CEO Hiring: A Deeper Dive into Ethics

With a CEO’s ethics and personal life now mattering more than ever, more boards are directly asking candidates questions that used to be off the table. 

The queries are delicate but are being asked: Would you hire a COO who has had extramarital affairs? How do you feel about sustainability, and can you support carbon-free initiatives? And regarding yourself, what’s the worst thing you’ve ever done?

Handling what was once a polite, genteel matter, directors at a growing number of companies are becoming more aggressive in how they interview and vet future CEOs—or any other C-suite candidate. The shift started during the #metoo movement, but experts say a host of issues that gained steam during the pandemic, from racial equality to environmental planning, have upped the game. “Integrity is now at the top of the board’s list, alongside operational ability when hiring a CEO,” says Charles Elson, a professor of corporate governance at the University of Delaware.

Don’t misunderstand: boards have always investigated individuals and factored personal conduct into hiring decisions. What has changed, however, is that now they are questioning CEOs directly as part of the interview process, asking them to attest on the record to past unethical behavior or posing hypothetical moral dilemmas to gain insight into their personality and thought process. In that regard, boards are approaching CEO searches the same way political parties approach nominating candidates—prioritizing the protection of the company’s reputation, and by extension financial performance, by putting any potentially embarrassing episodes on the table before moving forward. 

It’s a delicate dance for directors, particularly since it could put a bad taste in the mouth of the candidate they end up hiring. That’s why boards have historically shied away from questioning candidates so directly, preferring instead to rely on background checks. To be sure, there are still some boundaries in questioning that directors won’t cross, such as religious or political party affiliation. Plus, just because a question is asked doesn’t mean it will be answered— and honestly,  “Who is going to attest to harassment?” asks Joseph Griesedieck, a Korn Ferry vice chairman and managing director of the firm’s Board and CEO Services practice.

To some degree, boards have become more accustomed to leaning in due to the #metoo movement, wherein dozens of CEOs their lost jobs over sexual harassment issues, present or past. Ayana Parsons, a senior client partner in Korn Ferry's Board and CEO services and Consumer practices, says #metoo and Black Lives Matter helped put a CEO’s sense of right and wrong on the table more than ever. Today, CEOs must answer to a wider range of stakeholders and address social and community issues that were previously taboo. “They made it more difficult for boards to look the other way,” she says, noting that her board clients are increasingly looking for CEOs with inclusive leadership traits. According to one study of CEOs who lost their jobs in the past three years, some 39% did so over their misconduct—including fraud, bribery, or insider trading—a greater number than those asked to leave for financial performance.

Still, Griesedieck says the best way for directors to get real insight into a candidate’s moral conscience is to question independently sourced third-party references. He recommends that directors find references beyond those supplied by the candidate or even the search firm, and ideally ones they have a connection with. “Those are the people who will be the most honest,” he says.