Forced turnovers for ethical lapses rose to 5.3% of all global CEO successions from 3.9% over the last five years, according to consulting firm PwC’s recent Strategy & 2016 CEO Success Study, which notes that the jump represents a 36% increase. While the overall number of forced CEO transitions due to ethical lapses remains relatively small, the fact that the figure is growing bears scrutiny. What’s more, the increase was more dramatic among the largest companies in the U.S. and Western Europe—up by 68% when comparing such successions between 2007 and 2011 (4.6%) to those between 2012 and 2016 (7.8%).
The good news? Rather than more wrongdoing at large companies, PwC attributes these figures to increased public scrutiny of CEOs and their behavior, stricter governance and regulations, the 24/7 news cycle, the ethical risks inherent to doing business in emerging markets and through global supply chains, as well as the increased reliance on digital communications such email, text messaging and social media, which create permanent records of misconduct.
PwC analyzed CEO successions among the top 2,500 public companies worldwide for the study, and defined a forced removal of a CEO as one being the result of a scandal or improper conduct by the CEO or other employees, such as fraud, bribery, insider trading, environmental disasters, inflated résumés and/or sexual indiscretions.
In addition to positing reasons for the bump in forced turnover, the study pointed to several measures companies and their leaders can take to lessen the risk of CEO removals:
Establish a Culture of Integrity. Clearly communicate the company’s values and ensure that every employee understands how they translate to the work they do every day.
Match Your Metrics. Vet the ways in which you evaluate performance to ensure that your company isn’t inadvertently pressuring workers to bypass rules.
Create Controls. Put processes and financial controls in place to help minimize opportunities for unethical behavior.
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