What kind of ethic of ceo that fired employees

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In September 2016, Wells Fargo announced that it would pay $185 million to settle a lawsuit filed by federal regulators and the city and county of Los Angeles, admitting that employees had opened as many as 1.5 million accounts without customer authorization over a five-year period. These unethical practices resulted in an immediate drop the company’s stock prices and it continued to underperform by a significant margin.

Wells Fargo’s CEO attributed the banking scandal to bad apples at the company who were fired (some 5,000). But former workers spoke out, saying that they were fired despite being “good apples” who had contacted the company’s ethics hotline with concerns about fraud and an unhealthy sales culture. Several employees said they were fired after blowing the whistle.

This massive breach in ethics, one of the largest in recent years, stands in contrast to the company’s then-publicly stated mission to “satisfy our customers’ financial needs and help them succeed financially.” Sadly, even authentic, high-purpose CEOs and their companies can succumb to short-term pressures for profits.

Throughout my consulting work, I’ve discovered that honest conversations are a crucial tool in helping leaders and their organizations successfully act on their ethical ambitions. If you’re a CEO who aspires to lead ethically and with high purpose, consider the following strategies.

Start within.

The road to your higher ethical ambition starts with personal reflection about your values and purpose in life. Take the time to have an honest conversation with yourself to help figure out what matters to you, and where your ethics lie.

To start, write down key decisions you made in your life (for example, choice of job, spouse, and friends) and then ask yourself what motivated these decisions and what they say about you. For example, a newly appointed division manager, trained in accounting, reflected on why he chose to work for his company despite better offers and realized that it was the friendly, collaborative, and ethical culture. He then used this information to help define who he wanted to be as a leader.

Align your senior team.

Start a conversation with your senior team members. What are their aspirations for the kind of company they want to create? This type of discussion will allow you, the leader, to test your own advocacy, and then lead your team to a consensus statement. Here’s how one CEO went about developing his company’s statement of purpose:

In one of my first meetings with the senior team, we talked about what kind of legacy we wanted to leave. The team had a lot of energy for this. Everyone had something to say about it, and we put all the ideas up on the wall. We then looked for commonalities around what kind of difference we wanted to make. All of the ideas had to do with people, touching people in a positive way, and giving people a chance to grow. Today, we don’t talk about vision, but about the legacy we are trying to build.

Be prepared to be derailed.

Unfortunately, at some point, pressure to meet shareholder expectations will derail your aspiration to lead with a higher purpose and values. Research shows that there is an inevitable gap between what we humans espouse and what we actually do. The same is true for CEOs and their companies.

Don’t let your organization get caught off guard when things don’t go as planned. Schedule routine conversations to check-in on your organization’s ethical ambitions. I’ll explain more about how to execute this in the next section.

Don’t wait for the whistle to blow.

In too many companies, lower-level employees fear speaking truth to power about misalignments with purpose and values. To help combat this, my colleagues and I developed the strategic fitness process — a structured process that allows senior managers to lead conversations that uncover the whole truth about how their organization really works. It also helps senior management rest easier, knowing that they are not just waiting around, hoping the whistle doesn’t blow.

To understand what the strategic fitness process looks like in action, let’s look at a company that discovered that their practice of quarterly channel-stuffing (shipping large amounts of unrequested products to distributers) was inconsistent with their values and purpose, and was in turn, damaging distributer and employee trust, loyalty, and commitment, and not surprisingly performance.

To start the strategic fitness process, the CEO and his senior team first developed a two-page statement of direction that communicated their strategy and values. Then, a task force of eight was commissioned to interview 100 people in the organization — key leaders and individual contributors two to three levels below the top — about the alignment of the organization with their stated strategy and values. At this part of the process, organizational strengths and barriers to executing their direction, including channel stuffing, were identified.

They then held a structured meeting where they laid out ground rules —  no blaming, defensiveness, or emotional outbursts — that allowed the task force to report honestly on the barriers they found. The structured conversation helped the CEO and senior team truly listen and understand the issues. As the CEO later said, “The truth was compelling, and it made clear we had to act and on what to act.” Channel stuffing was suspended immediately even though quarterly earnings for the year would not match Wall Street expectations, and the stock price would suffer a decline. Moreover, it stopped a practice that later became illegal and for which a company in the same industry was fined $800 million.

