CORPORATE culture is what defines how companies are run and how they should operate.
In the world of sustainable business models, one of the questions often asked is: how sustainable is the corporate culture of an organisation? This usually refers to the tone from the top and whether it permeates through the organisation. Does management understand what it takes to maintain the culture of the organisation? Does management realise that what they do outside the organisation and how they behave also reflects on them as professionals?
Some may ask: why does it matter what a leader – whether of a country or a company – does in his/her personal life? Should shareholders and consumers be concerned about how CEOs behave outside of the company?
The investing community does believe that it is absolutely important for CEOs to maintain a certain decorum in their personal and professional lives. According to research looking at some of the best-managed companies around the world, how CEOs perform as responsible citizens is a marker for the company’s corporate culture.
If a CEO or chairman does not believe in ethics or values at home, how can we trust them to handle company business or funds with integrity? If they can’t keep their personal affairs in check, how can they possibly run their company with a clear mind?
The case of former HP CEO Mark Hurd shows how even seemingly minor personal misdeeds can have serious repercussions. Hurd was asked to step down in 2010 after an internal investigation found that he had submitted inaccurate reports that concealed his personal relationship with an actress who assisted on HP-sponsored events. Although HP cleared Hurd of the sexual harassment allegations, the company declared that fudging reports – to the sum of US$20,000 – amounted to misconduct that could not be tolerated.
While the manner of the misdeed creates the scandal, what shareholders are most concerned about are the implications on management. They are concerned about whether the CEO will be too distracted from having to deal with covering up/effects of disclosing the scandal.
They also use such scandals to judge the CEO’s character. CEOs who betray their family’s trust or use company resources for their personal affairs will be found lacking in trustworthiness and honesty.
In high-profile cases of CEO scandals like Hurd’s, the repercussions are often very obvious – drop in share prices or investors pulling out of joint ventures. But what we may not see are all the issues simmering below the surface, where mid-level managers and executives may be letting their personal problems interfere with their professional performance.
We recently came across a few stories.
The first is about a legal team who had been smoking dope with some friends and got into a fender bender after the party. For fear of being dragged off to the police station to make a statement or to take a driving-under-the-influence test, he just gave the other driver a pound of cash as a way of immediate settlement.
Now, what would your response be if you knew this story? What would your trust level towards this legal officer be – a person who is supposed to be part of the justice system?
Another story we came across was on an executive/working mother that provoked some thoughts and questions on whether professionals of all levels should be held to the same standards in their personal affairs as they are in their official positions.
In this story, the female executive had summarily dismissed her long-serving domestic helper, based on an offhand comment by another family member.
Terminated without cause
The comment had not been related to the helper’s conduct, work performance or character, and all evidence pointed to the helper as being a hardworking and trustworthy employee. Yet the executive had terminated her helper’s employment without speaking to her and getting an explanation on the matter.
To us, this story surfaces an important question: how would this executive handle a similar dispute in her workplace if it involved one of her subordinates? Would she also display similar lack of communication, by jumping to conclusions and failing to ask pertinent questions?
This anecdote forces us to confront the delicate and sometimes-taboo subject of how personal conduct can spill into the professional realm. It is not our intention to judge these executives. But one has to wonder how easily would they sweep an issue under the carpet if it indeed showed them up.
We recognise that both private and domestic issues are par for the course for all of us who juggle family and work responsibilities. Stability on the home front is key for a clear frame of mind in the workplace. However, we feel that there has to be a thought process where professionals realise that how they lead and manage at work actually begins at home, and not what they declare to the media how “charitable” they are.
How professionals solve problems at home should give the investing public valuable insight into whether they will be able to handle much more complex matters at the office, perhaps involving millions of ringgit and the welfare of hundreds of employees.
© CORSTON-SMITH ASSET MANAGEMENT SDN BHD 2014