Reputation – It’s getting personal
22 June 2018 | 1:00 min read
The C suite’s guide to recovery from corporate misconduct has long followed a fairly predictable path:
- Story runs in the press of Company A’s misconduct, negligence, or incompetence.
- The CEO states the conduct is unacceptable, doesn’t fit with the values of the organisation, and was an isolated incident or the result of a small minority.
- The regulator investigates, finds breaches of regulation or law, and fines the company.
- Commentators start speculating on the culture of the organisation.
- The share price drops sharply, and the CEO assures customers and shareholders that the company let them down and they should expect and demand better.
- A few managers leave to ‘pursue other career opportunities’.
- We all move on, the share price recovers, and the executive management team gets on with the job of maximising shareholder returns.
Job well done right? Maybe not.
After the recent steady stream of ‘corporates behaving badly’ stories, it seems community and political patience for this kind of conduct, and the culture that drives it, may be starting to wear thin.
Many of us woke to the news this week that Rupert Stadler, Chief Executive of German car maker Audi, was arrested in connection to the diesel emissions scandal which engulfed Audi and its parent company Volkswagen. Like a scene from some Danish crime drama, Stadler was arrested at his home in the early hours of the morning and is now currently in prison in the south German city of Augsburg.
And back home, earlier this month six executives from Citigroup, Deutsche Bank, and ANZ were served with criminal cartel charges by the ACCC relating to a capital raising program for ANZ in 2015. If found guilty, each executive could face serious jail time and significant fines.
Chill winds should be blowing through the boardrooms and executive suites of corporate Australia at the moment. Reputational risk has become a lot more personal. Roll into this the Banking Royal Commission, and the long overdue attention workplace behaviour and bullying is now receiving as a result of #metoo, and the risks to personal brand have never been higher.
If it happens on your watch, the chances are as the C-suite overseeing things you are likely to be held personally accountable. You may pay for this in forfeiture of short- or long-term incentive payments, or even your job. But if the calamity you preside over is big enough, like Stadler, you may pay a far higher price.
For Board Members and Executives, now is the time to have the frank assessment of the way your business or division operates, and where your reputational risks lie. Process and governance are obviously critical, but you need to ensure the culture you preside over drives the types of behaviours that see you live up to the values your organisation espouses.
Ultimately, you have a very personal interest in making sure of this.