2020

Case study of ethical

Mujahid Ali
Assignment
11/2/2020
 Case on Executive Integrity
Below are three examples of CEOs whose leadership of their firm has been called into question over
matters of their personal integrity and behavior. Issues have included their personal political positions
and contributions, personal behavior and relationships with employees while CEO, and illegal and
inappropriate behavior in college.

Mozilla
“Mozilla was built on the mission to promote openness, innovation and opportunity on the Web. Every
day, we bring together over half a billion users and thousands of contributors from more than 80
countries to advance the cause outlined in the Mozilla Manifesto. The web is a vital public resource and
Mozilla exists to protect it. That is what we do at Mozilla, our singular point of focus.” --From Mozilla’s
blog Q and A regarding the resignation of Brendan Eich

Brendan Eich was a co-founder of Mozilla, an organization set up as a nonprofit foundation, passionate
about its purpose. Eich’s previous political support for the Defense of Marriage Act, which prior to 2015
defined marriage on the federal level as the union between one man and one woman, was well known by
the board and employees prior to his appointment as CEO. What wasn’t known was how strongly
employees and outsiders would react to a perceived disconnect between Eich’s personal values and the
values of the company. In spite of posting about his commitment to continuing the organization’s support
of the LGBTQ+ community through various policies and benefits and apology for “causing pain,” the
issue did not die down. Eich made his own decision to resign as CEO and declined the board’s offer to
take another C-level position in the company.

American Apparel
“Passion, innovation & ethical practices for the clothing industry. That's American Apparel.”--From
American Apparel’s website under “About Us”

American Apparel founder Dov Charney has never apologized for using sex to sell clothes. In fact, it’s
been central to his company’s strategy and marketing from Day One. He has also long acknowledged his
personal behavior is strange and he is his own worst enemy.

For example, 10 years ago, “Charney gave a now infamous interview with Claudine Ko, a reporter
for Jane magazine, during which he masturbated, with her consent, while carrying on a conversation about
business. He engaged in oral sex with an employee with Ko nearby, too” (Bloomberg Businessweek, July 9,
2014). Also, in 2006, American Apparel starting asking employees to sign a form indicating that they knew
they were coming to work in a sexually charged environment.

According to board co-chairmen, in mid 2014, Charney was removed as chairman by the board pending
termination following a 30-day notice clause in his contract. The board first gave him the choice to resign
if he gave up voting rights to his 27 percent share of the company. In that scenario, he would have
received a four-year, multi-million dollar consulting contract. Officially removed for violating the
company’s sexual harassment policy and misusing company funds, Charney refused to go quietly, which
threw the company’s ownership and governance into play. Hedge fund Standard General stepped in with
a cash infusion for the company following a loan call by another investment firm after Charney’s ouster.
Five of the seven board directors voluntarily agreed to step down, and Standard General agreed to add
three new directors. Charney stayed on as a strategic consultant but was eventually fired as CEO in
December 2014.

Snapchat
“Deletion should be the default.”--Snapchat’s mission statement

At the end of May 2014, details of sordid emails from Snapchat CEO Evan Spiegel’s college days were
released to the media. Trouble is, his college years were only four years prior to these emails being
released, because, in 2014, he was only 24. The e-mails detailed illegal drug use, underage drinking, and
misogynistic behavior, including urinating on one after she passed out following sex, and harassing
women who he believed were overweight. Some found elements of his emails racist as well.

Spiegel’s privileged background and lavish lifestyle had always received plenty of press. After the email
release, he began getting more press for his bad behavior than his app. He apologized immediately
following the release of the e-mails saying, “ I’m obviously mortified and embarrassed that my idiotic
emails during my fraternity days were made public. I have no excuse. I’m sorry I wrote them at the time
and I was a jerk to have written them. They in no way reflect who I am today or my views towards
women.” Spiegel remains CEO and was responsible for taking the company public in 2017.

This case was originally written in 2014, and was revised in July 2018.

Leader Company Issue Outcome

Dov Charney American Sexual relationships with employees resulting Dismissed as CEO in December
Apparel in lawsuits for charges of harassment, misuse of 2014 and removed as
of company funds for personal expenses chairman prior to his termination
Evan Spiegel Snapchat Misogynistic behavior, drug use prior to Still in place
serving as CEO

Questions to Consider

1. Are there ethical issues involved in all of these cases? Which ones and why?
2. How important to a company’s investors and shareholders is the personal behavior of
the CEO? Do people have to like him/her for the company to be successful?
3. Does mission matter when assessing gaps between a leader’s values and the
organization he or she is running?
4. Should boards consider risky personal behavior in hiring executives? What should
boards do if the risky personal behavior comes from the founding CEO?
Answers of question.

1= yes there are ethical issues involved in all of these cases.

Company Issue
Mozilla Personal support of Prop 8

American Sexual relationships with employees resulting in lawsuits for charges of harassment, misuse
Apparel of company funds for personal expenses

Snapchat Misogynistic behavior, drug use prior to serving as CEO

2= The ethical personal behavior of COE in company influence the investors and shareholders.
No people do not have to like him/her for the company to be successful, people like his
honesty and ethical behavior to success the company.

3= When used properly mission, vision and values statements can be very powerful
tools. They are inspiring words developed by leaders to clearly and ... will gain a sense of pride
in working as part of an organization that ... Why do they matter? ... So, what is the
difference between mission, vision and values

4= To avoid a diffusion of responsibility, the board of directors should designate a ethical

Boards need to keep ahead of the public humiliation and loss of reputational equity caused by
major CEO misbehavior or malfeasance. If they deny, or stall, they run the risk of ruining their
company and turning themselves into the targets of shareholders' and the public's bloodlust.