When executives (and others) behave badly, you can just about bet that somebody is going to be around to catch the whole thing on film – and it only takes one viral video for their company’s reputation to get dragged through the mud as a result.
That’s why morality clauses have become increasingly popular in executive contracts.
What’s a morality clause?
Morality clauses are nothing new. Hollywood started to use them to control the behavior of its “assets” back in the days of silent films, and the practice spread to sports teams and other organizations, including private companies.
Sometimes called “behavioral clauses,” morality provisions in contracts allow a company to fire an executive if their behavior is deemed immoral, unethical or somehow damaging to the company’s image. A morality clause might be invoked to terminate an offending executive for things like:
- Criminal activity, including financial crimes – but also things like drunk driving, drug possession or domestic violence
- Sexual misconduct, including sexual harassment or assault that takes place outside the workplace and inappropriate relationships with employees
- Discriminatory behavior, including the use of hate speech that negatively affects the company’s image or casts doubt on its values
- Media scandals, including inappropriate or inflammatory posts on social media platforms that could harm the company’s image
- Intellectual property theft or other misconduct, such as lying on their resume about their educational background or getting caught engaging in plagiarism
In an age when news travels very fast and social media can amplify outrage, the actions of a single well-placed individual can do a lot of damage to a company’s image. If it causes a public relations nightmare, there can be real consequences for a company’s brand, consumer trust and stock value. By including a morality clause in your company’s executive contracts, you can safeguard what you’ve built and easily distance yourself from someone whose behavior becomes outrageous and offensive.