Broken windows

Your top manager is mildly flawed.  Does that impact the stock’s value?

In a word, yes.

An Executive’s Misdeeds Often Prove to Be Costly,” Wall Street Journal, May 27, 2015 B7. Drunk driving by the top boss costs 1.6%.  If it’s the chief executive, the cost is 4.1%.  About 65% of the execs studied kept their jobs.

What does it say about your culture if your chief executive’s flaws are known? If the CEO is observed jaywalking while walking to a meeting, can your company expect your employees to comply with all applicable laws? Your Code of Conduct does not distinguish between non-compliance with the Foreign Corrupt Practices Act and non-compliance with your record retention schedule.

Is a flawed senior executive a broken window, in the law enforcement context?

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Filed under Board, Business Case, Culture, Culture, Governance, Oversight, Risk

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