Are you a CEO, or are you married to one? If your answer is “yes,” then your divorce will have special considerations, personally and professionally. Read on as we explain why the CEO divorce is unique, and why boards of directors involved need to be conscious of this.
Let’s start with the CEO’s position in his or her company. The job of CEO comes with major responsibilities, many of which can threaten the stability of a marriage. More often than not, CEOs live hectic work lives. They’re gone from their family a lot and sometimes they spend more time travelling than they do with their spouse and kids.
Interestingly, research has found a link between CEO divorces and resignations and terminations. Often, a CEO will be with a company for a long time, but they’ll either resign or be fired shortly after a divorce. Boards of directors have noticed this trend and if they’re smart, they are paying attention to the personal lives of their CEOs and how the demands of the job are affecting their marriages.
One way to reduce the CEO’s pressure is to have a board member who is close to the CEO ask him or her on occasion, “How are things at home?” If the CEO says things are rocky because of their schedule, the board would be wise to ease up a bit on the CEO and encourage him or her to spend more time with their family. Of course, that’s easier said than done sometimes.
All boards of directors struggle with balancing risk management between finding out about a CEO’s personal status and respecting the CEO’s marriage. However, from the board’s perspective, the more it knows about its CEO’s well-being, the more proactive and effective it can be.
CEOs & Extramarital Affairs
Like members of the military, CEOs typically have a higher rate of divorce than most people, but the reasons for this are not hard for any CEO to grasp. He or she would quickly tell you that it’s hard to keep their board of directors happy and keep their spouse and kids happy at the same time.
The physical distance between the CEO and their spouse can easily lead to emotional distance. Often what ensues is the CEO develops an intimate relationship with a colleague, or they end up having a string of affairs. Sometimes, the lonely spouse at home does the same thing. He or she seeks comfort in the arms of someone who is more “available,” both physically and emotionally.
CEO Divorces & Job Performance
CEOs are under a lot of heat to perform well under pressure. They need to look good to the board of directors and they need to be strong in front of employees. This enormous pressure can cause CEOs to suffer in silence. For the CEO, it’s not acceptable to fall apart, to call in “depressed” for a week, or to break into tears before board members or employees.
Instead, CEOs must behave and appear strong. But divorce is stressful and asking a CEO to perform the superhuman feat of acting unshaken by their divorce is unrealistic. More often than not, the stress of the CEO’s divorce can be seen through the CEO’s actions, which we’ll explain below.
A CEO’s divorce can affect:
- Risk behaviors
- Job performance
There is one cautionary tale about the former CEO for P&G, as was widely reported. His divorce affected him so much that he was unwilling or unable to stay with the company. The possibility of CEOs resigning or being terminated due to the stress of divorce makes CEOs personal lives a concern for boards of directors who want nothing more than to see their CEOs succeed at home and in the company.
What Are the CEO’s Concerns?
If a CEO is headed toward a divorce, it would be foolish to assume it won’t affect him or her personally. Sure, a CEO may be able to dive into work for distraction, but they can’t ignore the fact that the divorce is likely to affect their focus and concentration. It can even affect the CEO’s sleep, behavior and attitude toward risk.
In the divorce situation, a husband or wife may lose the cognitive capacity to focus temporarily. Their energy may be sapped, especially if they’ve lost sleep over child custody or asset division. Then, there’s always the risk that the CEO may lose a large portion of their wealth or interest in the company in the divorce.
Can the board revise its compensation arrangement to offset the equity that the CEO will lose in the divorce? If not, is the company inadequately incentivizing the CEO? What about the shares that will go to the CEO’s spouse? Are they in good hands, especially the ones in private or closely-held companies?
Disclosing the Divorce to the Board
Whether it’s a serious health issue like cancer or a divorce, we’ve found that it’s best for CEOs to make a general disclosure to their boards. And, CEOs need to ensure that their boards take the serious and appropriate steps to protect the best interests of the CEO, especially in regards to the CEO’s personal privacy.
One might ask, “Where does a board or CEO draw the line in the context of a divorce?” It can be hard to say, but one thing is for sure: Divorce is one issue that a board should be informed about early on. It’s better for the board to know sooner than later, especially if there was an extramarital affair that can damage the company’s image. The message here is that the personal lives of CEOs do matter to companies.