CEOs who act morally are not only good role models for employees, they also pave the way for greater financial turnout, and contribute to a company cultures that help businesses stay out of trouble.
PwC’s global strategy consulting team Strategy& released the 2016 CEO Success study, which took a look at 2,500 of the biggest public companies internationally.
The study found that a whopping 36% jump in worldwide CEO firings over ethics violations. The percentage of CEOs fired for wrongdoing increased from 3.9% between 2007 to 2011 to 5.3% from 2012 to 2016.
The litany of extreme CEO wrongdoing — and how to stop it
What do CEOs get dismissed for? There’s a long list of reasons, all of which are pretty extreme: fraud, bribery, insider trading, sexual indiscretions, inflated resumés and flawed responses to environmental disasters.
But more of those leaders are getting found out —and fired.
PwC attributed five factors to CEOs being held liable for their actions: decreased faith in big companies and CEOs since the financial crisis in 2007-2008; the Great Recession and the aftermath, which has made people more sensitive to financial issues; a jump in digital correspondence (where evidence can be documented); laws resulting from major events; the idea that working abroad and using production processes that involve other nations can pose increased risk of ethical violations and the never-ending cycle of news.
There are easy ways for companies to avoid moral offenses, PwC said. They include emphasizing integrity so workers don’t violate policies, and making sure that company benchmarks for performance aren’t easily gamed.
Have big companies gone off the ethical deep end?
But the researchers claim not to have an answer to that question based on the findings.
“Our data cannot show — and perhaps no data could — whether there’s more wrongdoing at large corporations today than in the past. However, we doubt that’s the case, based on our own experience working with hundreds of companies over many years. In fact, our data shows that companies are continuing to improve both their processes for choosing and replacing CEOs and their leadership governance practices — especially in developed countries,” the study says.
The benefits of being an ethical leader
When CEOs act in the best interest of employees, they may reap the benefits in terms of both money and employees feeling more connected to their work.
In a 2015 interview with the Harvard Business Review, Fred Kiel, author of the book Return on Character: The Real Reason Leaders and Their Companies Win, talked about the results of his study as described in the text.
The research reportedly included “more than 100 CEOs and 8,000 hours employee observations” of them.
“We found that strong-character leaders contributed an amazing almost five times bottom line profitability as do the weak character leaders. And they enjoy a much higher level of workforce engagement, about 26% higher. And they also have a significant impact on reducing corporate risk to the company,” Kiel told the Harvard Business Review.
The upshot: Acting morally at large company benefits more than just the CEO— it can have a major impact on the financial stability of the business.