Rodney McMullen's recent resignation as CEO of grocery giant Kroger reminds us that personal actions remain important to corporate board members.
In a press release, the company said on February 21 that it recognized certain personal actions by McMullen, saying that it “has nothing to do with business but is inconsistent with Kroger's policies on business ethics.” The company did not provide details about what McMullen did, but in a press release stated that his personal actions were “not related to the company's financial performance, operations, or reporting and that Kroger Associates was not involved.” However, the company “supported an independent counsel immediately to carry out an investigation overseen by a special board committee.”
The board's response was decisive and prompt. McMullen resigned within 10 days of the board's awareness of his actions. Ronald Sargent, Kroger's lead independent director, director of Kroger since 2006 and former chairman and CEO of Staples, has been appointed Chairman and Interim CEO. Sgt. will be in that role until the newly established search committee appoints the company's next leader.
What is important for board members to take away from the way this resignation was born is the speed at which the company moved, conducted investigations and took action to acquire external lawyers. The company recognized McMullen's actions on February 21, and issued a statement by March 3, stating that he would resign and that Sargent would intervene as intervening as interim CEO. It can solve your research and stabilize the leadership of your company immediately speaking. Kroger's board seemed ready for this type of crisis, limiting the damage the incident could cause to the company.
Personal actions of CEOs and corporate directors may be overlooked as a major risk factor for the company and board of directors. In today's bipartisan political environment, certain private behaviors that are publicly disclosed can affect how a company is viewed by stakeholders and clients. This is a risk management issue that could be more notable from corporate board members. The company's reputation may be at risk, and the unethical actions of one director could pose legal liability to the entire board of directors and the company.
It may be a good idea for all business committees to do the following:
Review and re-emphasis the company's policies regarding professional behavior and business ethics. Make sure that corporate standards respond to changing public sentiment over controversial issues. Clearly the company's position on ethical decision-making, conflicts of interest, personal behavior, and confidentiality.
Review crisis management procedures for violations of professional and personal behaviour. Kroger wasted no time starting the investigation and coming to the resolution. Is your board ready to move just as quickly? Do each executive know what role to play in this type of crisis? A delay prevents the company from moving unfortunate issues into the past as quickly as possible. The longer it takes to resolve, the higher the chances of financial loss and reputational damage.
The crisis tells the company that it was resolved quickly with minimal risk. Through the press, direct conversations with key shareholders and stakeholders will inform the board that it is handling the crisis and moving the company forward in a positive direction. Explains how changes in direction and leadership will benefit the company in the future.
