Beware of these 5 Deadly Corporate Sins

Dubious corporate tactics that were once considered arcane business shenanigans are now consumed and broadcast on social networks as widely as the latest celebrity scandal.

The public’s sudden interest in corporate mischief is driven by a confluence of emergent populism, growing mistrust of institutions and the bully pulpit of social media messaging. People who were indifferent or oblivious in the past now take notice.

Behaviors that smack of irresponsibility or hubris—like the unimaginably rich CEO of a ride-sharing company who recently belittled an employee in a video that went viral—can have immediate and far-reaching negative consequences.

“Business news is no longer just business news,” says Edgar Baum, CEO of the brand measurement firm Strata Insights. “If CEOs are perceived as doing something fishy, the public knows about it immediately, even if the underlying business details are beyond comprehension. The problem is one of hyperbole, sensationalism and speed.”

“If CEOs are perceived as doing something fishy, the public knows about it immediately, even if the underlying business details are beyond comprehension. The problem is one of hyperbole, sensationalism and speed.”

“Fishy” is not necessarily illegal. Much of the public has raised the bar when it comes to the standards to which they expect both CEOs and the companies they lead to adhere. Small wonder at a time when a whopping 63% of the population does not trust CEOs, according to Edelman’s 2017 “Trust Barometer” survey. Do something with a whiff of impropriety, and people become hashtag activists, instantly expressing their protests or echoing others’ complaints across large swaths of the global population. This information then finds its way into apps like DoneGood, aVOID, Glia and BuyPartisan, which were created to steer
consumers away from “objectionable” companies.

How bad is it for companies portrayed as sinners? “The forest of rhetoric is so thick right now that corporate actions that are not illegal, but appear to be deceptive or unfair, can ignite a brushfire that’s not easy to put out,” says Hampton Bridwell, CEO and managing partner at brand and marketing consultancy Tenet Partners.

In addition to personal and corporate risk, bad behavior is undoubtedly tarnishing the overall reputation of capitalism: a 2016 Harvard survey showed that 51% of millennials do not support capitalism, while just 42% said they support it.

We’ve compiled five corporate “sins” that CEOs should do their best to avoid committing—not because they’re illicit per se, but because the short-term gain may not be worth the long-term pain.

1. Dual Shares, Double Trouble

Dual-class shares are a great way for a visionary founder of a company with voting rights to guide its long-term strategy, without the quarterly short-termism views that more ordinary shareholders might exact. But the structure, which on average calls for giving 10 votes to insiders versus one vote to public shareholders, has its share of detractors.

“Some CEOs think they know better than anyone else what is best for the business, but this is a very shortsighted view,” says Thomas Quinlan, chairman and CEO of LSC Communications, a global provider of digital and traditional print-related services and office products. “A poorly performing CEO should not be immune
to disciplinary actions that may even include the person’s ouster.”

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