Crisis Damage Quantified

Occasionally we see it….data that deliver metrics on behavior. A recent article in the Wall St. Journal “At Work: An Executive’s Misdeeds Often Prove to Be Costly” cited a Mississippi State University , Drexel University study that suggests bad behavior by top executives can cost an average of $110 million or 1.6% of shareholder valve. More than double that amount if that executive is the CEO.

Surprising? It shouldn’t be. What is surprising is that boards often keep that executive on at the organization even though additional studies show it hurts company performance and company value.

Who are the culprits? Often they are male and older and nearly half of the instances cited in the study were reports of sexual indiscretions. Locally, Best Buy Co Inc. founder and Chairman Richard Schulze had to step down in 2012 after being accused of covering up an affair between former Chief Executive Officer Brian Dunn and a colleague. Dunn resigned. (The stock hit the $20 range after Dunn’s departure and today trades in the $33 range.)

Previous posts here have detailed just how substantially these problems can hurt smaller companies, especially those without a response plan. According to the Association of Small Business Development Centers, more than one in four businesses will have a significant crisis. The Hartford Insurance company says 43% of those who have a crisis and no crisis plan never reopen. And the Hartford study says of those that do re-open; only 29% are still operating two years later.

In the digital age there are few secrets, very little privacy and lots of good reasons to hire and retain the right people.

This entry was posted in Crisis Communication, Reputation and Issues Management. Bookmark the permalink.