CEOs face axe for irregularities, non-performance: Experts

As performance becomes the key word in today's challenging economic situation, top executives like CEOs are no more immune to actions for suspected irregularities and non-performance, experts say.

 

Some high-profile CEOs have been ousted and are also facing regulatory probes for their alleged role in irregularities at the ventures headed by them and this might lead to greater scrutiny of the current and future corner-room occupants, the human resource experts believe.

 

In the midst of an approximately Rs 5,600-payment crisis, National Spot Exchange Ltd (NSEL) sacked a number of top executives including its CEO Anjani Sinha, who was associated with various ventures of the group for a long time.

 

Besides, two top officials of sportswear giant Reebok's Indian unit are facing probe for alleged financial fraud at the company. Head of global retail giant Walmart's Indian venture also had to leave the company unceremoniously in the midst of an ongoing probe against the firm.

 

Experts say that the tolerance level for under- performance has come down considerably due to the challenging economic conditions and such exits are now mostly sudden and brutal, while CEO departures were earlier handled discreetly.

 

"In today's scenario, there is no justification for non performance. Indian companies are welcoming the practice of pay-to-performance with open arms," said Ritu Mehrotra, VP Global HR and Talent Management, Bristlecone (a Mahindra company).

 

Echoing similar views, MANCER Consulting CEO Satya D Sinha said, "There is a paradigm shift in the tolerance level for under performance. The message is clear --  It is all about the performance. The CEO has to take ownership of the company performance or else face the brunt."

 

The non-performance of a CEO can depend on several factors beyond the individual's control, but it is very essential for the CEO to be able to overcome these issues in order to save the company's image, experts say.

 

They also point out that companies need to follow a more stringent due diligence process before appointing a CEO, as in many cases including in NSEL case, it has been found that the person might have been accused of irregularities in the past.

 

Before joining Jignesh Shah-led Financial Technologies group, the promoter of NSEL, Sinha was associated with the Ahmedabad Stock Exchange and Magadh Stock Exchange and both of them had come under regulatory scanner at that time.