Should CEOs resign after a personal scandal?

Antonio Horta-Osorio says he won't quit Lloyds after The Sun labels him a 'love rat'.

by Adam Gale
Last Updated: 24 Aug 2016

There’s little the British public like more than a juicy scandal. Long before the advent of social media, we’ve delighted in skewering the hoi polloi for their hypocrisy and moral failings.

Since the News of The World folded (we still mourn), the role of chief skewerer has fallen to that paragon of virtue, The Sun. Its most recent target in the world of business is the chief executive of Lloyds, silver fox turned ‘love rat’ Antonio Horta-Osorio.

It has many of the ingredients of a classic tabloid scandal: a married man having an affair, caught spending £4000 in expenses at a Singaporean luxury hotel and spa, despite earning an £8m pay packet, despite his company still being part-owned by the government, despite his public calls for the bank to be more ethical, despite his three kids...

Horta-Osorio was forced to make a statement apologising to Lloyds staff for any reputational damage he’s caused (not for the affair, mind) and confirming he wasn’t planning on quitting as a result.

But should he have had to make such a statement? When does personal scandal become a professional problem for a CEO?

Public image vs the bottom line

Scandals undermine trust. How much of a business problem a personal scandal is comes down to whose trust has been undermined and by how much.

In this case, the general public’s perception of Horta-Osorio has been hit, insofar as he registers with them. The implication is that this harms Lloyds's reputation by extension – if this man can’t be faithful to his wife, then how can we trust him and his company to deal honestly with us?

The problem with this reasoning is that it treats a bank boss like a politician. Yes, the job description of the CEO increasingly involves being the ‘public face of the brand’, but that doesn’t make it a popularity contest.

How many customers will Lloyds have actually lost because of Horta-Osorio’s affair? You may or may not approve of him as a human being, but would you change your bank because of it?

A leadership lesson from a Roman Emperor

In the third century, Emperor Septimius Severus gave the following advice to his sons on how to navigate the various competing factions in Roman politics: ‘pay the army, damn the rest.’ In some ways the same holds true today, only for shareholders.

They ultimately hold Horta-Osorio’s future in their hands. If they thought the boss had been fiddling his expenses – which both Horta-Osorio and Lloyds were keen to point out he did not – then that would be a problem. The same clearly also holds for criminal or unethical business practices.

Again, in this case, that’s not an issue. And while some shareholders may feel moral outrage, most are far more concerned with how successfully Horta-Osorio executes his fiduciary duties than what he gets up to in Singaporean hotel rooms.

The fact of the matter is, this scandal will not affect the bottom line. Unless it becomes an unbearable distraction for Horta-Osorio himself, it will not harm the business – if that’s what really matters, then he should not quit.

Less hard-nosed observers may argue that Horta-Osorio should still fall on his sword because he’s a role model and because Lloyds’s good name is being tainted by association, albeit in an intangible way. Maybe the personal unpleasantness of enduring public scandal will be enough.

Ultimately, that should be up to him. But if every less-than-saintly CEO quit the moment their personal indiscretions were revealed, we’d have a pretty dry executive talent pool. As Horta-Osorio rather unfortunately put it, 'we all make mistakes'.

Image credit: Gabe Austin/Flickr


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