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Scoundrels in the C-Suite

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Scoundrels in the C-Suite

How Should the Board Respond When a CEO's Bad Behavior Makes the News?

Stanford Business,

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What should the board of directors do when a CEO stands accused of injudicious, albeit legal activities?

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Editorial Rating

7

Qualities

  • Analytical
  • Eye Opening
  • Overview

Recommendation

How should a board of directors handle a “misbehaving” CEO? This report by David F. Larcker and Brian Tayan of Stanford University reveals mixed conclusions as to the degree CEO misconduct harms organizations and shows how boards lack consistency in their responses to misconduct. These contradictions underscore the importance of the questions the authors raise about how boards should respond and work to prevent poor behavior from leadership figures. getAbstract recommends this report to board members and those interested in corporate governance issues.

Summary

When news reports of CEO misconduct surface, the company’s board of directors must probe their truth and take steps to mitigate their negative effects. In instances where a CEO’s actions break the law, the actions the board must take are usually clear. But how the board of directors should respond and discipline a CEO whose misconduct is harmful, but legal, is more complicated.

Examination CEO misconduct reveals that the media continue to reference the bad behavior for an average of 4.9 years, though, in some cases, the stories have much longer lifespans...

About the Authors

David Larcker is director and a senior faculty member at the Stanford Graduate School of Business Corporate Governance Research Initiative, where Brian Tayan is a researcher.

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