Murdoch Scandal: The Fish Stinks from Head Down

Last Updated Jul 11, 2011 1:17 PM EDT

This past week saw two large and, in some quarters, highly-respected institutions seek to make restitution for its mistakes: News Corp and Ohio State. Neither organization went far enough and in doing so opened itself for further investigation and recrimination.

News Corp closed the News of the World in response to the widening phone hacking scandal in which privates citizens, along with celebrities and royals, had their private conversations hacked by investigators and then reported in the paper. On the surface, the decision seems to be a sound one, but few people are buying the reason why.

The decision to close had been in the works for awhile as a cost cutting move, but the immediate impetus was so that News Corp could focus on the real prize of British communications, buying controlling ownership of BSkyB of which it owns one third. By closing a scandal rag caught in a scandal, News Corp could seem above the fray.

Ohio State University released its response to the NCAA report of its multiple violations. For some reason the NCAA allows universities under investigations to offer up penalties before the NCAA imposes its sanctions. OSU is offering to vacate all wins from the 2010 season including the bowl game. It is also continuing to police itself but it has vacated the need for its disgraced coach, Jim Tressel, to repay a $250,000 fine and it is not offering to return monies earned in the Sugar Bowl. Nor is OSU willing to limit scholarships.

In both instances, the chief executives, Rupert Murdoch and Gordon Gee, president of OSU, are choosing to look the other way when it comes to meaningful change. Neither is asking for resignations of senior staff. Murdoch has gone out of his way to defend Rebekah Brooks, former News of the World editor and now a senior executive in News Corp. Many blame Ms. Brooks for her handling of the hacking affair, which has been going on for years.

Similarly, Gee has not asked his athletic director, Gene Smith, to resign. In fact he has praised him. It was under Smith's watch that Tressel broke the rules. The basketball program, too, has been investigated for illegalities.

For employees of News Corp â€" save for those laid off when the News of the World was shuttered -- and at Ohio State, it is business as usual. Murdoch, as reported by Joe Nocera in the New York Times, is blaming his enemies for the scandal, not his executives. Gordon Gee, as late as March during a press conference, tried to laugh the whole investigation away when he said he hoped that Tressel didn't fire him. Intended as a light hearted remark, it laid bare the belief of some critics that football rules the school, not the other way around.

What can we learn from NewsCorp and Ohio State? If you want to keep doing business, you can. Just pretend to take the high road. That is, take symbolic actions that preserve the status quo and most importantly,those who hold power.

Both Murdoch and Gee would be better suited to follow the example of Ed Breen, who upon taking over Tyco International which was under investigation after CEO Dennis Kozlowski was removed (and later jailed), cleaned house completely. He removed 290 of 300 managers and fired the board of directors. He also moved the company from Manhattan to New Jersey. A culture of accountability was instilled. Today Tyco is once more a respected and profitable company.

An executive taking over a corrupt company, one tainted by mismanagement and scandal, should do three things:

1. Remove the miscreants. Those who crossed ethical lines should be removed immediately. It sends the signal that a new sheriff is in town.

2. Affirm the good of those who remain. When senior leaders cross the line, it does not mean employees did the same. Most were ignorant and deserve no blame. They too would like to keep their jobs.

3. Insist on accountability. Make it clear that business as before is over. Those who stay will be held accountable for their actions. The top leaders must be more accountable than anyone.

The Italian proverbâ€" a fish stinks from the head down â€" is appropriate when organizations go astray. Until those at the top are held accountable the stench will permeate the organization.

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