REAL LIFE NEWS: BAD BOSSES BAD FOR BUSINESS
by Hazed
From the department of things that we always suspected were true, a study confirms that bosses who behave badly can have an adverse effect on a company’s share price.
Senior executives who get involved in sexual shenanigans, substance abuse, violence and dishonesty can cause a company to lose 1.6 per cent of its market capitalisation. If the miscreant is the chief exec, the value could shrink by 4.1 per cent. That’s an average of $226 million.
The study, called The Agency Costs of Managerial Indiscretions: Sex, Lies, and Firm Value, looked at 219 indiscretions that involved division heads, vice presidents or board members, between 1978 and 2012. About 47 per cent involved sexual misadventure, 22 per cent were to do with dishonesty, 11 percent substance abuse and 9 per cent violence.
These, of course, are only the problems that were made public. As the study says, “There are, undoubtedly, more indiscretions that we are not able to identify. Indiscretions are often summarily swept under the rug and never reported as neither the firm nor the executive typically has a vested interest in disclosure.”
Executives who were charged with these indiscretions are generally about 52 years old and almost exclusively male.
“Our results indicate that managerial indiscretions pose a significant risk to the company and inflict substantial agency costs upon shareholders, particularly when chief executives are involved,” the study concluded.
No surprise there!
Source: http://www.cityam.com/216313/bosses-behaving-badly-can-end-costing-companies-144m
