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Seven CEO Takeaways From the Donald Sterling Episode

Stocks in this article: KMX

NEW YORK (TheStreet) -- Los Angeles Clippers billionaire owner Donald Sterling made headlines this week for his alleged racist remarks captured on audio and published on TMZ over the weekend. Today, the NBA banned him for life and fined him $2.5 million. It's still unknown whether he can and will be forced to sell the team. Putting aside the abhorrent nature of Sterling's comments and the swift reaction from the National Basketball Association, there are lessons aplenty for CEOs watching this unfold.

This is yet another example of what can happen when organizations let down their guard against intolerance and racism. The blame falls on the entire organization, and not just Donald Sterling. The question is, what can we as business leaders learn from this fiasco?

DON'T BE A DONALD (STERLING, THAT IS) - Seven Lessons For CEOs and Business Owners:

  1. Have Zero Tolerance for Racism. There is no place in the workplace for prejudice. This should be a no brainer. Business leaders cannot tolerate these beliefs, whether individually or from employees. While we may not have a Donald Sterling in our ranks, we need to watch for inappropriate jokes or comments. Even those made innocently could have a destructive impact on our businesses and the people that work for them.
  1. Reputation Is Everything. Sterling didn't just destroy his relationship with his players, his staff, his fan base and the NBA, he jeopardized his team's brand. Players practiced with their jerseys inside-out to hide the Clippers logo. This event will be remembered in Clippers history and throughout the sporting world. It'll shame the team for years. Letting a racist member of your team slide by will eventually hurt your organization big time. It's not just about you, the leader, it's about everyone who is part of and supports your organization. Your employees depend on you to guide and support them, and your reputation among your team and your fans, or customers, is what will builds trust and respect. Only time will tell if the NBA can remove Sterling as the team's owner, but if they can't the marketplace can. If Sterling remains the owner, watch for the team to continue to lose sponsors and season ticket holders. So far, the following sponsors have pulled away from the Clippers: CarMax (KMX), State Farm Insurance, Kia Motors America, airline Virgin America, P. Diddy's water brand, AQUAHydrate, Red Bull, Yokohama tires and Mercedes-Benz.
  1. A Company's Most Valuable Asset Is Its Employees. It's not likely that Sterling will be able to continue as the team's owner. Players will not want to work for him. Treatment and respect are vital to attracting and retaining the best employees. Whether highly paid athletes or front line workers, employees will walk through walls for us if we create an environment of respect.
  1. Privacy Is Dead. Never assume that you can have a private conversation. There are several instances where supervisor-employee conversations are secretly recorded and posted to social media. As business leaders and managers, we are public figures. Know that your actions are always on display and act accordingly. Note: The best leaders are those who don't need to worry about being on public display because their words and actions are always well-intended.
  1. Leaders Must Live and Breathe Their Company's Values. A business is only as good as its culture and if respect is a value in your company, then diversity and inclusion must follow. It is impossible for a core value and culture to take hold if the leader does not embrace the values themselves first. Every CEO must live and breathe the company's culture in both actions and in words. We must recognize that our employees are as diverse as society itself and then proactively create an environment that thrives on diversity. Sure, most companies have handbooks that state this, but handbooks are perfunctory. What are we doing to proactively ensure that that the behaviors of our team are consistent with our core values?
  1. Never Waste a Good Crisis. While there is little that Sterling can do to repair the crisis that he created, the new NBA commissioner and the rest of the team owners can now make their mark. The league has an opportunity to redefine its relationship with its employees and fans by showing through actions and words that its values are the polar opposite of Sterling's. This goes beyond a press release and news conference. The lifetime ban is a start but the league must lay out a plan to assure its stakeholders that the Sterling incident is isolated and that a proactive action plan is in place. As business leaders, this would be a good time to ensure that our disaster plans are in place. No one is immune to adversity and, when hardship hits, it is vitally important to accept responsibility, lay out a remedial plan and not to hide until the crisis passes.
  1. The Owner Is Not King. News stories are abundant about Sterling's past discriminatory conduct, which includes settlement of a federal housing discrimination claim. The league must have known about Sterling's conduct and reputation for decades. The same is likely true for many players and employees who chose to work for the Clippers organization. Perhaps everyone hoped that Sterling's conduct would never hit the mainstream, staying tucked in a corner. This just goes to show that when we have problems or issues inside of our companies, we have to deal with them head on. They rarely take care of themselves and usually get worse over time. An issue is magnified when a key executive or owner is the problem. In business, it's essential to foster an environment of accountability, where it is acceptable, even encouraged, for employees to hold management responsible. No one in our companies should be above reproach. This is how we set the example. If we work in an environment where this is not possible -- where retribution follows a criticism of upper management -- then maybe it is time to find a new place to work.


WATCH: More feature videos on TheStreet TV | More videos from Kori Hale

This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff.

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