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Ethics & Morality: A Board of Directors Challenge

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As I cringed reading a story today about a CEO caught on an elevator surveillance camera harming a dog, I became outraged and wanted to join the social media uproar calling for the CEO’s dismissal. Then I paused for a moment to place myself in the position of the company’s management team and Board of Directors. Any professional organization that takes its responsibilities seriously will conduct an appropriate investigation and gather the facts. The Board of Directors, to whom a CEO ultimately reports, will conduct the appropriate due diligence, but must also weigh the legal consequences if existing company policy or the CEO’s contract does not provide for appropriate recourse. What next?

We know that ethics is generally defined by the environment and culture surrounding each of us whether professional or personal. Morals are defined by our own individual principles and beliefs. Clearly there was some questionable moral behavior by the CEO as evidenced in the video. The subsequent apology and financial contributions are certainly an attempt to quell and appease external audiences given the backlash, but where or how do we as a society draw the distinction between morality and ethical behavior?

The Board of Directors may find that although the CEO’s behavior may be morally wrong, there may be no clear ethical guidelines defined by the company that would permit discipline, including possible termination, without facing a wrongful termination lawsuit. Who decides what is ethical or moral? How is the Board of Directors expected to define ethical behavior outside the boundaries of company activities? Does a Board have the right to dictate how the CEO behaves on his or her own time?

The Board of Directors has a potential dilemma. While the Board members may personally view the activities as utterly reprehensible from a moral perspective, the same Board must act ethically to ensure due diligence is afforded the CEO: this is the Board’s fiduciary responsibility to the company and its shareholders.

This indiscretion may serve as a catalyst for Boards of Directors to consider adding morality clauses to CEO contracts and company Codes of Conduct, provided neither currently exist. which would prohibit similar behavior in the future. Unfortunately, if the facts, company policy, and the CEO’s contract do not currently provide the Board with recourse, the CEO will likely face minor penalty for the indiscretion, not face termination, and the incident will slowly fade away as the next news cycle begins.

Sometimes the “guilty” are “guilty,” but our system of professional conduct requires those with ultimate responsibility and accountability to weigh legal actions against public reaction. Sadly, sometimes legal action prevails, although some may view it to be morally wrong.

Article contributed by CGDC Founder & CEO, Patrick M. Callahan