Researchers have revealed how it is possible for boards of directors of companies around the world to proactively get a hold of the situation involving public trust over a company and CEO’s misconduct.
Published in the Journal of Trust Research, the study puts forward possible steps that boards of directors can proactively take to address CEO misconduct to increase public trust towards an organization. In the study researchers looked at two possible steps that boards of directors can take – kick the CEO out of the organization or keep the CEO in, but offer an apology and acknowledge the wrongdoing by the CEO.
In the first instance, where the CEO is kicked out, boards of directors will effectively distance them from the wrong doer and may very well keep the organization’s reputation intact, but if the second approach wherein the CEO is retained and an apology is issued is taken, people see it as a reformation and this could have more positive impact on the public trust factor.
Boards of Directors have a major role to play in each of the responses, and they have the authority to restore faith in the organization. For this reason the board of directors should look at how they can show that the guilty CEO is distinct from the rest of the top leadership (which is assumed trustworthy) or that the faltering CEO has learned a lesson from the event and will be a reformed leader in the future.
The signals that boards of directors send out are key to repairing an organization’s trust and whether they would do so while kicking out the CEO or keeping the CEO in the company.
Scientists point out that either of these strategies can address the violation and start to rebuild trust – but if the CEO needs to stay on with the company, the latter strategy (emphasizing CEO repentance) needs to be adopted.
To produce their findings, the researchers set up an experimental study with 87 participants, which replicated a real-life trust violation by a CEO at a leading Fortune-500 company. They then analyzed university students’ responses to the two different board-directed tactics, which were tested through a series of videos and newspaper articles.