As corporate scandals emerge, are corporate boards doing enough to eliminate bad executive behavior?

Australian billionaire Richard White and co-founder of logistics software company WiseTech Global announced this week that he will step down as CEO following allegations of inappropriate conduct.

The allegations have reignited questions about the roles and responsibilities of company executives and whether they provide enough scrutiny and skepticism towards CEOs.

The allegations are still being investigated, but WiseTech is not the only publicly traded company involved in crisis management due to allegations against high-profile executives.

On Thursday, WiseTech released a statement to the ASX saying Mr White, 69, had resigned from the company’s board and as CEO.

The company he helped grow from his basement three decades ago into a $37.5 billion company is now facing a reckoning.

While most of the allegations against Mr White relate to his personal life, the lines between the private and the public began to blur at some point and the matter is now being investigated by Australia’s corporate regulator.

Investors also reacted. The company’s share price took a hit this week.

WiseTech shares rose as high as $139.02 before falling to $99.37 on Thursday; It fell below $100 for the first time since the beginning of August.

But by Friday morning, WiseTech shares were up 20 percent to $121.33. As of Friday’s close, the stock lost some of its gains but still finished the day up 12.7 percent at $112.

WiseTech’s board was informed of ‘inappropriate conduct’ involving White in 2019

WiseTech’s board initially framed the allegations against Mr. White as a personal matter.

But concerns about his behavior were brought to the board’s attention more than four years ago by one of its then-managers.

In October 2019, WiseTech director Christine Holman resigned from the board, highlighting concerns over significant problems within the company, including Mr White’s behavior as chief executive, but was told to “have founder empathy and accept that’s what geniuses are like”. “.

Ms Holman, a former Telstra executive who now serves on various boards including AGL Energy, joined WiseTech’s board in December 2018 and was chair of its audit and risk management committee.

Nine newspapers this week published extracts from Ms. Holman’s resignation note to the board; where Holman accused Mr. White of “constant intimidation and bullying,” including “aggressive emails, one-on-one meetings, and public berating at both audit and risk committee meetings and board meetings.”

“This behavior by the CEO was witnessed by many people, including other executives,” he said in his letter published by Nine.

“Even though we repeatedly brought this unacceptable behavior to the attention of the president and other executives, it was not addressed and instead I was told to ‘have founding empathy and accept that this is what geniuses are like.'”

Managers ‘need a degree of skepticism’

As the WiseTech story unfolds, advisers to Australia’s biggest institutional investors are considering how to react, and that could mean hitting company directors where it hurts: voting against them and/or remuneration reports.

Vas Kolesnikoff is head of Australian and New Zealand Studies at ISS. He says they are still thinking about what to recommend to their customers.

But he told ABC News it’s no longer a private matter: “This is about what’s going on in a company. This is about corporate governance,” he said.

“All of these issues impact shareholder value.”

Mr. Kolesnikoff says having independent directors is crucial.

It notes how Qantas’ board was criticized in an independent review for enabling a culture that gave former CEO Alan Joyce too much power, thus reducing employees’ willingness to challenge or speak out on issues affecting the airline.

Mr Joyce left the company last year following a series of controversies, including the illegal dismissal of around 1,700 workers and the sale of tickets on already canceled flights.

The board then responded by reducing executive pay bonuses, including reducing Mr. Joyce’s final pay by about $10 million.

Ed John of the Australian Council of Superannuation Investors (ACSI) said on Monday the allegations were a “huge concern for investors”.

ACSI advises the country’s largest superannuation funds, including AustralianSuper, and told the AFR it was “critical that the board investigates these matters and responds appropriately on behalf of all WiseTech shareholders”.

WiseTech isn’t the only publicly traded company to face allegations of misconduct

WiseTech isn’t the only company whose allegations of misconduct have made headlines in the media.

Nine Entertainment’s board was this month forced to apologize to employees following a review that detailed a culture of bullying and sexual harassment and found the company had a “lack of accountability”.

The review was carried out after sexual harassment allegations against former Nine Entertainment news boss Darren Wick emerged. This investigation is still ongoing.

But Nine’s company-wide review heard conflicting accounts from workers detailing a toxic culture, including a cover-up by HR when complaints were made.

Australia’s corporate watchdog is also currently investigating Mineral Resources chief executive Chris Ellison following his admissions about an elaborate tax evasion scheme involving companies registered in the British Virgin Islands that spanned more than a decade.

The Australian Taxation Office (ATO) has dealt with the matter but ASIC is currently investigating. The agency, which has details of the conduct of Mr Ellison and other key executives, is investigating whether the miner breached his duties.

In a statement to the ASX on October 20, just two days before ASIC said it had launched an investigation, the board said it was “deeply regretful of Mr Ellison’s erroneous decisions” and sought to frame the matter as a “private tax matter”.

Australian Super sold its shares in Mineral Resources on Friday, MinRes said on the ASX.

Super Retail Group says it tried to resolve scandal but had to go to court

There’s also Super Retail Group, which owns Supercheap Auto, Rebel, BCF and Macpac; The group is facing legal action and an ASIC investigation after a workplace and sex scandal emerged.

News of the scandal emerged in April, when Super Retail reported to the ASX that it was the subject of a workplace lawsuit that could cost between $30 million and $50 million.

The legal action was brought by former general counsel Rebecca Farrell and former joint company secretary Amelia Berczelly, represented by Harmers Solicitors, who claimed they were bullied and victimised.

The allegations include that Super Retail chief executive Anthony Heraghty had a secret affair with former head of human resources Jane Kelly.

Documents filed as part of the lawsuit contain allegations that the company’s now-outgoing chairman, Sally Pitkin, and another unnamed board member attempted to interfere with Super Retail’s whistleblowing system and suppress staff complaints about the alleged relationship between the CEO and head of HR.

Super Retail Group this month won the right to appeal an earlier decision to lift a stay order on payment terms discussed with Ms Farrell and Ms Berczelly.

Answering questions at the company’s annual general meeting, Ms Pitkin said this week that the company had tried to reach an agreement on “reasonable terms” with two of its former executives over the scandal, but they could not reach an agreement.

Ms Pitkin said she was limited in what she could say because the matter was before the courts, but the allegations made by the two former employees had been fully investigated by the board and were “not proven”.

He said Super Retail had vigorously defended the allegations.

No doubt more information will emerge in the coming weeks and months about how much the Super Retail Group board knew about the relationship between the CEO and head of HR and how whistleblower complaints were handled.