Friday, June 18, 2010

CEOs Behaving Badly - DJ's Share Price Falls 4% After Inappropriate Behaviour Towards Female Staff Member

What happens when the CEO of ASX publicly listed upmarket department store David Jones resigns after a female staff member makes allegations about inappropriate behaviour towards her?

The termination of the contract of Mark McInnes as CEO and board member would be effective immediately, Sydney-based David Jones said in a statement to the ASX.

Mr McInnes admitted to behaving "in a manner unbecoming of a chief executive to a female staff member" at two recent company functions.

Under the circumstances, the board and Mr McInnes agreed that it was in the best interest of shareholders and the company for his employment to be mutually terminated, the company statement said.

Mr McInnes's settlement payment will be less than his contractual entitlement after working for 13 years at David Jones and seven as CEO.

Well, the retailer's shares fell 3.76 per cent to $4.34 at 1027 AEST, against a 0.16 per cent in the benchmark index.

Appointed CEO on December 10, 2002, Mr McInnes oversaw a significant rise in the company's share price.

From $1.06 shortly before his appointment, the share price peaked at $5.91 during his tenure and was $4.51 when the market closed on Thursday.

Mr McInnes has succeeded in improving the profitability of David Jones. In the last full year of his tenure, David Jones reported profit after tax of $156.5 million and sales of $1.99 billion. That was an increase from the $25.5 million net loss from sales of $1.71 billion for the 52 weeks to July 27, 2002.

So by any standards his performance as CEO has been good for shareholders.

What went wrong?

Well, CEOs are the custodians of culture and an organisation is driven by its vision, mission and values. The values are an organisation's moral compass and the CEO is the custodian and visible and tangible walking talking embodiment of these values.

When the CEO behaves badly it reflects of the whole company. This is especially important for a retailer where customer service is critical.

The Board acted correctly in the interests of shareholders and acted quickly. In a case like this swift action is needed and it is important to be proactive and make a public statement and hold a media conference.

The lessons here for leaders and CEOs, when you are in a leadership role your behaviour is under the spotlight 24/7. You are in public life 24/7. There is no off switch. If you can't handle this you are not up to becoming CEO of a listed company and the responsibilities that this involves.

Want more help on how values impact on leadership and the share performance of your publicly listed company? Book Tom for a Boardroom presentation for your Directors. Enquire here.

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