What should a board do with a corporate governance scandal?

When as corporate governance scandal arises, how should the board react? When a CEO is responsible for a ‘scandal’, what can the organisation’s board of directors do in the face of significant public disquiet?

CEO scandals used to happen fairly infrequently, but are now more common.

In the past, some business issues could have gone unseen or unnoticed. These days, boards, investors, and the public are much more aware of corporate scandals.

The recent case in Ireland where the CEO of a private hospital, Michael Cullen, gave ‘left over’ COVID-19 vaccines to teachers and staff at his children’s private school caused much national anguish.

The Taoiseach (Prime Minister) Micheál Martin said the actions of the hospital and its CEO were “repugnant”.

While thousands of very vulnerable people waited anxiously for the government’s vaccine roll-out to gear up, the optics of a private hospital’s CEO doing a favour for teachers at his children’s fee-paying school were not good.

For a jaded public, this was further proof that money and privilege get you access to better, faster healthcare. The Government’s ‘we are all in this together’ narrative was once again shredded.

The scandal led the Government to suspend the hospital’s vaccination programme.

The Beacon board apologised unreservedly but stopped short of taking immediate action against Mr Cullen. Instead, the board said it was seeking an independent review by Eugene McCague, the former head of Arthur Cox solicitors.

“Upon completion of the review, the non-executive members of the board will consider its findings and will at that time take any necessary actions required,” said the hospital’s board in a statement.

The board did not give any indication of how long the review will take. Will it be a month? Will it be a year? The board also didn’t say if and when the findings would be made public.

When a CEO causes a scandal, the board has the power to dismiss him or her. The board must also recognise that solid profits and share returns do not make up for ethical lapses. Such lapses can cause long-term damage to a company.

It will be interesting to see how the board at the Beacon responds to the ‘scandal’.

By the time the review is complete, will the angry public and political glare have worn off?

The Government has promised that by September 2021, most of the adult population in Ireland will be vaccinated. If the review takes six months to complete, the story of ‘left over’ vaccines and nepotism between privileged people may well be old news.

The long-term consequences of this scandal are more difficult to define, but as one journalist put it: “A system that values the lives and health of some citizens over others corrodes public trust and corrupts common decency.”