Every story has a villain and a hero. When the story is set in corporate America, it’s sometimes easier to identify the villain than the hero. But last week, after KPMG learned definitively that six senior managers received inside information about what the Public Company Accounting Oversight Board’s regulators were going to review during an upcoming examination of the firm’s audit practice, Chairman and CEO Lynne Doughtie’s response was swift and unambiguous: she fired all six executives and explained why in a public statement.
That’s why Doughtie is the High-Character CEO of the Month.
The stakes could not be higher. “The purpose of an audit of a firm like KPMG is to ensure that the company’s review of stock market companies is done accurately and in accordance with the guidelines of the accounting industry,” venture capitalist and CPA Joel G. Block told me. “If one of the companies the firm audits slips in shoddy information that isn’t detected, the firm’s financial reports could be materially inaccurate.” (Joel is also Chair of the Board of Directors of the Institute for High-Character Leadership.)
The trustworthiness of our investment markets such as the stock market hangs in the balance. “Not being able to rely on a public company’s financial statements compromises trust in the financial markets, which don’t have the best reputation as it is,” Block added. “Trust is the basis of currency and investments, so further erosion of trust in the market could be catastrophic to the entire economy.”
“But Lynne Doughtie simply did what anyone in her position should have done,” you might be thinking. “Why is doing the right thing a sign of high character?”
Yes, she did the right thing, but too often CEOs do one or more of the following:
· Blame others
· Wait too long to take action
· Apologize half-heartedly
When you learn that something is amiss in your company, you can become a more effective leader by doing what Doughtie did. Here’s how.
1. Own the mistake.
No matter the size of you organization, if you’re in a leadership position, you have an ethical obligation to act in the interests of your company every time, everywhere.
In the press release that KPMG issued immediately after the news broke last week, Doughtie said this:
KPMG has zero-tolerance for such unethical behavior. Quality and integrity are the cornerstones of all we do and that includes operating with the utmost respect and regard for the regulatory process. KPMG is committed to the highest standards of professionalism, integrity and quality, and we are dedicated to the capital markets we serve. We are taking additional steps to ensure that such a situation should not happen again.
It would be nice if every corporate leader evinced Doughtie’s accountability, but recall how Oscar Munoz, United Airlines’ CEO, reacted after Chicago police dragged Dr. David Dao off of an aircraft to make room for crew. Dao was “disruptive and belligerent,” Munoz initially said, until outrage around the world prompted him to see the situation for what it really was: an appalling abuse of authority.
2. Move quickly.
There is a window of opportunity for righting a wrong, and because news cycles are faster than ever, that window is miniscule. It took Munoz two days and two public apologies before he finally admitted his company had made a mistake of epic proportions. A generation ago, a 48-hour response time would have been considered lightning fast. Not now.
By contrast, as soon as an independent firm confirmed that six senior KPMG managers violated the company’s code of conduct, the company fired the employees and issued a press release to this effect.
Good decision making begins with getting the facts, so a rush to judgment can be as improper as waiting too long. Doughtie was right to get an objective assessment of what she had been told occurred. Once that evaluation was in, she wasted no time in acting decisively.
3. Don’t mince words.
One of the less attractive qualities of every profession—accounting, law, medicine, academia—is the tendency to use words as a smokescreen. Jargon, high-fallutin’ terms, impossible-to-discern acronyms, and bizarre, invented words are bad enough when they clutter emails intended only for employees. When they’re used in corporate communications to the public, it’s an example of bad leadership.
Doughtie avoids this trap by speaking plainly. There are no words in her statement that an intelligent fifth-grader could not understand. By using simple, unadorned language, she communicates her message clearly, and that’s the way it should be done.
As the platinum standard of good writing, William Strunk, Jr. and E.B. White’s Elements of Style, puts it, “Be clear” and “Omit needless words.”
The recent international drubbing United’s CEO got was well deserved. It’s important to hold businesses leaders accountable when they intentionally make choices that harm consumers, compromise the integrity of their employees, and damage their brand’s reputation.
But it’s even more important to recognize when corporate leaders get it right. Public recognition encourages those leaders to continue on the right path, and it may prompt others to say, “I want to lead like that.”
That’s why I proclaim Lynn Doughtie the High-Character CEO of the Month. May more CEOs follow her good example.