Boards Can't Tolerate CEOs With Antisocial Behavior

Soon after the Wall Street Journal reported that Steve Wynn, chairman and CEO of Wynn Resorts, had over many years sexually harassed female employees, the share price of Wynn Resorts (WYNN) dropped more than 10%. Wynn’s denial (complete with incredulity) was quickly issued. Mr. Wynn, your personal embarrassment is not the point. This is no longer just about personal reputation, it is a crisis, caused by credible reports of antisocial behavior that has materially impacted a publicly owned company.

Clearly, whether a company is public or not, no employee should be subjected to the sort of treatment reported in the Wall Street Journal article. When the top executive is the person causing a crisis, the task falls to the board to deal with it. Should they have known what was going on? Yes. Why didn't they?

One reason is the company's unhealthy dependence on Wynn. That it was clearly aware of this dependence is evidenced by a securities filing that states their business may be “significantly impaired” if Wynn is unable to continue in his role. A board that does not insist on a robust leadership continuity process is negligent. In the case of Wynn Resorts, the chairman and CEO is a 76-year-old man. When, exactly, was the board planning to address this issue?

This unhealthy relationship between the board and the chairman and CEO has not gone unnoticed. Such uncertainty regarding leadership continuity fuels destablizing speculation. More than one observer has suggested the company will be sold if Wynn is no longer able to serve.

How do boards get in this sort of crisis?

  1. A board recognizes its extreme dependence on a CEO but doesn’t want to rock the boat.
  2. A chairman who is also CEO has more power to control the board’s agenda. This is greatly magnified when the board is afraid of the Big Boss.
  3. A founder who grows a business and then sells it may have no intention of changing their leadership practices after a sale. I’ve told many an acquirer, “That multi-million dollar check you wrote warms the heart of the recipient for about 20 minutes.” The same holds true when the sale is to the investing public.
  4. Tolerating or turning a blind eye when a leader uses force, threats and manipulation.
  5. Relationships that fracture under the slightest pressure. Most people — even directors — do not like tension. The most constructive relationships accommodate areas of disagreement. Directors need to have the courage to work through the tension. Failing to do so is to fail ultimately.

Leaders at every level need to have the courage to deal with antisocial behavior, whatever form it takes. We expect boards to be exemplary. The question is why would anyone ignore behavior that is not just unseemly, but  downright criminal? Fear, denial and probably a cadre of advisors who try to find help them hide and deny.

What trumps fear and denial?

  1. The courage to make tough decisions.
  2. The judgment to sniff out the source of cruddiness.
  3. The fortitude to intervene systemically.

The issue at Wynn Resorts is not just a crisis for the chairman and CEO it is a crisis for the board. High-stakes situations are tense, emotional and more so when conducted in the public eye. It’s time for the board to prove that their coziness with Wynn is no longer a factor in their decisions. Patricia Mulroy, an independent board member, is leading a committee to look into the matter. Many people are counting on her to be courageous.


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