Why CEOs Resign
The Fédération Internationale de Football Association (FIFA) is the governing body for the worlds favorite sport: soccer (aka, football to the rest of the world). FIFA has been rocked by not one, but repeated, scandals for decades: World Cup hosting scandals, election scandals relating to the re-election of current FIFA President Sepp Blatter, misappropriated funds in the tens of millions of dollars, and a series of resignations by disgraced members of the governing executive committee, as well as Joao Havelange, the honorary president of FIFA. The organization has struggled to regain public confidence, but a quick review of the sports media makes it clear that theyre losing that battle. I served, until my departure last month, on FIFAs Independent Governance Committee. While the groupand FIFAmade some initial progress, several key proposals were rejected or ignored and the scandals continue.
Amidst such turmoil in an organization, I began to wonder: At what point does a leader do greater harm to good governance by staying than by leaving?
Why do CEOs resign? Some CEOs resign because their arrest and prosecution is imminent, and walking out the door before that happens is more dignified. Bernie Ebbers resigned from WorldCom in 2002, the same year that Ken Lay and others on his team resigned from Enron; in a corporate malfeasance hat trick, Dennis Kozlowski, chief executive of Tyco International, also resigned in 2002 after it became known that he was being investigated for tax fraud. These men were ultimately sentenced to prison terms of varying lengths. Phil Condit, CEO of Boeing until 2003, resigned after news of unethical bidding practices became public. It ultimately came to light that he had offered Darleen Druyun, the principal deputy undersecretary of the Air Force for acquisition, a signing bonus and lucrative position after retirement in exchange for preferential treatment for Boeing in her final days with the military. In this case, it was Druyun who went to prison.
Others resign in the face of public outrage. Into this category fall all of those CEOs who believed, briefly, that they were beyond scrutiny or above reproach. Although Kozlowski resigned over tax fraud allegations, the public continues to hold the $6,000 shower curtain he expensed to the company against him, long after the tax investigation has been forgotten. This group also includes those CEOs brought low by an extramarital affair with a colleague, driving drunk, falsifying credentials on a resume, or making politically charged or insensitive comments.
Still others resign, at least ostensibly, for the sake of the company. These are the CEOs who leave before they are read their rights by prosecutors or shown the door by the board, those who dont insist on clinging to power because they didnt know or it wasnt their fault. These leaders understand the knew or should have known standard. In an analysis akin to military protocol, these leaders understand that they are responsible for what has happened on their watch. They understand that if they stay, they are left with the unhappy choice between arguing that they were complicit in wrongdoing or incompetent in their oversight of the organization.
CEO Les Hinton resigned from Dow Jones after 50 years of service in the wake of News Corps phone hacking scandal. In a letter to his colleagues, he said "[t]hat I was ignorant of what apparently happened is irrelevant . . . I feel it is proper for me to resign from News Corp." Regardless of his actual role in the scandal, Hinton appears to have recognized that there was no other acceptable exit strategy.
Heinrich von Pierer, then Chairman of German conglomerate Siemens, resigned amidst that companys growing bribery scandal in 2007, stating that his duty to the company took priority over his personal interests: "I assume that electing a new chairman of the supervisory board will also make a contribution toward taking our company out of the headlines and bringing it back into calmer waters."
CEO Oswald Gruebel of Zurich-based UBS said it even more succinctly in a memo to UBS staff in 2011. As CEO, I bear full responsibility for what occurs at UBS . . ." He made his decision to step down over apparent resistance from the board. According to the same Associated Press story, UBS President Kaspar Villiger told reporters the board had tried to persuade Gruebel to stay until the bank's [annual meeting], but the gravel-voiced German had wanted to send a strong signal about the trading loss immediately. He thinks that this act could maybe create a new basis for UBS to continue, said Villiger, who earlier noted that UBS wants to turn this disaster into an opportunity. "
For any leader to ensure that his or her departure helps bring the organization back into calmer waters can be a final responsible act of leadership. If the negative event happened on your watch, that wont changebut by taking yourself out of the story, by giving the next slate of leaders a fresh start and a chance to both do the right thing and be seen to do it, you can depart with dignity and hope that history will be kind.
Alexandra Wrage is the president of TRACE, a nonprofit antibribery compliance organization offering practical tools and services to support the good governance efforts of multinational companies. She is a former member of the Independent Governance Committee (IGC) of the Fédération Internationale de Football Association (FIFA), footballs governing body. Prior to founding TRACE, Wrage was international counsel at Northrop Grumman.