It's always noteworthy when a CEO of a multibillion-dollar company agrees to resign without severance and other perks. But yesterday's ousting of Christopher Kubasik, CEO of L3Harris Technologies, also got a lot of attention because the company has been at the center of a few significant developments: It overhauled a Qatari plane that's now used as Air Force One, as the Journal noted. And Kubasik recently led L3Harris to win a $1 billion U.S. government investment in one of its units, a supplier of rocket motors.
Then there was the mystery about why the $52 billion defense contractor was parting ways with the veteran defense executive. L3Harris only said that an investigation found the CEO had violated the company's code of conduct and that his alleged behavior wouldn't impact the company's financial performance, business relationships and operations. (It didn't respond to a request for comment.)
The company may have reasons to stay silent, but the secrecy could also be a bad sign-if it continues and if the company doesn't discuss Kubasik's actions even with its employees, according to Guido Palazzo, a professor at Switzerland's Université de Lausanne and co-author of last year's book "The Dark Pattern: The Hidden Dynamics of Corporate Scandals."
Palazzo is best known for his research identifying those dynamics-his book names nine factors, such as perceived unfairness, a climate of fear and a rigid focus on profits at all costs, that combine in various ways to create the right environment for bad behavior. Of these, one element-the presence of ambiguous rules-stands out from the others as playing an outsize role in misconduct cases, Palazzo told me yesterday in a call from Lausanne.
"For instance, you have a code of conduct, you do trainings about the code, but then people inside observe that...a salesperson breaking the rules or being highly successful is tolerated. Suddenly you realize, 'Ah, there are two types of rules in the organization: the official ones and the informal ones,'" he said.
If a CEO bends the rules, he added, "that sends a devastating message to the people inside the organization because it shows that, well, if he can do that, I can do that." (As it happens, in 2012, when he was about to become the CEO of Lockheed Martin, Kubasik was instead ousted for a "lengthy, close personal relationship" with a subordinate, which violated that company's code of conduct.)
While we don't know how the series of events played out at L3Harris, Palazzo argues that in general preventing ambiguity requires regularly talking about values and linking ethical choices to success at the company.
It also matters how a company responds to a scandal once it's caught in one, he explained, saying that most blow the moment by choosing secrecy over transparency.
Here's an opportunity to reset the culture that led to the breach in the first place, but instead "your PR team and your legal team tell you 'Don't dig into these things-it's not good for the company,' so you silence all the debates," Palazzo said.
Companies often bring in new leaders who "are not paid for digging into the problems of yesterday. They are paid to look forward, to bring the company back on track," he added. And when the new regime encourages people to start speaking up in the future, while banning discussion of what has happened, another ambiguous rule is born.
"Companies need to create this safe space where people inside organizations can talk about what happened, and use it to learn," said Palazzo. "If you don't do that, nothing changes." Lila MacLellan Editor, CEO Brief
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CEO Brief is written and edited by a team from The WSJ Leadership Institute: Alan Murray, president; Erle Norton, C-Suite Content managing editor; and Lila MacLellan, CEO Brief editor.
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