Consider what the CEO and senior leaders of Wells Fargo might have learned if they wanted to. They would have had the chance to change unethical practices, instill pride in and commitment to the company by employees and other stakeholders and avoid financial and reputational damage before the whistle was blown. If you aspire to lead ethically and with high purpose, you must consistently have these honest conversations with yourself, your team, and your organization.

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Companies have become much more likely to dismiss their chief executive officers over the last several years because of a scandal or improper conduct by the CEO or other employees — including fraud, bribery, insider trading, inflated resumes, and sexual indiscretions. Larger companies are more at risk than smaller ones, as are companies where the CEO has been in office for a long time, and companies where the CEO is also the board chair, according to PwC’s Strategy& recent CEO Success study.

From 2007-2011, forced turnovers due to ethical lapses were 3.9% of all successions at the world’s 2,500 largest public companies. From 2012-2016, that figure rose to 5.3% — while that might sound small, it’s a 36% increase. On a regional basis, the share of all successions attributable to ethical lapses rose most sharply in the U.S. and Canada (from 1.6% of all successions in 2007–11 to 3.3% in 2012–16), in Western Europe (from 4.2% to 5.9%), and in the BRIC countries (from 3.6% to 8.8%).

Each year, the study identifies the world’s 2,500 largest public companies, defined by their market capitalization on January 1, and focuses on those that experienced a chief executive succession over the next 12 months. Each company that appeared to have changed its CEO is investigated for confirmation that a change occurred, the reason for the change (using company, press, and media reports as well as the knowledge of Strategy& consultants), and information on both the outgoing and incoming chief executives.

We see five reasons for the rise of ethics-based dismissals. First, the public has become more suspicious, more critical, and less forgiving of corporate misbehavior. Second, governance and regulation in many countries has become both more proactive and more punitive. Third, more companies are pursuing growth in emerging markets in which ethical risks are heightened due to higher levels of corruption and less mature governance structures. More extended global supply chains also increase these counterparty risks. Fourth, the rise of digital communications has exposed companies and the executives who oversee them to more risk , both from whistleblowers seeking to expose wrongdoing and from hackers attempting to access customer data. Finally, the 24/7 news cycle and the proliferation of media in the 21st century publicizes and amplifies negative information in real time.

The data also indicate three factors that indicate company might be at greater risk:

Large companies: From 2012 to 2016, CEOs at the companies in the top quartile (by market capitalization) were significantly more likely to be dismissed for ethical lapses—7.8%, compared with an average of 3% for smaller companies. The fact that dismissals were higher at larger companies makes sense, since larger companies are the ones most affected by the five trends that we’ve cited above, and are subject to the greatest scrutiny—whether by customers, media, or shareholders. In addition, the biggest companies are better equipped to proactively remove a CEO if the need arises: They likely have more advanced succession plans in place, a better bench of potential candidates, and experienced, independent board members who have seen similar situations unfold before.

Longer-serving CEOs: We also found that CEOs forced out of office for ethical lapses had a median tenure of 6.5 years, compared with 4.8 years for CEOs forced out for other reasons. A couple of potential reasons exist. It’s possible that companies with long-serving CEOs tend to be those that have been achieving above-average financial results, and thus may attract less scrutiny from the media and shareholders — especially activist investors — than companies that have been performing poorly. It has become common for activists to expose unflattering individual information about a CEO whose company they are targeting in order to advance their agenda of removing that individual and changing the company strategy. It’s also possible that when an organization’s leadership is static, employees may begin to see ethical lapses as normal, and allegations of misconduct are less likely to be raised, investigated, or acted on. Of course, the law of averages may be partly to blame — the longer a CEO’s tenure, the greater the chance that something will go wrong.

Combined CEO-Chair roles: When we compared the reasons for dismissals of CEOs who also held the title of board chair with the reasons for dismissal of those CEOs who did not hold both titles, we found that 24% of ousted CEOs with joint titles were dismissed for ethical lapses, compared with 17% of those with the CEO title only — a 44% difference. It is likely that the boards of companies who have split the Chairman and CEO roles are better able to act independently and investigate or oversee company operations than those where the CEO controls the board’s agenda. In some recent cases, shareholders have prompted boards to strip the CEO of the board chairmanship in the wake of a scandal.

For all CEOs, and especially those who oversee large organizations, the responsibility for preventing or minimizing wrongdoing is daunting. The best way to prevent ethical lapses in the current environment of strict scrutiny and instant scandal, is to build a culture of integrity—and to put in place effective governance structures, processes and controls that discourage wrongdoing.