a recently acquired client, ended its relationship with Teneo after the FT’s report. The situation with longer-standing clients isn’t clear. At the least, any who were already wavering have another reason to look elsewhere.

Questions remain relating to how the firm handled this situation. Teneo is majority owned by funds run by CVC Capital Partners, with Kelly also a sizeable shareholder. While it doesn’t have public-market investors, Teneo cannot simply hunker down like it’s just a regular private company. It is in the reputation business and has a reputation of its own to defend. Who-knew-what-when should matter to clients and staff.

Kelly was founder, chief executive officer and chair, a supremely powerful position. The board would have initiated an external investigation. The question with such endeavors is their precise terms of reference and whether they ask the right questions. The board’s brief statement on Kelly’s departure ignores the allegations, saying the directors regret his resignation and thank him for his leadership. Combined with Kelly’s separate statement that he doesn't want the matter to be “an ongoing distraction,” the impression is that his exit primarily happened because the story got out.

Teneo doesn’t provide the identities of its board directors (although it’s happy to publicly promote its senior advisers who help open doors). Ultimately, responsibility for the handling of the situation falls on CVC given its controlling position. Even closely-held, entrepreneurial businesses need governance that can hold a strong CEO to account and take decisive action when necessary. A private business must demonstrate the same zero tolerance of misconduct that listed company boards are expected to show.

Faced with a damaging story that is likely to leak, standard PR advice is to get ahead of it, set out the facts as you would like them heard, put in place a solution and win some plaudits for transparency. Amid the #MeToo era, there is little chance that any kind of inappropriate behavior by a CEO at a public function will stay secret for long. Whichever manner this came out, Kelly would have had to leave. This way just looks worse.

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

Chris Hughes is a Bloomberg Opinion columnist covering deals. He previously worked for Reuters Breakingviews, as well as the Financial Times and the Independent newspaper.

©2021 Bloomberg L.P.

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