For the first time, a court ruling in Delaware acknowledged that C-suite executives can be held personally liable and have a fiduciary responsibility to address workplace misconduct. The suit, brought by McDonald’s shareholders against a former executive, reinforces the role and responsibility of the C-suite in addressing workplace misconduct or escalating the issue to the board or CEO.
Just as in the 1996 Caremark decision that mandated board oversight accountability, executives, too, can now be held personally liable for misconduct at the company.
The CFO’s role now encompasses additional risk mitigation and the heightened responsibility to emphasize what personal responsibility can cost the company — both for the bottom line and the company’s image.
Avoiding bad hires who engage in misconduct can help companies avoid costly lawsuits — and stock market declines for publicly traded companies — and ensure employees are the best representatives of your company and its values. Given this context, here are five actionable steps CFOs can take to fortify their organizations, safeguard against misconduct, and ultimately protect their bottom line.
1. Enhance Due Diligence During Hiring
Traditional background checks, which typically involve checking criminal records and verifying qualifications, no longer suffice independently. Modern companies need to leverage digital solutions that compliantly delve deeper into the places where misconduct presents itself in 2023: the digital persona.
A holistic approach to hiring is crucial because it can unearth patterns that may suggest a propensity for misconduct. Using such digital tools, which are typically AI-enabled, can help hiring managers make more informed decisions about who they bring on board and how to cultivate a safe, respectful, and accountable workplace which makes a huge difference to a company's bottom line.
Simultaneously, using a reputable third party to conduct the candidate online check protects all parties in the hiring process. How? It prevents a hiring manager from seeing protected class information about a candidate (like pregnancy, religion, disability, or more), which could create bias.
2. Robust Reporting Mechanisms
Encourage a culture of openness and transparency by implementing robust reporting mechanisms for misconduct. Give employees multiple, easy-to-access channels to report any workplace misconduct, thus ensuring red flags aren’t ignored and don’t go unanswered either.
Regularly review these reports and take swift, appropriate action. Transparency and immediate action are key to mitigating risks and preventing even bigger issues from arising.
3. Prioritize Internal Training and Workshops
One of the most effective preventative measures against misconduct is regular training and workshops on acceptable workplace behavior, ethics, and company policy. This also ensures internal alignment, which is really important not only for day-to-day operations but also for hiring.
When your whole organization is aligned on the proper code of conduct, you know what to look for when bringing on someone new. Make sure that every employee, regardless of their role, is familiar with the expectations and consequences related to workplace behavior.
4. Risk Management Framework
CFOs should work closely with their legal, human resources, and talent acquisition teams to develop a comprehensive risk management framework. This should include policies for hiring, reporting misconduct, investigating reports, and, most importantly, how to take corrective action.
This not only ensures compliance but also protects the company and its executives from personal liability, protecting your business from following in the footsteps of McDonald’s recent major misstep. Note that you should continue to keep this plan updated as regulations and industry standards evolve.
5. Foster a Culture of Accountability
A good company culture starts at the top. As CFOs, leading by example in promoting a culture of accountability and integrity is absolutely crucial. Regularly communicate the importance of these values to employees and embed them into your practices.
The actions of senior leaders greatly influence the attitudes and behaviors of all other employees, and promoting a culture of accountability and internal alignment can significantly reduce instances of misconduct.
These steps will not only help to ensure the safety and satisfaction of employees but also safeguard companies, executives, and boards of directors from legal repercussions. In the end, it is about fostering a culture of respect and hiring people who will abide by the code of conduct, which are cornerstones of a successful and profitable business.
Ben Mones is the CEO of the online screening company Fama.