When there is an incident involving the police, such as an arrest or a traffic stop, police officers should assume they are being watched by their body cameras, which could then be inspected by their superiors. CEOs, today, live under the same scrutiny. Except, their “body cameras” are the thousands of smartphones in any arena, stadium, or conference that they enter, Erik Gordon, a corporate governance professor at the University of Michigan Ross School of Business, told Fortune.
“If you are a CEO who remembers the good old days when you got away with things, now you need to know that those days are over,” Gordon said.
That reality explains why a Polish CEO caught on video snatching a hat from a child at the U.S. Open went internationally viral, and why experts say that boards can no longer afford to ignore the reputational risk of poor CEO behavior caught on social media.
Why boards can’t control the narrative anymore
Social-media algorithms, above all, reward a good visual—and the video of Piotr Szczerek, who runs the Polish paving company Drogbruk, stealing fellow countryman and tennis player Kamil Majchrzak’s game-worn hat away from a child is “a striking visual act,” Gordon said.
“Visuals are more powerful than just reading about something,” the professor added. “You can go online and read about something that can be bad, but actually seeing a big person reach out in front of a small person to intercept the hat that was being sent to the small person, seeing that has a much stronger effect than reading about it.”
It’s the kind of lesson corporate boards and their CEOs should especially learn after the scandal that stole July, when former Astronomer CEO Andy Byron was caught canoodling at a Coldplay concert with his former chief people officer Kristin Cabot, who were both married to other people at the time.
The faces Byron and Cabot made, and their desperate attempt to hide away from the big screens, created the perfect viral moment, Kara Alaimo, a professor of communication at Fairleigh Dickenson University, said.
“On social media, people make judgments within seconds, and misbehavior can go viral very quickly,” Alaimo explained. Thus, with Byron, the board “didn’t have much choice” but to replace him, because his misdeeds were so public.
That board’s swift decision-making highlights the broader truth: once misbehavior is broadcast to the public, companies no longer get to control the narrative. Social media has a way of delivering its verdict almost instantly, often before boards have the chance to investigate fully. That puts board directors in a double-bind: pressured to act quickly in order to preserve their credibility, while also being aware that public opinion can be formed on incomplete or fully misrepresented facts.
If companies fail to move fast, the reputational damage can harden. Communication scholars refer to the first 60 minutes after a scandal breaks out as the “golden hour” of crisis response. Alaimo compared it to a heart attack: just as survival rates soar if a patient is rushed to a hospital within the first hour, a company’s reputation is more likely to survive if it addresses a viral controversy immediately. Too many boards, she argued, squander that critical window. Silence, she warned, is deadly.
The dangers of a scandal-clad company
The financial consequences are just as severe. In the case of the Polish CEO, angry internet users “review-bombed” his company, Drogbruk, to such a severe extent that it fell to a 1.1 rating on Trustpilot, a company-reviews website. Trustpilot said it “closed” the company’s page to new reviews due to media attention.
There’s no such thing as a distinction between the company’s reputation and their financial worth, Alaimo said. She pointed to research that suggests the majority of a company’s market value is tied to reputation, and that scandals don’t just impact shares—they can make recruitment harder, too.
Nell Minow, a scholar of corporate governance who has spent decades advising institutional investors, said the pattern is clear: Bad behavior at the top is nothing new, but social media has stripped boards of their ability to sweep it aside. In her view, the larger problem is inconsistency. Boards are often willing to forgive executives in ways they would never tolerate from lower-level employees, which sets a dangerous precedent inside the organization. Tone at the top, she stressed, is everything.
The apology is one of the first trials of governance, she said. Minow joked that she and a colleague maintain a “hall of shame” of poor CEO apologies. The worst offenders, she said, fail to acknowledge fault or explain how the company will prevent a repeat. The best responses are blunt, swift, and leave no space between words and action.
Boards themselves are still learning how to navigate this new environment. All boards now should have succession plans in place for if their CEO becomes a liability, something too few companies price in, Minnow noted. And while many directors now monitor how their companies are perceived on social media, she suggested they need to do more to treat reputational risk as seriously as financial or legal risk.
That shift is beginning to take hold. Minnow noted companies are moving faster to crack down on workplace relationships between CEOs and subordinates, a trend that could ultimately boost the number of women in senior leadership roles.
She added the recent case of the Nestlé CEO, who was replaced over Labor Day weekend for having an affair with a “direct subordinate,” marks a significant cultural change, because he was forced out without any termination payment.
“That is really unusual,” she said, with a sardonic kind of laugh. “I think that that’s actually a badge of success for corporate governance.”
In the end, the lesson for CEOs is deceptively simple: as Gordon put it, there’s no new burden, only new visibility.
“The fact that CEOs’ bad conduct can be caught more easily is less an imposition on CEOs and more a benefit to everybody else,” he said.
Politics8 years ago