A new academic study suggests that companies “get what they deserve” when they hire a CEO and would be well advised to thoroughly review a chief executive’s background as a predictor of fraud and crisis.
The study, by professors at Georgetown and the universities of Minnesota and Chicago, looked at 109 companies the Securities and Exchange Commission determined committed fraud between 1992 and 2004. They compared those to 109 companies of similar size and characteristics that did not, and then investigated all the CEOs’ backgrounds. Past criminal behavior, found in 12 of the fraudulent 109, was seen as an indicator.
The New York Times reported last week that the academics counted eight felony drug charges, four cases of domestic violence and four traffic violations so serious that they were lumped under the heading of reckless endangerment. (Some of the bosses had more than one item on their record.)
As Floyd Norris wrote in the Times:
What this could indicate is that people who are willing to violate one set of social norms are more likely to be willing to violate far more serious ones.
This would all seem a no-brainer — and thanks to our squeaky clean CEO Eric Mower for sending it along — but apparently there are companies that hired CEOs either without checking thoroughly, or if they found the criminal past, let it go.
And while this study can be knocked for the small sample, CEOs of large companies are a small group. And, the study also looked at the flip side. Those who were clean had CEOs who were clean and played by the rules. Even speeding tickets were an indicator of proper or improper behavior.
For crisis managers, this is one more tool to consider. While crisis managers may not have access to personal information about CEOs, they should also think twice about the clients they accept, and what those clients ask them to do.
The content of this blog is about crisis management and mismanagement in a digital age. It originates with Steve Bell, who spent 30 years as a journalist for the Associated Press and in four top editor positions at The Buffalo News. He is now Partner/Director of Public Affairs at Eric Mower + Associates, one of the nation’s largest independent advertising, integrated marketing and public relations agencies, with seven offices in the Northeast and Southeast. Learn more about EMA at http://www.mower.com. Steve’s blog is based on his own opinions and does not represent the views or positions of Eric Mower + Associates.