How Executive Indiscretions Can Hurt the Bottom Line

Did you ever think about what executives of big name companies do during their time away from the office? If you hear they golf or take lavish vacations, you may just glaze over their activities.  But, what if you heard one of them was arrested for drunk driving or even sexual assault? Would that impact your decision to do business with that company or change the way you look at that company?

A recent study led by Adam Yore, assistant professor of finance at The University of Missouri’s Trulaske School of Business, found that indiscretions at the hands of company executives do indeed affect the bottom line. In fact, they affect them to the tune of billions of dollars of lost revenue.

Yore says he first decided to look into the issue nearly ten years ago after reading about a Boeing executive who lost his job due to an affair.  According to a Washington Post article, the executive’s affair led to questions about his ability to lead going forward. Yore says this got him to thinking, “If you lie to your wife, would you also lie to your shareholders?”

When people see a leader of a company acting unethically after hours, it makes them start to question if that’s how they act in their professional lives as well. If you’re invested in a company you want them to be on the up and up at all times.

Yore and his colleagues looked into 325 cases of executive indiscretions over the years, which they based their study upon. These indiscretions were broken up into four categories: substance abuse, violence, sexual indiscretions, and dishonesty. They found an immediate 1.6% loss in shareholder value in companies where these indiscretions existed. Perhaps not so shocking, dishonesty indiscretions proved to be the most damaging. When these come to light, major customers and potential joint venture partners tend to shy away from doing business with the company that the CEO is associated with. Perhaps there is a fear of guilt by association. Whatever the case, it spells bad business.

“There is market reaction to dishonesty indiscretions, “ says Yore. He also says that indiscretions committed by CEO’s, not employees in a lower position or board members have the most damaging effects on any given company. No one wants a leader whose behavior may be looked upon as being dishonest or puts the company in a negative light.

On the flip side, the study also found that companies that have a tendency not to comply with federal regulations saw less of an impact on their bottom line when executive indiscretions came out.

What can be done to avoid the problem? Yore says, “resume frauds often account for a large number of indiscretions.” He says first and foremost; don’t lie on your resume. He says this is something that he stresses to his students. With all of the online searches available, employers will be able to quickly discover when you’re lying. The truth you are trying to hide will eventually come out.

In the end, it’s about integrity. Yore says, “Personal integrity at the top matters and can have major impacts on these companies.” This is definitely something to keep in mind when it comes to business dealings.

 

45 COMMENTS

  1. Thanks for the publish. My spouse and i have constantly seen that many people are desperate to lose weight simply because wish to look slim along with attractive. Even so, they do not often realize that there are additional benefits so that you can losing weight also. Doctors state that over weight people are afflicted with a variety of health conditions that can be perfectely attributed to their excess weight. The good news is that people who’re overweight along with suffering from various diseases are able to reduce the severity of their own illnesses by means of losing weight. It’s possible to see a constant but marked improvement in health while even a minor amount of weight reduction is realized.

  2. Thanks a ton for your post. I’d like to comment that the price of car insurance will vary from one insurance plan to another, for the reason that there are so many different issues which give rise to the overall cost. By way of example, the brand name of the car will have a huge bearing on the price tag. A reliable older family car or truck will have a less expensive premium over a flashy fancy car.

  3. Good website! I really love how it is nice on my eyes it is. I’m wondering how I could be notified whenever a new post has been made. I have subscribed to your RSS which may do the trick? Have a great day!

  4. You are so cool! I do not think I’ve truly read something like that before. So nice to find someone with some original thoughts on this subject matter. Really.. many thanks for starting this up. This site is one thing that’s needed on the internet, someone with some originality!

  5. Hi would you mind stating which blog platform you’re using? I’m looking to start my own blog in the near future but I’m having a difficult time selecting between BlogEngine/Wordpress/B2evolution and Drupal. The reason I ask is because your design seems different then most blogs and I’m looking for something unique. P.S Apologies for getting off-topic but I had to ask!

  6. Wonderful beat ! I would like to apprentice even as you amend your site, how could i subscribe for a weblog site? The account helped me a appropriate deal. I were a little bit familiar of this your broadcast offered vivid transparent idea

  7. I have been exploring for a little for any high quality articles or blog posts on this kind of area . Exploring in Yahoo I at last stumbled upon this website. Reading this info So i am happy to convey that I have a very good uncanny feeling I discovered just what I needed. I most certainly will make certain to don’t forget this site and give it a glance on a constant basis.

  8. Thanks for your useful post. As time passes, I have been able to understand that the symptoms of mesothelioma are caused by your build up associated fluid regarding the lining in the lung and the chest muscles cavity. The illness may start from the chest place and propagate to other body parts. Other symptoms of pleural mesothelioma include weight-loss, severe inhaling and exhaling trouble, temperature, difficulty swallowing, and infection of the face and neck areas. It should be noted that some people having the disease never experience just about any serious symptoms at all.

  9. One more thing that I desire to share at this place is that, whatever you are using free blogging service however if you donít update your blog on on a regular basis basis then itís no more worth.

  10. It’s a shame you don’t have a donate button! I’d certainly donate to this outstanding blog! I guess for now i’ll settle for bookmarking and adding your RSS feed to my Google account. I look forward to brand new updates and will share this blog with my Facebook group. Chat soon!

  11. Hi there, just was aware of your blog via Google, and located that it’s truly informative. I’m going to be careful for brussels. I’ll be grateful in case you proceed this in future. Lots of folks will likely be benefited out of your writing. Cheers!

  12. My brother suggested I might like this web site. He was entirely right. This post truly made my day. You can not imagine simply how much time I had spent for this information! Thanks!

  13. Wonderful goods from you, man. I have understand your stuff previous to and you are just too fantastic. I actually like what you’ve acquired here, certainly like what you are saying and the way in which you say it. You make it enjoyable and you still take care of to keep it sensible. I can’t wait to read much more from you. This is actually a tremendous site.

  14. Thanks for revealing your ideas on this blog. Also, a delusion regarding the lenders intentions when talking about home foreclosure is that the standard bank will not take my installments. There is a specific amount of time in which the bank will need payments in some places. If you are also deep in the hole, they should commonly demand that you pay that payment in full. However, i am not saying that they will not take any sort of installments at all. In case you and the bank can have the ability to work anything out, the particular foreclosure approach may halt. However, in case you continue to miss payments in the new program, the foreclosure process can just pick up exactly where it was left off.

  15. Nice post. I learn something totally new and challenging on websites I stumbleupon every day. It’s always exciting to read through articles from other authors and practice a little something from other sites.

  16. certainly like your website but you need to check the spelling on quite a few of your posts. Several of them are rife with spelling issues and I find it very troublesome to tell the truth nevertheless I’ll certainly come back again.

  17. Thanks for your article. It is extremely unfortunate that over the last 10 years, the travel industry has already been able to to take on terrorism, SARS, tsunamis, flu virus, swine flu, as well as the first ever real global economic downturn. Through everthing the industry has proven to be powerful, resilient as well as dynamic, acquiring new tips on how to deal with hardship. There are usually fresh complications and the opportunity to which the field must again adapt and act in response.

  18. I know this if off topic but I’m looking into starting my own blog and was wondering what all is required to get set up? I’m assuming having a blog like yours would cost a pretty penny? I’m not very web savvy so I’m not 100 sure. Any recommendations or advice would be greatly appreciated. Kudos

LEAVE A REPLY

Please enter your comment!
Please enter your name here