by Meridith Levinson

Get Your Lawyer: Executives Under Internal Investigation Should Seek Separation, Not a Fight, Experts Say

Nov 07, 20074 mins
CareersIT Leadership

Microsoft's dismissal of CIO Stuart Scott after an internal investigation points to the near-futility of an executive's continuing in a leadership role with a credibility cloud hanging overhead.

Once you’re under investigation, it becomes virtually impossible to continue in a corporate leadership role like that of a CIO, experts say. In fact, calling a lawyer, seeking a separation agreement from your current employer and moving on to a new role often represents an executive’s best option—whether or not there was wrongdoing involved.


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That’s what executive and leadership coaches are saying in the wake of Microsoft’s firing of CIO Stuart Scott, who the company said was dismissed after violating company policies. Microsoft has declined to comment further on the case and attempts to reach Scott have been unsuccessful.

How can an executive lead effectively when his credibility is being questioned, or she is being investigated for an alleged misdeed? While sources for this story could not specifically comment on Scott’s dismissal from Microsoft, the question of recovering from a high-profile investigation most often is a dead end, experts say.

Barb McEwan, president and founder of 20/20 Executive Coaching in Toronto, says that in most cases continuing in an executive role while under investigation is not an option. McEwan says when an employee is being investigated for a serious wrongdoing the employer will put the employee on a paid leave of absence so that the employee isn’t in the company facility while the investigation is going on. And an employer would need to have solid evidence of wrongdoing to put the individual on a leave of absence without risking a lawsuit. McEwan says corporate investigations can last anywhere from two weeks to three months.

Knowing that these kinds of investigations can be extremely distracting to the executives they target—and can crush the morale and productivity of the executive’s subordinates—companies will try to keep their workings under wraps, says Shawn Banerji, an executive recruiter with Russell Reynolds. “Typically the disclosure [of an investigation] is kept to an absolute minimum,” Banerji says. “Only those who have to know are in the know.” Sometimes that means not even informing the individual who’s the subject of the investigation.

Marc Lewis, CEO of executive search firm Leadership Capital Group, says that when an executive is accused of some wrongdoing, one tactic they can take to limit the damage to their reputation and to their career—regardless of whether or not they are guilty of the accusations—is to negotiate a separation agreement with their employer that prohibits disclosure of the employee’s controversial acts.

Depending on the amount of evidence against an executive that an investigation produces, the executive may not be entitled to any severance, including any stock options that may have vested. “If a company has near irrefutable evidence of wrongdoing, the executive is not likely to have much leverage to get a hold of their severance payment,” says Lewis.

But if the proof behind the accusation is weak, adds Lewis, the executive may have the leverage to obtain their contractually owed severance or even more severance. “If an employee is agreeing to let themselves be terminated when there is significant doubt about the employee’s guilt, then a large company might feel an obligation, might feel forced to pay a larger settlement to avoid the expense and energy of a longer, protracted fight.” In other words, the company may be forced to pay off the executive to stay out of legal trouble.

If you are accused of unethical behavior or violating a company policy, Lewis says the first thing you should do is involve your lawyer. If you’re innocent, Lewis says, you’ll have to provide your attorney with all evidence proving your innocence. He adds: “Once that fact gathering is completed, then you need to come up with a plan for how to respond to the false accusations. At that point, an accused executive might consider hiring a crisis management coach rather than a traditional executive coach.”