When the CEO is the cause of a crisis

Social media can be a boon to business.  But it also offers yet another way for the CEO to bring an organization crashing down.

The latest “colourful” CEO to learn this lesson is EnergyWatch boss Ben Polis, whose racist and sexist rants on his personal Facebook page threaten the very survival of his business. EnergyWatch makes its money by switching power consumers to big energy retailers for a fee.

However, when the CEO’s extreme opinions became public this month, three football teams handed back his sponsorship, followed by energy retailers rushing to cut ties with his company.

Polis was a man who courted controversy – like posting photos of himself in his underwear on outdoor advertising to show the organization had “nothing to hide.” But his online indiscretions had the media pack baying for blood as reports surfaced about his less than enviable business record, and alleged unfunded employee entitlements. He quickly resigned as CEO and a week later handed his 50% share in the company to his business partner and co-founder.

Sadly there are too many cases where employees, shareholders and creditors have lost out massively when the CEO was the cause of a crisis – be it dishonest, dubious or just plain dumb.
• The ebullient Alan Bond went to jail for fraud and destroyed Bond Corporation
• Newspaper mogul Conrad Black defrauded millions from his company, which was dismantled and eventually sold
• HIH Insurance boss Ray Williams and other top executives were jailed after Australia’s largest corporate collapse
• Media magnate Robert Maxwell fell off his yacht and was drowned after hundreds of millions went missing, and his Mirror Group then crashed and burned  
• Martha Stewart went to jail for lying over insider trading, and her company lost two thirds of its value, costing her an estimated $400 million
• And of course British high street jeweller Gerald Ratner described his own products as “total crap” and company shares fell from two pounds to ten pence, leading to 330 store closures and the loss of 2,500 jobs.

At the time of writing, EnergyWatch has survived its crisis, but only time can tell whether the CEO’s damage will prove fatal.
University of Queensland Professor Mathew Hayward has written extensively on Egos and Executive Hubris. He believes organizations need a process for checking ego before making decisions, and suggests how senior managers can help prevent crises and protect shareholder value
• Acknowledge their limitations and shortcomings
• Seek the best advice rather than trying a “quick fix” which may or may not work
• Know when a problem is beyond their expertise
• Welcome advice from other parties
And Hayward could have added – remember that the CEO’s personal Facebook page cannot be separated from the business reputation.
His counsel is sound crisis management advice and could make the difference between survival and disaster.

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About managingoutcomes

Issue and crisis management expert
This entry was posted in Crisis management, Reputation risk and tagged , , , , . Bookmark the permalink.

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