There are good bosses and then there are bad bosses. And what employees may see as good, a board of directors may see as bad, and vice versa. The real question in this age of social media and the democratization of all information is this: Who has—as distinct from who should have—the power to hire and/or fire CEO’s?
Take the case of Market Basket’s ousted CEO, Arthur T. Demoulas. Market Basket is a family-owned business, and Demoulas was terminated by family during a fight for control of the $3.0 billion company. Mr. Demoulas was revered by Market Basket employees as a kind-hearted and generous leader. The employees loved him. So when he was ousted as CEO, they took action. After six weeks of worker strikes and tense negotiations, shareholders of the Tewksbury, Mass.-based company agreed to allow Mr. Demoulas to buy out his cousin’s stake in the company and return as CEO.
What makes this situation really interesting is that Market Basket is a nonunion company, and even customers boycotted the store and joined the workers on the picket lines.
Then take the case of Dov Charney and American Apparel. Mr. Charney built the business, but his being CEO apparently went to his head. His behavior generated several sexual harassment charges against him. It was even reported that he conducted job interviews in his underwear. In one interview he gave to the media, he said, "My biggest weakness is me. I mean, lock me up already! It's obvious! Put me in a cage, I'll be fine . . . I'm my own worst enemy. But what can you do? I was born strange." The Board of Directors tried to get rid of him, but the best they could do was suspend him, make him a consultant to the company at his CEO salary, and decide when he could resume officially as CEO.
Then there is the case of Desmond Hague, president and chief executive of Centerplate, a Connecticut-based catering company that serves fans at sports and entertainment venues. He was caught on camera riding down an elevator in a building abusing his Doberman Pinscher puppy repeatedly, causing it to shrink away from him. The video went viral and next thing many cities were considering revoking the contracts they had with Centerplate. The Board of Directors ended up suspending Mr. Hague and sending him to anger management, but the public had spoken—a petition with over 180,000 signatures was circulated demanding his removal as CEO. The Board of Directors listened; he was removed from his position.
And when a company has well-publicized ethical issues reported in the news, it would likely be good to ensure that the new CEO is clean as well. When the former CEO of Boeing resigned in 2003 because of the scandal of hiring a federal procurement officer who helped the company gain a major contract, the company brought in a former CEO of McDonnell Douglas, Harry Stonecipher, and gave him a mandate to “clean up” the company. However, two years later the Board of Directors ordered Mr. Stonecipher to step down because the 69-year old grandfather was conducting a love affair with one of his direct reports.
So what should happen when a CEO behaves badly? Theoretically, that CEO should have the whistle blown on him or her by a whistleblower or whistleblowers well protected from retaliation by the law. In practice that has sometimes worked and sometimes not worked; the whistleblower in many cases still runs considerable risks in stepping forward. However today, largely because of Internet-enabled social media, the behavior of even moderately high-profile CEOs often becomes public information instantly or nearly instantly. Then that CEO is tried in the court of public opinion, and often enough the Board of Directors is no match for the power wielded by employees, customers, and the general public.
Sources: The Christian Science Monitor 8/28/14, CNN Money 6/20/14. The Washington Post 9/3/14, Zuckerman Spaeder LLP 8/29/14, Yahoo News 9/8/14, CNN 3/7/2005