As compliance officers consider the story of Steve Wynn and the sexual misconduct allegations against him, we should start by acknowledging one crucial fact.
Wynn is a good businessman.
His accomplishments don’t lie. Wynn remade the Las Vegas Strip into what we know today. He built Golden Nugget, the Mirage, the Bellagio, and most recently the glittery Wynn Las Vegas.
[UPDATE: Wynn was a good businessman. Resigned from Wynn Resorts on Wednesday morning.]
Wynn Resorts, which Wynn has led as chairman and CEO since 2002, is currently building a casino resort in Boston worth $2.4 billion. The company’s revenue has gone from $3.2 billion 10 years ago to $6.8 billion today; operating income went from $312 million to $1.05 billion. Someone who invested $10,000 with Wynn when the company went public in 2002 would be sitting on $130,384 today.
None of that is easy to do in any industry, let alone one as rife with nonsense, vanity, greed, and regulatory scrutiny as gambling is. Wynn did it.
I don’t say any of this to excuse Wynn’s alleged misconduct with employees. In the Wall Street Journal’s expose last week of Wynn’s behavior, we see one accusation after another of Wynn browbeating women into compromising situations and outright sexual assault. Those allegations deserve a full investigation, and if true, Wynn deserves the same harsh discipline that any other employee would get — and the board of Wynn Resorts now seems well on its way to deliver just that.
Still, if compliance professionals at other organizations want to study Wynn’s example for lessons of how to prevent a disaster as colossal as this one, we need to study the complete picture. We can’t talk about Wynn’s failures without talking about his success as well, because his success led to the conditions that allowed the misconduct to happen in the first place. And that’s what you want to avoid at your organization.
Competence and Arrogance
When I look at the role Wynn plays at his company and the allegations against him, the first words that come to my mind are competence and arrogance.
Because he was so good at his job (competence), the normal constraints of good conduct ceased to apply (arrogance). Wynn achieved one feat after another in the business world, to the point where he could set any objective he wanted in the gambling business and know he would achieve it. Should we really be surprised that the same dynamic might infect his personal conduct?
This often happens with companies built around the superstar talents of one person: the company is designed so that the star’s competence empowers his arrogance. That is, when a manicurist at Wynn Resorts accused Wynn of raping her in 2005, he could pay her off with a $7.5 million settlement only because he had the talent to generate that $7.5 million, and the authority within the company to direct its use in that way.
We see the same with Harvey Weinstein at Weinstein Co.; Bill O’Reilly and Roger Ailes at Fox News; with Matt Lauer at the Today Show; and most recently, with Wayne Pacelle, ousted last week as CEO of the Humane Society. In all cases, these were men of talent and power, with gross sexual appetites to match. They could direct that power to silence women who posed a threat to them, either by giving the women cash settlements (complete with non-disclosure clause, of course) or by pushing them out of the industry.
Consider executive misconduct in that light, and suddenly Wynn Resort’s boilerplate disclosure of risk factors becomes much more unsettling:
Our ability to maintain our competitive position is dependent to a large degree on the efforts, skills and reputation of Stephen A. Wynn, the chairman of the board, chief executive officer and one of the principal stockholders of Wynn Resorts. … If we lose the services of Mr. Wynn, or if he is unable to devote sufficient attention to our operations for any other reason, our business may be significantly impaired.
You can’t dispute a word of that disclosure. Alas, it also captures the huge risk that superstar executives can pose to an organization. So how do you mitigate it?
It’s About Governance
Clearly the routine control activities for harassment don’t help much. How useful is anti-harassment training and certification for an employee who believes the normal rules do not apply to him, and can put that belief into practice? What good is a reporting hotline, really, if the subject of the complaint oversees the HR department and everyone else? Even if the victims speak up about harassment (good), the damage to the company will be extreme (bad).
The solution has to be structural: a deliberate effort to design the company so that even with a superstar talent at the heart of operations, that person cannot direct company resources to empower his misconduct.
For example, Wynn Resorts never should have allowed Wynn to be both chairman and CEO. Or Wynn Resorts should have established a strong, independent compliance function — one separate from the legal department, reporting directly to the board. The company’s Code of Ethics does list several executives employees can contact with concerns, but they all seem to be legal, accounting, or regulatory affairs specialists; nobody who ensures ethics and compliance in the way other large corporations understand it today. I could not find any ethics and compliance officer for Wynn Resorts on LinkedIn.
In fact, I keep coming back to independence over and over again. That’s what Wynn Resorts needed: independence built into the corporate structure, to act as a series of checks and balances against an overweening CEO. An independent board chairman; an independent ethics and compliance function; an independent internal audit function — these are the institutions a company needs if it wants to endure beyond any one superstar. Especially if that superstar later turns out to be a jackass whose failure could ruin the business.
In the fullness of time, I suspect we’ll see more stories of a weak board at Wynn Resorts, unable or uninterested in checking Wynn and his predations. And remember, we’ve already seen just those allegations at Weinstein Co.: that two board members tried for years to uncover his misconduct, and were thwarted repeatedly by lawyers acting on Harvey Weinstein’s behalf.
Core values, strong ethical cultures, independent oversight, good governance — sure, they sound so dorky, right up until they matter. But boy, once they matter, don’t they seem to matter a lot?