Takeaway on CEO tirade
A couple of conclusions are brought to mind by the recording of an obscene rant directed by KB Home Chief Executive Jeffrey Mezger at his Bel-Air neighbors, comedian Kathy Griffin and her boyfriend, Randy Bick: You might not want to have Griffin and Bick as your neighbors. And you probably don’t want to have Mezger as your neighbor, either.
And one other thing: If you’re the boss, like Mezger, you can probably get away with a semi-public eruption of atrociously bad behavior — behavior that would get an underling fired — without its costing you a cent.
KB Home disclosed in a regulatory filing Thursday that it’s docking Mezger 25% of his 2017 bonus as punishment, and placing him on notice that another such incident will result in his dismissal.
Mezger’s rant occurred Saturday, and an audiotape of the incident drawn from security cameras was made public via Huffington Post, evidently by Bick, on Tuesday. The outburst was apparently prompted by Bick’s and Griffin’s summoning police to quell a noisy family party in Mezger’s backyard, although it was only 9 p.m. or so.
Mezger responded with an unhinged, profane rant, replete with personal slurs, directed at Bick and Griffin. “He called the cops on my 5-year-old granddaughter,” Mezger informed Griffin. Then he threatened to escalate the neighbor-toneighbor hostilities. “War’s happening,” he said.
Mezger offered a written apology to Griffin and said through a KB spokesman that he “regrets” his outburst and language.
KB’s punishment sounds harsh on the surface. But it’s proper to observe that the amount of Mezger’s 2017 bonus hasn’t been established, and that he hasn’t received a bonus at all since 2014, when he got $125,000. On the other hand, from 2014 through 2016 he received total compensation of $28.2 million. To put it another way, losing 25% of nothing is pretty painless. We’ve asked KB to quantify the amount of Mezger’s punishment, but haven’t heard back.
This may sound like a classic L.A. story, pegged to what really goes on in affluent neighborhoods filled with residents who present a media-friendly image to the public but are subject in private to the same furyinducing indignities from neighbors as, well, the rest of us. It’s evident, moreover, that Mezger forgot a fundamental rule about life in the fast lane in modern times, which is there’s almost always a camera running, and that the lives of celebrities and business leaders are almost never really private.
More to the point, social media can distribute and magnify almost any behavior. The disclosure of Mezger’s rant produced a swift response on Twitter from personal finance guru Suze Orman, who tweeted: “Disgraceful talk from the CEO of KB HOMES. You really want to buy a home from this man?” Mezger has served as the home builder’s CEO and president since 2006 and was named chairman in 2016.
The home-building company’s prompt reaction to its CEO’s public misbehavior suggests that the ground has been shifting beneath the feet of top executives who stray over the line. In years past, a board might take months to ponder discipline for a CEO who was caught using abusive language (typically against subordinates), engaging in sexual harassment or even consensual adultery, or doing something otherwise immoral.
There would be an internal investigation, the commissioning of a report by an outside law firm, followed by a carefully calibrated punishment, up to and including dismissal. That was the pattern followed as recently as this year by Uber in managing its co-founder and CEO, Travis Kalanick.
Public tolerance is wearing thin, however. A survey earlier this year by Stanford’s business school indicated that the public wants to see punishment meted out severely and quickly to misbehaving CEOs. Lying about the company’s product was deemed the worst offense, with nearly twothirds of respondents saying the CEO should be fired. Bad language and behavior, even in private, was ranked the second-worst offense, with more than half of respondents saying the executive should be fired, followed by having an affair, lying about other matters, financial chicanery, and holding inappropriate views.
KB’s swiftness in pulling the trigger on Mezger may reflect its recognition of the potential damage to its brand. But so far, how harshly its CEO will be punished is unknown. All we know for sure is that KB Home has understood, and responded to, a PR crisis.