Weeks of allegations and scandal have taken a hard toll on the staff of Toronto Mayor Rob Ford.
News broke Thursday afternoon that senior Ford staffer Brian Johnston has resigned. In the past week, George Christopoulos and Isaac Ransom also quit, while chief of staff Mark Towhey was fired last week as the scandal at city hall continues to keep both citizens of Toronto and people around the world transfixed.
A pertinent question is, how would a business grapple with a problem like the highly questionable behaviour of a CEO? With the reputation of the company or brand at stake, how would do senior executives step up to the boss and tell him they have concerns about the way things are being run?
Earlier this month, a Wall Street Journal article on the problem of CEO burnouts noted the impact of a two-month medically-prescribed break taken by Lloyds Banking Group PLC chief António Horta-Osório in late 2011. The stress leave during Horta-Osório’s first year on the job caused Lloyds’ shares to slump the next few weeks amid uncertainty about the short-term future of the company.
Horta-Osório wasn’t the only one with fatigue problems. A study by Harvard Medical School reported 96 per cent of senior executives were dealing with burnout problems.
Dr. Richard Leblanc, an associate professor of governance law and ethics at York University, said there are many potential hints of a CEO burnout, including erratic behaviour, inconsistency at work, divorce or family issues, and even substance abuse.
“A CEO will work 70 hours a week, and the tenure now has gone down to four or five years,” says Leblanc. “That puts pressure on a CEO to perform sooner rather than later.”
Jonathan Dye, a Toronto-based Heenan Blaikie employment lawyer, said that in his experience, corporate leaders usually sort out any perceived problems with the CEO internally before floundering leadership becomes public knowledge. He said a company’s VPs will often consult amongst themselves about whether to address behavioural problems with the CEO directly, or raise the issue with the board of directors.
“At that kind of level, you’re talking about usually some very senior, very sophisticated business people… and you typically will have a fairly developed working relationship between those people,” Dye said.
Of course executives must to tread carefully when claiming that a CEO’s personal life is affecting the work of others, particularly when a CEO’s alleged problems are grist for the office rumour mill. Unless there is substantiated evidence the boss is damaging the company or interfering in productivity, the rank and file workers are in an unfortunate situation.
“It’s unlikely that a court would consider any personal issues an employer is going through as justification for an employee’s inability to perform work, unless of course the personal issues directly affect the workplace and the employees,” said Ron Minken, head of Markham, Ont.’s Minken Employment Lawyers.
Still, in situations where there is genuine cause for concern, news of erratic CEO behaviour can spread quickly online, affecting the level of trust felt by stakeholders.
Leblanc said there is an increase in the number of companies that hold special board meetings without the CEO, providing an opportunity for senior management to raise any concerns without the boss’s influence. But the best way to head off potential behaviour problems is before the reins of power are handed over. Potential leaders are now screened by boards with an eye to detecting personal problems that could fester and engulf a corporation.
Background checks for those applying for positions at the C-level are much more thorough than in the past, said Leblanc. Candidates are screened for their references and credentials, but also their public behaviour and use of social media. Many companies even hire independent firms to scrutinize a candidate’s suitability, and have new CEOs sign contracts requiring them to maintain a good reputation or risk dismissal.
“It’s almost like an athlete, where the athlete has a rider in his contract—a morals clause,” says Leblanc.
“It’s no different for a chief executive officer in that type of position. Your actions can affect the brand of a company, so boards now are moving towards a broader definition of reputation risk.”
And it’s not just the brand of a company that can be affected by a CEO’s behaviour. If you’re a member of the C-Suite in a flailing enterprise, the longer you stay, the more affected your own reputation might be.
“For companies that have been charged with regulatory malfeasance, or are off-side in a significant compliance way, then it’s completely appropriate for managers to jump ship. And in fact that could advance their career because they’re avoiding any taint,” said Leblanc.
As long as their own performance isn’t being questioned, Leblanc believes C-Suite executives should wait no longer than six months before making their move, or else risk a future career tainted by their former employer’s reputation.
“You can limit the damage by just extricating yourself from the situation,” added Leblanc. “The longer you wait the more identified you are with the scandal.”