Capital Markets Corporate

November 1, 2019

No individual is bigger than the institution: how to avoid the dangers of a rogue CEO

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The last few months have seen a number of high-profile departures from troubled businesses.

From Neil Woodford and the suspension – and eventual closure – of his Equity Income Fund to Adam Neumann and the disastrous collapse of WeWork’s IPO, shareholders and stakeholders alike have been quick to call for the removal of these leaders from their respective businesses.

But in an age of influencers and social media where the focus is often on a single “face” of a company, what can businesses learn from this recent spate of CEO cullings?

The power of social media

We live in an age where the President of the United States of America can tweet his most trivial thoughts to a global audience, so it is no great surprise that many business leaders want to get in on the action too.

Some of the world’s most successful businesspeople have cultivated substantial social media followings, with Bill Gates (48.3m), Tim Cook (11.6m), Elon Musk (29m) and Richard Branson (12.7m) amassing over 100 million followers between them on Twitter alone.

However, while the influence of social media is undeniable, the impact of a bad social strategy can be just as significant – as seen when the aforementioned Mr Musk took it upon himself to tweet that he was considering taking Tesla private, consequently resulting in his removal from the Board and hefty fines for both himself and the business.

Ensuring clear social media policies and guidelines are in place with regular training for high profile members of the team can make all the difference when it comes to going viral for the right reasons.

Individual vs. the institution

While maintaining a human element to your business is essential, particularly within the financial services industry where this can often be difficult to achieve in the first place, it is important to maintain a balance between the individual and the institution.

Good corporate governance is only becoming more important in today’s era of responsible business, so it is key that the C-suite exemplifies such behaviour in order to avoid wider ramifications for the entire firm.

In the wake of WeWork’s shelved public listing following investor concerns about the viability of their business model, CEO Adam Neumann was also placed under the microscope.

Rumours of drug misuse, tequila-fuelled staff parties and a slew of conflict of interest accusations ultimately culminated in him stepping down from the firm last month – but not without leaving a hefty dent in the business’ reputation first.

It is important to remember that no one person should be bigger than the vision and purpose of a company and everyone must be held accountable to the same standards.

Stick to the house view

As a group, it is vital that all members of the business are singing from the same hymn sheet when it comes to key messages and issues.

While we are all entitled to our individual views and opinions, we must remember that it is not always possible to separate our personal and professional lives. What is said in a personal capacity can have significant repercussions from a business perspective, as the US National Basketball Association (NBA) recently found out.

In response to ongoing political unrest in Hong Kong, Houston Rockets’ manager Daryl Morey tweeted in support of pro-democracy protestors, rapidly prompting a furious backlash from the Chinese government and state-run broadcasters.

What’s more, efforts by the NBA to disassociate themselves from the tweet attracted further criticism, this time from US politicians who felt the move was an attack against free speech.

Creating a central set of signed off key messages, relevant talking points and Q&As can help avoid such situations by ensuring staff are kept up to date on the latest house view and providing guidance on sensitive topics they should steer clear of in the public domain.

Curb your rogue CEO

Overall, while upholding a personal element to your business is important to maintain customer relationships and encourage engagement, it is important that the success of the firm does not hinge on a single individual.

The risk-reward balance of such an approach can be dicey at best and catastrophic at worst.

Instead, look to encourage the characteristics and nurture the culture you want your business to embody across all elements of the firm. This will provide you with the best insurance against the dangers of a rogue CEO.

By Kaj Sahota, Senior Account Manager at Instinctif Partners

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