When a recent study discovered CEOs are getting fired more frequently for their ethical “lapses”, researchers named five reasons for the rise.
Tellingly, none of those reasons were that leaders were “breaking bad” more often – which leads to the conclusion that they are merely now more likely to be caught out and punished.
The report by PWC finds dismissals for ethical lapses rose from 3.9 percent of all successions in 2007–11 to 5.3 percent in 2012–16. This is a 36 percent increase.
The reasons, they say, are: the public has become more suspicious and less forgiving; governance and regulation is more proactive and more punitive; expansions into emerging markets where ethical risks are heightened; the rise of digital communications; and the 24/7 news cycle which amplifies negative information.
All of this means that behaviours that used to be hushed up or tolerated, cultures that excluded and discriminated, are now there for everyone to see. It just takes a shareable tweet, a clickable video or a tip-off to the ABC’s Four Corners program, and a profitable company can be smashed apart in less than a week.
The risks are huge. And imposing more rules and regulations – while that may also be necessary – is no defence against a reputational storm.
Leaders often get blindsided by controversy and scandal because their own attitudes are out of step with community expectations and they are surrounded by “supporters” who either think the same way, or don’t tell them when they are wrong.
United Airlines CEO, Oscar Munoz, missed out on a promotion to chairman after he mishandled his response to an incident where a passenger was dragged, screaming from a plane, because the airline wanted his seat for staff.
Munoz’s first response was to praise his staff and to brand the passenger (who lost teeth and suffered a broken nose and concussion) as “belligerent”.
Where were the people to tell him that forceably ejecting customers from their seats because the airline had a crew scheduling problem is in no way acceptable behaviour?
That was in April, one month earlier, beverage company Coopers was making its own apologies for sponsoring an advertisement from the Bible Society about the marriage equality debate.
The tagline for the advertisement “Keep it light”, was ostensibly about being able to discuss difficult topics without being heated, but was criticised for making light of an issue that is important for many people.
Where were the people within the beverage company to tell leaders that this campaign was likely to do more harm than good?
Over at Uber, in the US, founder Travis Kalanick has had to resign from his own company after a string of allegations about the sexist workplace culture started to threaten the company’s future.
A buccaneering, macho spirit may have helped the entrepreneur create a new market and challenge regulators around the world, but it is not how employees expect to be treated. Customers too will delete an app if they disapprove of the company culture.
In each of these cases, the decision-makers would have been unprepared for the extent of the public backlash. Like most of us, they think their way of viewing the world is the only way to view it.
This is the argument for diversity. A “brains trust” of people of different backgrounds in positions of authority can ensure leaders are less likely to be blinkered by their own biases – unconscious or conscious.
One of the wonderful things about doing business in Australia is that we have a wealth of diversity, which means we can hire talented people from the same groups that we are selling to or doing business with.
In inclusive environments – where they are empowered to speak their minds – those people of diverse backgrounds provide the insight to be able to see how actions affect people of different cultural and religious backgrounds, of different generations, sexual orientation and levels of ability.
Analysis of Australia’s latest Census
The census shows the country has reached a “tipping point”, where only slightly more than half its residents had two Australian-born parents.
It is important to remember that being a member of a dominant power group (middle-aged, white and male for example) may mean you tend to be less aware of the barriers faced by those who are not like you. However, some of the biggest champions of diversity and equality are also from this power group.
A look through the membership of the Male Champions of Change group shows no shortage of white, middle-aged men who are willing to take gender diversity seriously – and it is not a big step from there to make strides towards being inclusive of other groups as well.
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About the author: Felicity Menzies has been appointed CEO and Equity partner of Stephenson Mansell Group Australia, joining partners Virginia Mansell and Joe Fischer on the leadership team.
Felicity founded Culture Plus Consulting (which has been acquired by Stephenson Mansell Group) – a diversity and inclusion consultancy with expertise in inclusive and global leadership. Notable engagements include The Walt Disney Company, Liberty Insurance, Scotiabank, VISA, Abbott Pharmaceuticals, Thales Defence Aerospace, Monash University and World Vision.
Previously, Felicity held the position of Head of Private Bank, Westpac, in Singapore. With more than 15 years of experience in financial and professional services with leading organisations including investment bank UBS and KPMG, Felicity brings a strong business acumen to her consulting work.
Felicity has been a member of Chartered Accountants of Australia and New Zealand since 1995 and holds a Bachelor of Commerce and a Bachelor of Arts in Psychology.
Felicity is author of A World of Difference: Leading in Global Markets with Cultural Intelligence