Case on Executive Integrity

Below are three examples of CEOs whose leadership of their firm has been called into question over matters of their personal integrity and behavior.  Issues have included their personal political positions and contributions, personal behavior and relationships with employees while CEO, and illegal and inappropriate behavior in college.

Mozilla

“Mozilla was built on the mission to promote openness, innovation and opportunity on the Web.  Every day, we bring together over half a billion users and thousands of contributors from more than 80 countries to advance the cause outlined in the Mozilla Manifesto.  The web is a vital public resource and Mozilla exists to protect it. That is what we do at Mozilla, our singular point of focus.” --From Mozilla’s blog Q and A regarding the resignation of Brendan Eich

Brendan Eich was a co-founder of Mozilla, an organization set up as a nonprofit foundation, passionate about its purpose.  Eich’s previous political support for the Defense of Marriage Act, which prior to 2015 defined marriage on the federal level as the union between one man and one woman, was well known by the board and employees prior to his appointment as CEO.  What wasn’t known was how strongly employees and outsiders would react to a perceived disconnect between Eich’s personal values and the values of the company. In spite of posting about his commitment to continuing the organization’s support of the LGBTQ+ community through various policies and benefits and apology for “causing pain,”  the issue did not die down. Eich made his own decision to resign as CEO and declined the board’s offer to take another C-level position in the company.

American Apparel

“Passion, innovation & ethical practices for the clothing industry. That's American Apparel.”--From American Apparel’s website under “About Us”

American Apparel founder Dov Charney has never apologized for using sex to sell clothes.  In fact, it’s been central to his company’s strategy and marketing from Day One. He has also long acknowledged his personal behavior is strange and he is his own worst enemy.  

For example, 10 years ago, “Charney gave a now infamous interview with Claudine Ko, a reporter for Jane magazine, during which he masturbated, with her consent, while carrying on a conversation about business. He engaged in oral sex with an employee with Ko nearby, too” (Bloomberg Businessweek, July 9, 2014). Also, in 2006, American Apparel starting asking employees to sign a form indicating that they knew they were coming to work in a sexually charged environment.

According to board co-chairmen, in mid 2014, Charney was removed as chairman by the board pending termination following a 30-day notice clause in his contract.  The board first gave him the choice to resign if he gave up voting rights to his 27 percent share of the company. In that scenario, he would have received a four-year, multi-million dollar consulting contract.  Officially removed for violating the company’s sexual harassment policy and misusing company funds, Charney refused to go quietly, which threw the company’s ownership and governance into play. Hedge fund Standard General stepped in with a cash infusion for the company following a loan call by another investment firm after Charney’s ouster. Five of the seven board directors voluntarily agreed to step down, and Standard General agreed to add  three new directors. Charney stayed on as a strategic consultant but was eventually fired as CEO in December 2014.

Snapchat

“Deletion should be the default.”--Snapchat’s mission statement

At the end of May 2014, details of sordid emails from Snapchat CEO Evan Spiegel’s college days were released to the media. Trouble is, his college years were only four years prior to these emails being released, because, in 2014, he was only 24. The e-mails detailed illegal drug use, underage drinking, and misogynistic behavior, including urinating on one after she passed out following sex, and harassing women who he believed were overweight.  Some found elements of his emails racist as well.

Spiegel’s privileged background and lavish lifestyle had always  received plenty of press. After the email release, he began getting more press for his bad behavior than his app.  He apologized immediately following the release of the e-mails saying, “ I’m obviously mortified and embarrassed that my idiotic emails during my fraternity days were made public. I have no excuse. I’m sorry I wrote them at the time and I was a jerk to have written them.  They in no way reflect who I am today or my views towards women.” Spiegel remains CEO and was responsible for taking the company public in 2017.

Questions to Consider

1. Are there ethical issues involved in all of these cases?  Which ones and why?
2. How important to a company’s investors and shareholders is the personal behavior of the CEO?  Do people have to like him/her for the company to be successful?
3. Does mission matter when assessing gaps between a leader’s values and the organization he or she is running?
4. Should boards consider risky personal behavior in hiring executives?  What should boards do if the risky personal behavior comes from the founding CEO?

Additional Reading

Ethical Issues in Snap’s IPO: Evaluating Leadership Character

This case was originally written in 2014, and was revised in July 2018.