The resignation of Uber chief executive Travis Kalanick after a shareholder rebellion against the company’s sexist culture and behaviour may be part of a wider trend as a new report finds that the number of chief executives fired for ethical lapses is rising.
The report claims 18 chief executives, working for the world’s top 2,500 public companies, were forced from office for ethical lapses last year which, while still a small number, indicates a trend that is appreciating.
The CEO Success Study, produced by PwC, found that 5.3 per cent of chief executives were dismissed for ethical lapses between 2012 and 2016, which represents a 36 per cent increase on the previous five years when 3.9 per cent were fired for such misconduct.
But the increase was more dramatic in North America and Western Europe where dismissals for ethical lapses rose from 4.6 per cent of all chief executive successions between 2007 and 2011 to 7.8 per cent between 2012 to 2016.
This increase comes at a time when companies are improving both their processes for choosing and replacing chief executives and bolstering corporate governance policies.
The report finds ethical wrongdoing by chief executives typically involves fraud, bribery, insider trading, exaggerating their academic qualifications or embellishing career history, sexual indiscretions and flawed responses to environmental disasters.
It attributes the companies’ no-nonsense approach to firing errant chief executives to five factors, ranging from the decline in public trust and confidence in business, increased governance and regulations, expanding into emerging markets where ethical risks are heightened and the 24/7 news cycle.
But the report also believes that digital communications, such as emails and social media, have played a role. Firstly, they can provide irrefutable evidence of misconduct. But the rate of growth has also outpaced the development of systems, rules or measures to mitigate risks, allowing hackers to access private data and publicise embarrassing conversations or conduct.