What if your CEO went to Epstein Island?

As the saga of the Jeffrey Epstein files continues with more information gradually being released, the list of business leaders linked to Epstein is increasing. 

The files have exposed relationships of some form with Epstein for leaders such as Guy Laliberté, founder of Montreal-based Cirque du Soleil; co-founder of Google Sergey Brin; and Hyatt Hotels executive chair Thomas Pritzker; and several more. This has led to internal investigations and reviews for some leaders by their organizations, and in Pritzker’s case, stepping down from his position. 

For HR leaders, it raises hard questions: when a senior executive is implicated in a public scandal, do you remove or keep them, and what’s the risk of each option to the organization? 

When an organization’s CEO is linked to a scandal like the storm around Epstein, it isn’t just a branding and public relations dilemma — it goes to the core of organizational character, people risk, and long-term culture, says Mary Crossan, professor of general management and strategy at Western University in London, Ont. 

“The culture of an organization will be a reflection of the character of its members and particularly its leaders,” she says, adding that any scandal involving someone at the top is a live test of whether the stated values of the organization actually govern how power is exercised. 

CEO character as important as competence 

Crossan believes that boards and CHROs too often fixate on technical competence and lag far behind on systematically assessing and developing character in their senior leaders. She has spent years building evidence that imbalances — leaders who are high on drive and accountability, but low on humility and collaboration — lead to compromised judgment and a higher risk of public failures. 

“Understanding what character is, how to develop it, and how to embed it in organizations is a new area for a lot of HR practitioners and leaders,” she says. “They don't really know how to select on character as well as competence and promote succession planning based on character as well as competence.” 

For Crossan, that means reframing an organization’s scandal response as the visible tip of an iceberg.

“When a crisis hits, it exposes the base of the iceberg, and if you're confident in the base of your iceberg — you’ve made the investment around character, competence, and commitment — your whole communication strategy and what you're going to do will be guided by that,” she says. “You're likely going to defend your CEO, and you may pick up that their judgment wan’t as strong as it could have been, your first response isn't ‘We've got a panic here,’ it’s going to face it head-on, accept accountability, solve it, and move forward.” 

Crossan says that, following a CEO scandal, organizations should focus less on the moral and ethical side of things and more on leadership’s quality of judgment and decision-making.

“We have to take some culpability in the organization — did we put a leader in place who might have these imbalances of character?” she says. “We see the risk for judgment about what's happened, and I would argue that, particularly at a senior leadership level, you can't afford that risk.” 

Company values that apply at the top 

For Adam Dean, president and founding partner at Dean Executive Search in Toronto, any CEO scandal is first and foremost a test of whether the organisation’s values truly apply to its most powerful people. “When a CEO is tied to a scandal, it's not just a PR crisis, it's a leadership and talent crisis,” he says. “So how [the organization] responds determines whether your best people stay, leave, or never join in the first place.” 

Dean agrees on the importance of character for a CEO, warning that employees don’t draw a neat line between personal behaviour and corporate values at the Csuite level. 

“If the CEO says that integrity matters and then treats a potential scandal as a private matter, you just told the workforce that your values are optional at the top,” he says. “The real test of values is whether they apply to the CEO and whatever you do with that individual becomes the defining case study for your culture.” 

Dean also believes that the CHRO needs a clear and protected line for independent oversight on handling the situation.

“The CHRO often reports to the CEO, and that creates a conflict when the CEO is at the center of the scandal, so this is where strong governance really matters,” he says.

“You need to have a clear escalation passed to the board, audit and ethics committee, or independent counsel, and some pre-agreed protocols for an independent investigation... And there might be an argument advocating for dual reporting models between the CEO and the board, or at least the standing expectation that the CHRO would go directly to the board on matters involving CEO misconduct.” 

The CHRO has to assert the importance of process and independent fact-finding with a clear scope and a defined timeline, with the CEO typically stepping back or going on leave pending findings, says Dean. “The CHRO has to anchor to the code of conduct, evaluate the CEO's position using the same standards applied to everyone else, and document that rigor — that will protect both the culture and the organization if there are later disputes,” he says. “If HR can't safely escalate concerns to the board, then you don’t really have governance, you have marketing.” 

Dean suggests that HR can be thought of as a convener of legal communications and external advisors that can ensure consistency between what's done internally and what’s said externally. 

Remove versus retain: the people risk lens 

For Crossan, the decision to remove or retain a scandal-tainted leader has to start with judgment, not optics. She believes that many crises simply expose longstanding character gaps: leaders who have been rewarded for results despite patterns of poor judgment, weak collaboration, or abuse of power. At senior levels, it’s an ongoing risk to employees, customers, and the organization’s ability to do business, she says. 

Dean sees the downstream impact when boards treat CEO misconduct as a narrow legal or communications problem. Mishandled cases or inaction quickly become talent problems such as departures, grievances, and a lasting loss of faith in the code of conduct, he says.  

There will be situations where an investigation finds insufficient proof to terminate a CEO, or where boards conclude that, on balance, the leader can remain. If that decision is made, the real work is only beginning, according to Dean.  

Equally important is transparency about how the decision was reached, says Crossan. 

“It would be a huge problem for the CEO to be entangled in some kind of scandal and the organization to say, ‘We reviewed it and we’ve found everything to be okay, and the CEO is staying on’ — and everybody's still wondering,” she says. “A CEO might have been accused of something and it is innocent until proven guilty, but the fact is, you hold that position and you have to be transparent about how it was handled so that employees have confidence in that.” 

Present and future talent risk 

Dean believes that when a CEO is publicly linked to a scandal, the real damage is often internal and there can be a loss of trust with the organization’s top performers. 

“It's hard to separate personal from the professional behavior at that level, especially if you're worried about credibility with employees,” he says. “Employees should be very much considered primary stakeholders, and yet sometimes they're the last to be formally briefed and they feel like they're the first to feel the shock.” 

Whether the CEO leaves or stays following a link to a scandal, the organization and HR leaders should plan for interim and permanent succession, and retention efforts for important executives, according to Dean.

“The CHRO needs to understand that any future C-suite leaders will probe exactly did the board do, how independent was the process, and what changed as a result,” he says. “Many organizations underestimate how quickly a mishandled response can turn into a talent issue — in my world [in executive searching], the sophisticated boards will quietly ask us, ‘Would strong candidates still join us after this?’ and the honest answer depends heavily on the transparency and the rigor of the company's response.”