Such hotlines where employees can anonymously report issues are common at big employers, with 93 per cent of organisations having one, according to a survey of 284 employers by HR Acuity, a hotline provider. The 2002 Sarbanes-Oxley Act in the US required public companies to establish procedures for employees to report potential securities violations, and employees can also use those to report inappropriate behaviour.
Once a report is submitted, it typically goes to HR or compliance for investigation. But those probes are not always thorough: just over half of firms said they use a “required, structured” process, HR Acuity found, while 38 per cent simply follow “suggested” guidelines and 4 per cent just wing it.
“It’s hard to tell how effective they are,” said Laszlo Bock, a former HR chief at Google. “The investigations can be quite deep or shallow, depending on the level of detail the complainant provides.”
And while anonymity encourages more employees to come forward, it can also make it more difficult for the HR department to substantiate claims and confirm details, the HR Acuity report found.
“Hotlines only work if they’re anonymous and backed by a culture that protects reporters,” Petraeus said, citing a report that found only half of employees actually reported misconduct after witnessing it, with many citing fear of retaliation.
For boards, a boss’ lack of transparency, and not his libido, is often the deciding factor. At BP, where chief Bernard Looney resigned in 2023 after the oil group’s board reviewed allegations relating to Looney’s past personal relationships in 2022, it later emerged that Looney hadn’t been fully transparent with the previous investigation. He was sacked only after further allegations were received – leading to another investigation.
Bernard Looney, a former chief executive of BP, resigned in 2023 after revelations about his previous relationships.Credit: Bloomberg
Looney was also accused of promoting women with whom he had had undisclosed past relationships, the Financial Times reported. “Mr Looney knowingly misled the board,” the company said in a statement at the time.
“Boards are often in a tough situation when these sorts of lapses occur, especially if the company is otherwise doing well and the ethics policy leaves some room for interpretation,” said Eric Talley, Stern professor of law and business at Columbia University.
A study of 219 examples of management misdeeds from 1978 to 2012 found nearly half of the instances were reports of sexual indiscretions, ranging from accusations of sexual harassment to an inappropriate relationship with a subordinate. The average executive charged with an indiscretion was 52 years old, and 96 per cent were male.
When the chief executive was implicated, the fallout cost shareholders $US226 million ($347 million), the study found.
“By the time a company’s ethical problems are apparent in the boardroom, they have resulted in a dramatic loss of shareholder value,” the study said. “The collateral damage goes further: at least some shareholders seem to hold board members responsible for indiscretions associated with the firm’s executives.”
McDonald’s dismissed chief Steve Easterbrook in 2019 after having sexual relationships with subordinates.Credit:
That was the case at McDonald’s, whose former boss Steve Easterbrook was ousted in 2019 after having sexual relationships with subordinates. He was later fined by the Securities and Exchange Commission for not fully disclosing violations of company policy leading up to his termination.
Shareholders criticised former McDonald’s chairman Rick Hernandez and other board members for paying Easterbrook severance. The company sued to claw some compensation back after concluding it had been misled about the extent of Easterbrook’s misbehavior.
In 2024, Norfolk Southern chief executive Alan Shaw was ousted after having a relationship with the company’s chief legal officer, while Intel boss Brian Krzanich was fired in 2018 after allegations he failed to disclose a past relationship with an employee.
Still, chief executives rarely lose their jobs for bad behaviour, according to data from Exechange.com, which tracks chief executive departures at big US companies. Since 2017, when exechange.com began tracking the data, fewer than 2 per cent of 2542 chief executive exits were because of misconduct allegations.
‘It confounds me that in 2025 they think they can get away with this.’
Kabrina Chang, who teaches courses on business ethics and law at Boston University’s Questrom School of Business
The departure of Freixe marks the eighth unexpected exit of a chief executive in the European consumer sector since last September, said RBC, beginning with Freixe’s appointment to replace former Nestle boss Mark Schneider.
“When he took over as CEO just over a year ago, following Mark Schneider’s ejection from the role, we thought of him as a Nestle lifer who would restore the company’s reputation of slightly boring predictability,” wrote RBC Europe analyst James Edwardes Jones in a note.
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“How wrong we were.”
Bloomberg
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