Saturday, Jun. 27, 2009

Pink slip would be Sanford’s fate in private sector

Take the Gov. Mark Sanford story out of politics and put it in the business world.

A Fortune 500 CEO lies about his whereabouts and then disappears without telling his executive vice president, board of directors or secretary where he is going. He turns off his phones. He’s gone for six days. When he comes home, it’s discovered he was overseas visiting a mistress.

What would happen?

Business management and ethics experts have a simple answer.

He would be fired, said Jim Balassone, executive-in-residence at the Markkula Center for Applied Ethics at Santa Clara University where he teaches business ethics.

“If I were on the board, I would question, ‘Do we have the right CEO? Does he have the right priorities?’ ” Balassone said.

A company president’s extramarital affair might not impact a corporation’s bottom line, but it says a lot about his character. That, in turn, calls into question his leadership ability, Balassone said.

The CEO in that scenario probably would be fired because of the “tremendous image crisis,” said Richard Larrick, professor of management for Duke University’s Fuqua School of Business. But it might be easier for a businessman to bounce back.

Such a move shows bad judgment, but not necessarily business incompetence, he said. “The corporate world is somewhat forgiving of that.”

Politicians, on the other hand, also have constitutional responsibilities, he said.

“I actually think businesses are more flexible,” Larrick said. “There’s no assumption in an organization that there’s some formal head that’s always available to make decisions.

“Government officials have this extra layer of responsibility and in some sense can fall farther.”

To be sure, affairs have brought down CEOs.

In 2005, Boeing’s board of directors fired its then-CEO Harry Stonecipher for having a personal relationship with a female executive who did not immediately report to him.

At the time, the board issued a statement saying Stonecipher’s actions reflected poorly on his judgment and impaired his ability to lead. His actions also were inconsistent with the company’s code of conduct, the board said.

“The CEO must set the standard for unimpeachable professional and personal behavior, and the Board determined that this was the right and necessary decision under the circumstances,” the statement said.

Over the years, those who study ethics have found that a person’s integrity is consistent in their personal and professional life, Balassone said.

“Anyone who is ethical in their business life will be ethical in their personal life,” he said.

An affair might seem like a personal issue, but chief executives are held to higher standards, said Chuck Gallagher, who leads business ethics seminars.

“The higher you rank in an organization, the more public accountability you have for what you say and the actions that reflect on, not only you, but that office,” he said.

A chief executive in Sanford’s situation might be able to get away with an affair or disappearing for a few days, Gallagher said. But the combination of events would not fly at most companies.

“When you don’t speak the truth, you find everything around you collapses,” he said. “A board of directors would remove a CEO or executive vice president.”

Gallagher said he knows first-hand what it feels like to have a downfall. In 1995, he was sent to federal prison for organizing a Ponzi scheme. After prison, he went on to have a business and consulting career.

Now that Sanford has been forced to come clean about his affair and his secret trip to Argentina, the governor’s future depends on him, Gallagher said.

Gallagher predicted Sanford’s political career is over but said the governor could be effective in other ways. It’s up to him.

“When you’re pushed into a corner, you have to admit it. The next question is, ‘What are you going to do about it?’ Who are you as a human being? And are you going to do the right thing? People get the opportunity to have a second chance.”

Reach Phillips at (803) 771-8307.

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