In the not-so-distant past, the mis- deeds of corporate leaders would
often be swept under the rug. But that’s
happening less frequently these days.
The percentage of CEOs forced out of
their jobs for ethical violations increased
to 5. 3 percent of all successions between
2012 and 2016 from 3. 9 percent
between 2007 and 2011, according to
a study by PwC’s Strategy& released in
June. The study analyzed CEO exits at
the world’s 2,500 largest public companies over the past 10 years.
However, it’s not clear whether more
ethical violations are occurring.
“That’s a nearly impossible statistic to
measure,” says Kristin Rivera, forensics
services partner with PwC U. S. and study
co-author. “It’s fair to say that it seems
the world is less tolerant and more apt to
take action than in previous times.”
Public trust in large corporations has
declined significantly since the 2007-09
Great Recession. Business scandals have
led to increased government regulation.
And more companies are moving into
developing markets where the rules of
operation are murkier and global supply
chains raise their risk.
Meanwhile, digital communication
methods such as e-mail and social media
make it easier to capture evidence of misconduct—and a 24/7 news cycle ensures
that such revelations are disseminated
The study captured data from CEOs
whose departures were triggered by their
own acts of impropriety or by ethical
lapses of those further down the chain
of command. That points to a cultural
problem that HR professionals can help
address, Rivera says, by taking the following key steps:
• Ensure that the company isn’t creating incentives for employees to act
• Develop business processes and
financial controls that discourage bad
• Prevent employees from rationalizing
“One thing that HR can do to help prevent employees from starting on that slippery slope is to call out those small issues
early on and nip them in the bud,” Rivera
says. In cases of major fraud, there was
often an early red flag that was ignored or
inappropriately addressed, she says.
Changing a culture that encourages
unethical behavior can be tough, especially when corporate
leaders are among the
“There should be
someone who is objective that the HR professional can work with,”
such as an external audit
committee or an internal auditor, compliance
officer or legal counsel,
It’s far easier to build ethics and integrity into the corporate culture from the
start, says Teri Barros, HR director at
Pyrotek Inc. in Spokane, Wash. It helps
if that message comes from the top. At
Pyrotek, each new hire receives a letter
signed by the company president stating
that every employee is expected to maintain high ethical standards.
The company also adopts processes
to help achieve those high standards. For
example, it doesn’t pay bonuses to its
salespeople because that might encourage
them to sell for the wrong reasons, says
Barros, who is a member of the Society
for Human Resource Management’s Eth-ics/Corporate Social Responsibility and
Sustainability Special Expertise Panel.
To maintain an ethical culture, HR
leaders must ensure that the rules apply
equally to everyone—even executives.
That takes courage, but it can be easier
if the HR leader has built prior relationships with members of the executive team
and the board of directors, she says.
“It’s important for every company
to have someone from HR at the executive table so they can be an influence for
good,” Barros says. “If HR isn’t courageous and willing to make those decisions, then who will?”
Dori Meinert is senior writer/editor for HR
As more CEOs are forced out for unethical behavior, what can HR do?
By Dori Meinert