CEO Accountability in FTC vs. SEC Filings: Turnover Consequences of Consumer and Shareholder Violations

This paper analyzes the impact of Federal Trade Commission (FTC) enforcement actions on CEO turnover. Our findings reveal a significant disparity in penalties faced by CEOs involved in misconduct, particularly highlighting the impact of FTC filings. Only 36% of CEOs are replaced within three years of FTC enforcement, a rate significantly lower than the 73% observed in SEC cases involving shareholder interest violations. Furthermore, CEOs in FTC cases remain in their roles for an average of 4.9 years after the filing, compared to 3.7 years in SEC cases, indicating that FTC-related consumer violations result in relatively lenient penalties. Regression analysis confirms that FTC filings do not lead to significant turnover penalties for CEOs, contrasting sharply with SEC filings, which are associated with substantial turnover penalties. This suggests that decisions harmful to consumers are often perceived as aligning with shareholder interests, shielding CEOs from accountability. Our study highlights a critical gap in regulatory consequences for CEOs when consumer interests, rather than shareholder interests, are at stake.