When the CEO Has To Go: Best practices when sending a pink slip to the corner office.

Author:Temin, Davia
Position::CEO MAINTENANCE
 
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With the explosion of the #MeToo movement, CEOs --like other executives--are being accused of sexual harassment or inappropriate behavior more than ever before. And after an investigation, if found guilty, more are being shown the door.

Our Temin "#MeToo Index," which has cataloged all of the serious allegations since December, 2015 (when Bill Cosby was first arrested), has logged accusations against 32 public company CEOs or presidents, 29 private company CEOs or presidents, and 18 nonprofit CEOs or presidents to date. Approximately 89% of those accused have either resigned or retired, or were fired or suspended. Approximately 30% were fired outright.

But one of the most challenging tasks for any board is firing its CEO.

Often the CEO has been an integral part of bringing on the very board members who must then turn around and make the decision to terminate his or her tenure. Or, they have been a part of the search committee that chose the CEO in the first place. They have a vested interest in the leader's success, and to fire that CEO can be seen as the board's public admission of failure.

No succession plan, no matter how sophisticated, prepares a board member for that.

Every allegation puts a huge burden on the board to conduct a full, fair, independent investigation swiftly and then take appropriate and fair action, depending upon the results. But when the evidence shows that the CEO must be terminated, the pressure is extraordinary, plus all eyes--internally and externally --turn to the board, to judge how dispassionate and equitable they will be. And make no mistake, both pressure to condemn and to exonerate is fierce.

A board must be quite experienced, and truly dedicated to good governance and best practices to survive the pressure.

It is easier for a board to fire its CEO if the CEO has engaged in egregious behavior. Sexual misconduct, fraud, theft, grand malfeasance, steep drops in share price and consumer confidence, or other serious conduct unbecoming; all of these behaviors will make it easy for the board to act. No gray zone there, reputational risk now dictates that the organization clearly cannot allow someone who has acted in such a manner to remain.

But the task becomes more challenging the more nuanced or ambiguous the issue over which the CEO will be fired is. Perhaps the company's strategy just seems off, or moribund, or not future-oriented enough. Perhaps the company's executive committee has turned against him or...

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