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Before you suspend your company CEO, consider these three things

by , 16 April 2014
Suspending a CEO may sound uncommon, but it's not. Earlier this year, Pikitup suspended its Managing Director, Ms Amanda Nair. And late last year the Government Employees Pension Fund suspended its Principal Executive Officer John Oliphant. Both these CEOs are facing disciplinary inquiries right now. These high profile suspensions have prompted the Institute of Directors in Southern Africa (IoDSA) to caution companies to tread carefully when suspending their CEOs. Here's what the Institute says you need to consider to ensure your company's isn't negatively affected...

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IoDSA recommends you consider the following before you suspend your CEO

IoDSA says recent high-profile suspensions of public-sector CEOs raise several issues that boards need to consider carefully.

#1: Make sure the suspension of the CEO doesn't cause harm to your company

The CEO of IoDSA, Ansie Ramalho says in a statement, 'the principle that boards should hold management accountable is sound, but boards need to apply judgement so there isn't any unnecessary harm to the organisation and those involved.'

Ramalho says your company's board should only be concerned with what's in the best interest of the company.

He says 'suspension prior to the completion of an investigation for instance, should only be instituted if the board is fairly certain that the CEO's continued presence would harm the organisation or interfere with the investigation.'

Ramalho warns that the suspension of an organisations CEO affects its reputation adversely. And that's why 'your board should at least have the certainty of an investigation as the basis before such drastic action is taken.'

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#2: You must ensure the suspension of your CEO is fair

The other consideration is fairness towards the CEO.

'To be suspended while an enquiry is ongoing can inflict grave reputational damage on an individual, even if he or she is later found not guilty,' says Ramalho.

Your board must ensure that there are no battles in the public domain. Deal with the matter decisively.

#3: Reserve suspension for serious conduct

Suspension should be reserved for conduct that would include dishonesty, undue personal advantage to the CEO and gross negligence or incompetence, explains the Labour Watch Newsletter.

'Mistakes, such as error in judgement or a bona fide oversight probably deserves the forfeiting of a bonus rather than suspension.'

The bottom line: Hindsight always gives perfect vision, and boards must accept that judgement calls are made within a particular context and must be judged as such.

Ramalho concludes: 'If CEOs and other executives feel they are being constantly second-guessed by their boards, they will cease to take the kind of bold but well-considered action that is integral to a successful business operation.'

Taking all these factors into account will help ensure your company's isn't negatively affected when you decide to suspend your CEO.

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