I have to say that I have never seen behaviours of CEOs under the microscope as much as they are at present. Once upon a time, the private affairs of executive staff and company directors were kept private and stories of misdemeanours were only rumours. They were never commented on or confirmed and they certainly had no visible impact on job security or remuneration. Times have certainly changed though and this has been evident with the recent examples of two prominent publicly listed company CEOs who have had their private lives analysed and dissected in recent times.
Tim Worner is the CEO of the publicly listed company, Seven West Media. He has been with the group for over 20 years, starting his career as a journalist before heading into programming and finally into the top role. He was part of the executive team that saw Channel Seven usurp Channel Nine as the ratings leader in Australia and he is known to be extremely close to major shareholder and Chairman Kerry Stokes. His position as CEO was secure and he was deemed to be a top performer. However, his reputation is now in tatters following the reporting of his affair with his ex-executive assistant, Amber Harrison and the ensuing legal case.
Without venturing into the legal fight, it has been stated that Seven West Media paid a generous settlement to Ms Harrison after the reporting of her affair with Worner made her position untenable. However, that was only the beginning as both parties engaged in a war of words over social media that kept the issue simmering and caused substantial damage to all involved. The Board of Seven West Media were steadfast in their support of Worner, launching an internal investigation and then clearing him of any wrongdoing. The defence was led over social media by board member and former Victorian Premier Jeff Kennett who tweeted about the generous settlement and poured scorn on Harrison’s claim to be a victim. He was strong and direct in his actions but I imagine that he was shocked by the reaction that it caused. Instead of retreating and remaining silent, Harrison responded by releasing letters and text messages over twitter which highlighted that she was a high performer who received great performance reviews and also some of the more tawdry details of the affair. Most importantly, these text messages and internal memos highlighted the possibility that company (and shareholder) money had been used inappropriately so that the affair could flourish. Seven West responded with even great strength by getting a court order to prevent Harrison from sharing any more information while still continuing to promote the fact that she has been very well looked after. It hasn’t painted any party in the best light and has made it difficult for both Worner and Harrison to progress in their careers without the shadow of the affair hanging over them.
It was a similar but different scenario over at QBE Insurance where CEO John Neal was docked $550,000 of his bonus for not declaring to the board that he was in a relationship with a secretary employed at the company. Mr Neal had separated from his wife and this was not an affair in the typical sense of the word but Neal erred by not letting his board know of the new relationship and to conduct it in private.
The response from the QBE Board could not have been any more different from the response from the Seven West Media Board. The US based Chairman, Marty Becker, issued a statement where he said “the group CEO has had a commendable year and delivered a strong full year result for QBE. His performance is well regarded by the board. However, both parties agree some recent personal decisions by the CEO have been inconsistent with the board’s expectations”. The punishment for these personal decisions cost Neal $550,000 and was delivered with an efficiency rarely seen. It was front page news for one day but disappeared from the news within 48 hours. There was no mud- slinging from any party and with this action, the Chairman sent a strong message to his team and the market in general that behaviours, processes and standards matter at QBE and everybody is accountable, irrespective of what position you hold. It was a powerful message and one that I think resonated in the boardrooms of many businesses.
I am not in any way casting judgment over the decision from the board of Seven West Media to back Worner and clear him so quickly. Nor am I saying that a $550,000 deduction in pay is a fair penalty for what amounts to little more than not disclosing a personal relationship. What is evident and indisputable though is that CEO behaviour is now a matter that is open for analysis by the media and the wider community. Boards must be aware of this and have clear expectations on what their executive can and cannot do. They must also have a plan as to how to deal with situations like this and ensure that their actions protect the brand of the companies they represent. They must be seen to be fair to all parties and not engage in any undue bullying or intimidation. CEO behaviour counts and is now under the microscope like never before and boards need to be aware of this.
Brad McMahon – Managing Director