CEOs should lead by example
THE recent spate of media reports on the conduct of chief executive officers (CEOs) in and out of office leaves a lot to be desired. The following are some of the recent headlines, which involved bosses of leading public institutions in Zimbabwe: “ZSE Boss trial starts…wife narrates abuse ordeal (H-Metro January 12, 2016),” “Bosses cream off NSSA (Zimbabwe Independent January, 2016)” and so on.
CEOs should lead by example because they are supposed to be cradles of ethics in the organisations they lead.
Instead some CEOs in Zimbabwe have turned rogue.
Some organisations in Zimbabwe are slowly “rotting from the head” and it won’t be long before that rot spreads to all internal organs of such organisations, resulting in their collapse.
A key tenet of good corporate governance is responsible ethical leadership.
Ethical leadership is pivoted on ethical values of integrity and responsibility.
As heads of operations in organisations, CEOs should demonstrate high standards of ethical behaviour on and off the job.
Society expects CEOs, as leaders, to set the right tone at the top.
There is a moral expectation that integrity should permeate in all aspects of the CEO’s conduct both on and off work.
Leaders are supposed to create trust within and outside organisations they lead. The conduct of CEOs should thus be aligned to both the organisation’s ethical standards and societal norms of integrity.
CEOs through their conduct should create trust and confidence with relevant stakeholders such as shareholders, investors, boards of directors, employees and the society in which they operate.
CEOs negative behavioural conduct within and outside an organisation such as corruption, fraud, theft, abuse of assets, violent misconduct, domestic violence etc, produces negative effects (ethical risks) that are detrimental to the performance of an organisation.
Misconduct of a CEO creates bad publicity of an organisations, which in turn produces negative consequences for that organisation. The reputation of an organisation suffers; the morale in an organisation goes down; performance is negatively impacted; confidence of investors/shareholders is lost; and shareholders lose value of their investment etc.
How does a CEO, who has been involved in misconduct, whether it’s on or off work, motivate or discipline employees when he/she (CEO) has lost credibility?
The increase in corruption cases involving CEOs, for example, erodes investor confidence in the country’s governance systems. This, in turn also affects the country’s reputation risk and its ranking on the corruption index, thus scarring away potential investors and foreign direct investment.
In developed countries, bad behaviour of a CEO can impact the organisation the moment it appears in the media. Share prices drop on the stock market, investors are driven away and contracts are cancelled etc, thus affecting the sustainability of an organisation.
That is why CEOs are either fired or are “forced” to resign immediately if they are involved in any scandal on or off work.
The 2011 case of the then International Monetary Fund managing director, Dominique Strauss-Kahn, who was “forced by circumstances” to voluntarily resign from the IMF, following a “sex scandal” off work (with a New York maid), should serve as a precedence for errant and misbehaving CEOs in Zimbabwe.
It’s high time that CEOs in Zimbabwe know that being a CEO is not a right or opportunity for one to do as they wish.
Being a CEO is a good opportunity of-course, but that opportunity comes with responsibilities.
CEOs should know that they occupy those positions at the pleasure of owners of the organisations they lead, who are represented by the board of directors.
Boards of directors should not “sleep on the switch” in exercising their over sight role over management. Directors should always monitor conduct of their CEOs and take appropriate disciplinary action where there is misconduct (regardless of whether such misconduct is on or off the job) that violates set ethical standards and impacts negatively on the organisation or its reputation.
Board of directors should ensure that CEOs are held accountable and that they lead by example through adherence with high standards of ethical behaviour.
Directors should build and sustain ethical corporate cultures by ensuring that there is a Code of Ethics, which sets out an organisation’s ethical standards and consequences for their breach.
Allen Choruma is an independent researcher and writer on corporate governance.
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