CEOs fired for misconduct should forfeit their stocks, argued Wayne Eastman in Fortune

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Thursday, September 21, 2017
New York, NY

Fortune Magazine

Why Startup Founders Should Be Required to Sign a 'No Go, Bro' Clause
By Wayne Eastman and Andrea Marino

The recent resignation of Social Finance CEO Mike Cagney, in the wake of allegations that he sexually harassed female employees, fostered a frat house culture, and misrepresented the firm’s finances to investors, raises the question of what boards and investors can do to check misconduct by startup executives.
Startup CEOs like Cagney, Travis Kalanick at Uber, and Taylor Freeman at UploadVR—accused in a recent lawsuit of bragging with his co-founder Will Mason about how many girls they were going to have sex with at company parties, and designating a room at the office as a "kink room"—can destroy as well as create billions of dollars in value for their companies, all while creating toxic work environments.

Whether they resign like Cagney and Kalanick or remain with the company like Freeman and Mason, startup executives typically own a large percentage of company stock. That often leads investors and boards to treat them gently when it comes to sexual harassment allegations and other forms of misconduct—but it should not.

Wayne Eastman is a professor in the Department of Supply Chain Management at Rutgers Business School-Newark and New Brunswick. Andrea Marino is a corporate attorney and consultant.

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TAGS: Advisory Board Ethics Supply Chain Management Wayne Eastman