When a serious complaint arises against a CEO, the first 72 hours are critical for corporate boards. According to Howard Levitt, a columnist and legal expert, the initial decisions made by directors often determine not only the CEO's future but also the board's credibility and whether members should resign.
Immediate Challenge: Responding Before Facts Are Clear
Directors commonly assume their greatest challenge will be determining whether allegations are substantiated. However, the more immediate challenge is ensuring the organization responds appropriately before that determination can be made. The first 72 hours are rarely remembered for what the board did right, but for what it failed to do.
Complaints against senior leadership arrive with uncertainty. Facts are often incomplete, emotions run high, and rumours spread quickly. Directors face pressure to act decisively with only fragments of information. The greatest risk is not making the wrong decision, but making a premature one.
Who Should Receive the Complaint?
If allegations concern the CEO, management cannot investigate itself. The matter must move beyond the normal reporting structure into the hands of independent directors, typically through the board chair, lead director, or an appropriate board committee. Some of the most significant governance failures begin when a complaint remains with management for too long. A board cannot exercise oversight on a matter it is unaware of.
Retaining Outside Counsel
Boards sometimes hesitate to retain outside counsel or investigators due to cost, disruption, or discomfort. However, the decision to retain outside counsel should always occur. It is not solely about legal advice, but about independence, credibility, and process. Employees, regulators, shareholders, and courts may accept an unfavourable outcome, but they are far less willing to accept a process perceived as compromised.
Should the CEO Remain Active?
Whether the CEO should remain active while the investigation proceeds has no universal answer. Some allegations may not justify interim action; others may require restrictions on authority, limitations on access to personnel or information, or temporary leave pending the investigation's outcome.
