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Here's what to doHoward Levitt: Difficulties arise because directors underestimate the significance of their early decisionsLast updated 18 minutes ago You can save this article by registering for free here. Or sign-in if you have an account.Directors often assume that their greatest challenge when a complaint is brought against the CEO will be in determining whether the allegations are substantiated. Photo by Getty Images/iStockphotoWhat should a board do when a serious complaint arises respecting its CEO?Subscribe now to read the latest news in your city and across Canada.Exclusive articles from Barbara Shecter, Joe O'Connor, Gabriel Friedman, and others.Daily content from Financial Times, the world's leading global business publication.Unlimited online access to read articles from Financial Post, National Post and 15 news sites across Canada with one account.National Post ePaper, an electronic replica of the print edition to view on any device, share and comment on.Daily puzzles, including the New York Times Crossword.Subscribe now to read the latest news in your city and across Canada.Exclusive articles from Barbara Shecter, Joe O'Connor, Gabriel Friedman and others.Daily content from Financial Times, the world's leading global business publication.Unlimited online access to read articles from Financial Post, National Post and 15 news sites across Canada with one account.National Post ePaper, an electronic replica of the print edition to view on any device, share and comment on.Daily puzzles, including the New York Times Crossword.Create an account or sign in to continue with your reading experience.Access articles from across Canada with one account.Share your thoughts and join the conversation in the comments.Enjoy additional articles per month.Get email updates from your favourite authors.Create an account or sign in to continue with your reading experience.Access articles from across Canada with one accountShare your thoughts and join the conversation in the commentsEnjoy additional articles per monthGet email updates from your favourite authorsSign In or Create an AccountorThe complaint may involve harassment, bullying, discrimination, retaliation, conflicts of interest, financial impropriety or other misconduct. The allegations may ultimately prove true, false or somewhere in between.At the outset, the board likely does not know. What it does (or should) know is that the next several days may determine not only the future of the chief executive, but of the board’s own credibility and whether it or any of its members should best resign.Directors often assume that their greatest challenge will be determining whether the allegations are substantiated.FP Work touches on HR strategy, labour economics, office culture, technology and more.By signing up you consent to receive the above newsletter from Postmedia Network Inc.A welcome email is on its way. If you don't see it, please check your junk folder.The next issue of Work will soon be in your inbox.We encountered an issue signing you up. Please try againThe more immediate challenge is ensuring that the organization responds appropriately before that determination can even be made.The first 72 hours are rarely remembered for what the board did right. They are remembered for what it failed to do.The difficulty is that complaints against senior leadership arrive burdened with uncertainty. The facts are often incomplete. Emotions run high. Rumours spread quickly. Directors find themselves under pressure to act decisively while possessing only fragments of the information they require.In such circumstances, the greatest risk is not making the wrong decision. It is making a premature one.One of the first questions is deceptively simple: Who should receive the complaint? If allegations concern the chief executive, management cannot investigate itself. The matter must immediately move beyond the normal reporting structure and into the hands of independent directors, typically through the board chair, lead director or an appropriate board committee.This might seem obvious. Yet 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.The second question is whether outside counsel or outside investigators should be retained.Boards sometimes hesitate. Independent investigations are expensive, disruptive and often uncomfortable. Directors may also believe they can assess the issue internally before involving external advisers.That instinct is understandable. It is also frequently misguided.The decision to retain outside counsel, which should always occur, is not solely about legal advice. It is about independence, credibility and process. Employees, regulators, shareholders and courts may be willing to accept an unfavourable outcome. They are far less willing to accept a process that they perceive as compromised.Another difficult question arises almost immediately.Should the CEO remain active while the investigation proceeds? There is no universal answer.Some allegations may not justify any interim action. Others may require restrictions on authority, limitations on access to personnel or information, or temporary leave pending the investigation’s outcome.What matters is not necessarily the conclusion it reaches. What matters is that it confronts the question directly rather than avoiding it. A decision not to act is still a decision.Evidence preservation presents another challenge.By the time directors learn of a complaint, relevant emails, messages, documents and electronic records may already be at risk of alteration or deletion.The board’s obligation is not merely to investigate. It is to ensure that the evidence necessary to conduct a fair investigation remains intact. Organizations often underestimate how quickly this information becomes critical.The same can be said of communications. Silence creates a vacuum. Vacuums invite speculation.Yet excessive disclosure creates its own risks. Employees want reassurance. Investors want confidence. The media may demand answers. Regulators may seek information.Boards frequently discover that communicating too little or too much are both capable of causing damage. The objective is neither secrecy nor transparency for their own sake. It is preserving confidence in the integrity of the process.Public companies face an additional consideration. At some point, directors may need to determine whether the allegations or the investigation itself trigger disclosure obligations. That analysis depends upon the facts, the nature of the allegations and their potential impact on the corporation.What should never occur is allowing disclosure considerations to influence the investigation itself. The board’s first responsibility is to discover the truth. Its disclosure obligations flow from that responsibility, not the other way around.Over the years, I have observed that the greatest challenges for boards rarely lie in the allegations themselves. More often, difficulties arise because directors underestimate the significance of their early decisions.A complaint is treated as a personnel matter rather than a governance matter.Its investigation lacks independence.Potential evidence is not preserved quickly enough.Communications are improvised rather than planned.Most commonly of all, directors assume they have more time than they do. They usually do not.The ultimate findings of an investigation may vindicate the CEO, justify discipline or lead to dismissal.In the first 72 hours, however, those outcomes remain unknown.The board’s responsibility is not to predict the conclusion. It is to ensure that when the conclusion eventually arrives, it is one that the organization, its employees, its shareholders and the public can trust.In governance, credibility is not established when the investigation ends.It is established in the first few days after it begins.Howard Levitt is senior partner of Levitt LLP, employment and labour lawyers with offices in Ontario, Alberta and British Columbia. He practises employment law in all provinces and is the author of six books, including the Law of Dismissal in Canada. Join the Conversation This website uses cookies to personalize your content (including ads), and allows us to analyze our traffic. Read more about cookies here. 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