WHEN the Kohl’s Corp board fired its CEO on May 1, less than four months into his tenure, the struggling retailer’s stock soared.
Kohl’s announced that it had terminated Ashley Buchanan for cause, having discovered he directed millions of dollars of business to someone with whom he had an undisclosed personal relationship.
Wall Street seemed to be buying Kohl’s based on the idea that its board had done its job by taking decisive action once it uncovered the CEO’s misdeeds. But should investors have been so confident that the directors had acted heroically? It didn’t take long for more details to come to light — each one raising new questions about what the board knew and when.
Later that same day, the Wall Street Journal (WSJ) reported that the relationship in question was with entrepreneur and ex-retail executive Chandra Holt. It also revealed that court documents from Buchanan’s divorce proceedings said the pair were romantically involved while Buchanan was in his previous role as CEO of arts and crafts retailer Michaels Cos, where he tried to hire her onto his executive team. (Holt, who met Buchanan when they worked together at Walmart Inc, told the WSJ they weren’t in a romantic relationship while she was being recruited.) The Journal also reported that the two currently live together in an upscale golf community in the Dallas suburbs.
Then over the weekend two weeks ago, Bloomberg News reported that this was not the first time Buchanan’s connection with Holt had drawn scrutiny, with their relationship described by some as an “open secret among colleagues” that spanned his previous stints at Michaels and Walmart.
How did the board of a public company miss the red flags unearthed by the news media in less than 72 hours? Kohl’s told Bloomberg News that before Buchanan was hired, the board conducted a “thorough and customary background check” with an investigative firm and detailed reference checks.
“This process did not surface any evidence or allegations of previous instances of violation of company policy in his prior employment,” a company spokesperson said. Buchanan didn’t respond to the reporters’ request for comment; Holt told Bloomberg News that she has “known Ashley Buchanan for 10 years, but I have not received any compensation” for her business from Kohl’s.
That leaves two possible scenarios. The first is that the investigative firm hired by Kohl’s didn’t turn up the details reported by the Journal and Bloomberg News. That’s plausible; C-suite executives aren’t always as thoroughly vetted as they should be, often because a company is in a rush to fill a role. Or, because the old boys’ club might kick into gear and executives vouch for one another in lieu of proper checks.
The second scenario is that all or some of those details did come to light — but that Kohl’s decided that since none of the behaviour explicitly violated the policies of
Buchanan’s previous employers, it would hire him anyway. I asked Kohl’s if it could clarify, but the company declined to comment beyond its statement to Bloomberg News.
One can imagine how the company could have known something about how Holt and Buchanan’s relationship blurred professional lines, but still offered him the job. Buchanan was the third CEO in three years at a struggling retailer, and the candidate pool was likely looking relatively slim by the time he was vetted. The board might have been willing to look past some of his arguably questionable but not outright disqualifying history in order to bring in an experienced retail executive.
But failing to fully examine or take an executive’s personal life into account increasingly looks like a mistake — especially as researchers keep building a body of work that indicates that the private lives of CEOs do impact their companies. The most obvious is their health and safety, which is why Meta Platforms Inc discloses Mark Zuckerberg’s proclivity for contact sports. Perhaps more surprising are reports that find CEOs who are more interested in accumulating materialistic wealth than their peers are more likely to commit fraud.
Data that came out of the Ashley Madison hack showed that CEOs who cheat at home are more likely to cheat at work. Divorce has also been shown to impact a CEO’s productivity as well as attitude toward risk — so does whether he or she is single or married.
“What happens in the private lives of CEOs trickles through to their professional roles,” said University of Western Australia Associate Professor Sebastiaan van Doorn who studies the public-private life link.
The question is how far to take this information. It’s hard to imagine discounting CEO candidates because they’re going through a divorce. What’s clearer is that boards need to expand their ideas about which aspects of a CEO’s life should be monitored and vetted — not just for hiring decisions but also to have a better understanding of potential issues that might crop up, even if that makes for awkward conversations. Some chiefs will claim that probing their personal relationships crosses the line into invasion of privacy.
That’s an argument I’m less sympathetic to as corporations delve further into monitoring the lives of lower-level workers. CEOs are a different breed of employee; they should be prepared to be scrutinised like they’re running for public office — and are paid handsomely for the intrusion.
The Kohl’s saga is a wakeup call for corporate boards that have shied away from considering who their CEOs are when they’re off the clock. Top executives are increasingly the face of their companies, their reputations intertwined. That means boards have a responsibility to take a holistic look at people they’re empowering. When it comes to the corner office, it’s time to reexamine just how private a “private life” can really be. — Bloomberg
- This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
- This article first appeared in The Malaysian Reserve weekly print edition
The post Can CEOs really have private lives? appeared first on The Malaysian Reserve.
