Whether CEOs are aware of it or not, the fallout from any serious wrongdoing at a company can, and arguably should, reverberate all the way to the top.
And that’s what’s just happened at LafargeHolcim, which said CEO Eric Olsen resigned this morning only two years after taking the reins of the world’s biggest cement company.
An internal investigation found staff had paid militant groups to help keep one of the Swiss-based company’s cement plants open in northern Syria. The cement plant is located in a part of the country that has been controlled by Islamic State for several years. French prosecutors also are investigating the company’s activities in Syria, though it is not yet clear if it committed criminal offenses related to terrorism financing.
The internal review, performed by an independent external council, found that “significant errors of judgment” were made in relation to payments to “certain armed groups and sanctioned parties” between 2013 and an evacuation of the plant in September, 2014.
Questionable decisions were made by local and regional managers, though “selected members” of group management were aware of circumstances indicating violations of the company’s code of conduct, the report found.
“In hindsight any misdeeds may seem clear,” LafargeHolcim said in a statement. “However the combination of the war zone chaos and the ‘can-do’ approach to maintain operations in these circumstances may have caused those involved to seriously misjudge the situation and to neglect to focus sufficiently on the legal and reputational implications of their conduct.”
Operating in war-torn countries can present difficult challenges for CEOs and it’s not unheard of for big oil companies, such as Shell, for example, to pay security forces to protect their operations.
Doing so means setting up stringent compliance procedures and in this instance LafargeHolcim clearly fell short. The company admitted a series of shortcomings in its report, a full summary of which can be viewed here, and said it would take the following five remedial steps:
— Improving compliance communications
— Creating comprehensive sanctions policies and procedures
— Adopting country-specific risk assessments
— Enhancing restricted party screening
— Establishing an ethics, integrity and risk committee
The board concluded that Olsen was not responsible for, or thought to be aware, of any wrongdoings. But in a separate statement, Olsen said he thought it was best to stand aside. “My decision is driven by my conviction that it will contribute to addressing strong tensions that have recently arisen around the Syria case,” Olsen said.
“While I was absolutely not involved in, nor even aware of, any wrongdoing I believe my departure will contribute to bringing back serenity to a company that has been exposed for months on this case.”
Olsen, who was tasked with integrating Paris-based Lafarge with Jona, Switzerland-based Holcim following their 2015 merger, will stay on until July 15 to steer the implementation of the compliance changes.
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