CEO Monthly May 2017

CEO MONTHLY / MAY 2017 7 , The share of CEOs forced out of office for ethical lapses has been on the rise, according to the 2016 CEO Success study released onMay 14th by Strategy&, PwC’s strategy consulting business. Global Study on CEO Trends Indicates a Significant Uptick in CEOs Forced out of Office for Ethical Lapses The study, which analyzed CEO successions at the world’s largest 2,500 public companies over the past 10 years, reports that forced turnovers due to ethical lapses rose from 3.9% of all successions in 2007-11 to 5.3% in 2012-16 - a 36% increase, due in large part to increased public scrutiny and accountability of executives. The increase was more dramatic at companies in the U.S. and Canada. Forced turnovers for ethical lapses at these companies increased from 1.6% of all successions in 2007-11 to 3.3% in 2012-16 - a 102% increase. In Western Europe, the share of CEOs forced out for ethical lapses increased to 5.9% from 4.2 %, and in the BRIC countries, to 8.8 % from 3.6%. “Our data cannot show - and perhaps no data could - whether there’s more wrongdoing at large corporations today than in the past. However, we doubt that’s the case, based on our own experience working with hundreds of companies over many years,” says Per-Ola Karlsson, partner and leader of Strategy&’s organization and leadership practice for PwC Middle East. “Over the last 15 years, five trends have resulted in boards of directors, investors, governments, customers, and the media holding CEOs to a far higher level of accountability for ethical lapses than in the past.” The Five Trends Shaping CEO Accountability • Public opinion: Since the financial crisis of 2007-08 and the Great Recession that it ignited, confidence and trust in large corporations and CEOs has been declining; the public has become more suspicious, more critical, and less forgiving of corporate misbehaviour. • Governance and regulation: The rise of public criticism of executives and corporations has translated directly into regulatory and legislative action, and companies in the U.S. and many other countries have moved to a zero-tolerance approach toward bad behaviour in the C-suite. • Business operating environment: Companies increasingly are (1) pursuing growth in emerging markets where ethical risks, such as the possibility of bribery and corruption, are heightened, and (2) relying on extended global supply chains that increase counterparty risks. • Digital communications: The use of email, text messaging, and social media has created new risks for ethical lapses. A company’s digital communications can provide irrefutable evidence of misconduct, and their existence increases the likelihood that a CEO will be held accountable. • The 24/7 news cycle: Unlike in the mid- to late 20th century, when most executives and companies