What if CEOs Misuse their Positions

CEO frauds in companies of all sizes are not new but a major threat. Seemingly CEOs with great credentials and performance records can turn out to be imposters. Exposing your company to such CEOs poses risks not only to financial embezzlement, but leaking of sensitive information, and undesirable and unauthorized actions. Timely interception of frauds can prevent your company from major financial and reputational harm. CEOs often fraudulently inflate financial results which can not only land you in scandals but cause stricter regulations and controls from the tax departments, Institutions, and shareholders beside it may result in bankruptcy.? A policy of continual auditing and monitoring of expenditures can minimize fraud.

CEO or White-Collar Crime?may not be violent, but they have their victims. These crimes not only erode trust but also wipe millions of dollars, devastate personal lives, and rob investors. These crimes require complex investigation and forensic auditing of accounts. Some of you will have to involve law enforcement agencies and security and exchange regulatory bodies. As frauds become real situations, many companies are sending their CFOs for special courses and training in fraud prevention.

?The major dilemma of Boards is to save the company from public humiliation and reputational loss while dealing with CEO malfeasance. Earlier boards were light on founding CEOs mainly to suppress the noise. Founding CEOs were privately disciplined and allowed to carry on with stricter controls. Sometimes they quietly let off without much fuss.?? CEOs caught up is sexual misconduct have made it difficult for boards to ignore without severe action. The boards have little choice but to act swiftly on CEO misconduct once they are found guilty of ethical and reliability abuses.? The sooner the offending CEO is out of the company the better it is for the board and the company. Denial is not acceptable. Nowadays the public and stakeholders’ scrutiny is more than ever and many times it is impossible to cover up for such misbehaviors. This makes the board’s job vastly uncomfortable, complex, and often, untenable.

The boards must be noticeably clear in understanding causes and consequences before deciding the ouster of their CEO, like:

• Does the misconduct justify an ouster?
• Are they criminal in nature?
• CEO is briefed on the seriousness of the situation in explicit terms.
• Is the board fully convinced?
• The ethical, legal, and reputational repercussions sacking of the CEO are considered carefully.
• Keep an eye on public opinion.
• Reduce any repercussions of a lawsuit!
• Anticipate legal fightback that the CEO may take!
• Prepare for all-out legal recourse and fallout.
• If you will need to have a strong interim plan

The board must swiftly and wisely move because public opinions tend to be biased against the action. Send the CEO on forced leave while the board cleans up the mess and puts an interim setup. It can take months to weed out and fully separate the CEO. And often, a compensation or buy-out called a severance agreement is offered in exchange for good behavior. For the sake of the dignity of the board under no circumstances go public or on social media. What I say is conservative or even defensive, but the intention is to save the company first.

#CEOFrauds #Frauds #Boards #Career

?