New Job contracts – Unethical CEOs

India Inc is not quite and fortunate as the government with a disturbing 10% to 20% or more of its top leadership losing the trust vote or going back on contracts and commitments. According to top global executives search firms in the country a growing number of India’s best paid and most sought after executives are revealing a dark, opportunistic and irresponsible side. They accept plum offers in the CEO, CXO series and then fail to show up at work on the joining date because they have used the first offer to negotiate a better deal either with their present employer or in another company.

The number of such betrayals which comes at a huge cost to all stake holders is staggering. What is worse, the rate of default appears to be directly proportional to the rate at which firms transform from national players to transactional or global organizations.

According to estimates, India’s top 7 executive search firms collectively handle roughly 705 senior search mandates annually, of which 60% of 423 are for CXOs. Out of these 10% to 20% or as many as 85 walk away from the commitment at the very last minute shockingly, often without prior intimation.

The numbers will be even larger if we include data from smaller executives search firms. This last minute betrayal is directed not only at Indian firms, but also at MNC firms. The confidentiality in the search process and the huge demand for leaders is making candidates reckless about spoiling their relationship within the industry.

The fact that senior talent is finding it so easy to break away from professional ethics even as Indian firms globalize, is a major challenge confronting India Inc.

The ugly face of street savvy CEOs:

The high number of Indians who are defaulting on new job commitments is sounding alarm bells among headhunters and placement agencies in the country.

Success for a politician is measured by his ability to win votes, for a businessmen it is value of his assets, but a professional, it is respect that he commands. To willfully choose greed over respect is professional suicide.

It takes a minimum of 3 to 4 months to close a search, with search firms either charging a retention fee of up to Rs 50 lakh per mandate of 33.3% of the candidates’ cost to company. After this, the candidate could take between 3 to 6 months to join, depending on the notice period he is required to serve in his current workplace. When he fails to show up in the new workplace, the process starts afresh, which means a further 8 to 10 months delay and a crippling leadership vacuum that affects mission-critical business expansion.

In one case, first class travel of the new CEO was organized across Europe and USA, internal company announcements were sent out to prepare the team for his arrival, a welcome party and briefing sessions scheduled. The candidate did not show up on the day he was to join even refused to answer calls.

Financial damage is just one dimension. The company board starts challenge the chairman and hiring tea about the value proposition of getting external talent. It is a terrible loss of face for all concerned.

While such candidates are black listed for life within the search firms, the fact that there is no sharing of information about such individuals within the industry allows these defaulters an easy getaway. It is a small world. These people are building up a history of default that will catch up with them eventually. It is just a matter of time. While some consultants believe the industry must join hands to tackle this issue, perhaps even to expose these individuals, others say confidentiality must never be compromised. However, the issue of corporate ethics is under serious debate at several levels.

The party that is most compromised in terms of integrity and vision is the company that eventually hires such an individual, knowing that he/she has reneged on a prior contract. This is equally applicable to companies that hold back such individuals within the firm with huge raises.

Another dilemma is that being street-savvy is a trait that is sought after and carries value and this is its ugly face.

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