Opinion

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Expect more sackings and scandals in 2015 (and throughout 2016)

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These stories may be worlds apart in many respects, but it’s no coincidence that they’re making headline news now, nor that many of them end the exact same way, with those at the top paying a stiff price, even losing their jobs. Expect more of the same for the rest of 2015 and throughout the whole of 2016.

Businesses are operating in, and often fall victim to, an increasingly uncertain and highly competitive economy. Those at the top now may find it harder to stay there than in years gone by.

Under pressure

Once the regulators and press get wind of a scandal, something has to give. It’s as simple as that. 

Even if a CEO isn’t directly to blame, the buck has to stop somewhere and it is usually with them. This is not unique to 2015 of course. However, corporate governance failings are much more apparent during periods of economic uncertainty, the like of which we’re currently experiencing. 

Nothing happens in isolation, scandals and sackings included, and the economy is a huge contributing factor for both.

When all is going well, it’s much easier for companies to forgive misconduct or watch it go under the radar – or be swept under the rug in some instances – whether it’s company-wide or specific to an individual. 

Very few CEOs lose their job when their organisation’s financial prospects are looking good, and the mood in their respective market is positive. 

Through periods of economic flux or decline, things are very different. It’s not just that fingers are more rapidly pointed – and scapegoats made – the reason compliance scandal stories are rampant today lies in how companies are doing their business day-to-day.

If companies aim for the lowest compliance standards, often for temporary gains, half the time they’re going to fall short and run the risk of falling off the edge of legality. 

When markets go bad, sales are down and a company needs to squeeze every penny, this risk becomes greater, and company leaders need to be even more diligent. The more a company struggles, the more likely it is to blur and break the lines between right and wrong, legal and illegal. 

A company’s brand and reputation are priceless, and should be valued as such, but some employees will discard them entirely if it means meeting a sales quota, increasing market share, or closing a strategic deal.

Sacrifice

The value of such gains are fleeting and made at the cost of sacrificing core principles that made the company great in the first place. 

Companies that sacrifice their corporate integrity at the drop of a hat will often find it comes back to haunt them in a big way later down the line. 

These kinds of scandals not only cost people their jobs, they can also damage an organisation’s reputation beyond measure. As the likes of Toshiba, VW and United Airlines will no doubt testify, this kind of reputational damage can be much more costly than the original incident and take far longer to repair.

No organisation can say with 100 percent certainty that it is free of fraud or corruption, unfortunately that is the nature of business. 

However, companies can take steps to ensure that they have the right risk culture and tone at the top. Even when that is in place, it is critical that leaders in the middle of the hierarchy are projecting the same tone, and not turning a blind eye to misconduct. 

Likewise, companies must be capable of monitoring the early warning signs of misconduct and stopping it when it does occur anywhere in an organisation. 

We can’t know which company or CEO will be the next high profile casualty, but only companies with a strong compliance programme and sense of integrity are certain to avoid this fate. 

French Caldwell is chief evangelist at GRC apps company MetricStream.

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