In this Market Foolery podcast segment, host Chris Hill and Motley Fool Asset Management's Bill Barker consider how an activist board reacts when an exec embarrasses the company. KB Home (NYSE:KBH) CEO Jeffrey Mezger was recorded unleashing a vulgar tirade at his neighbor, comedian Kathy Griffin, and the homebuilder's board didn't remotely laugh it off. But what was really on their minds when they censured him and cut his bonus by 25%?

A full transcript follows the video.

This video was recorded on Sept. 21, 2017.

Chris Hill: We've talked before about, certainly recently, Equifax, and one of the questions we've asked is, where is the board of directors in all of this? And what does it take to get fired at Equifax? The board of directors at homebuilder KB Home, on the other hand, is not messing around, because, as some may have heard, last Saturday night, the CEO of KB Home, Jeffrey Mezger, was caught on audio yelling a string of profanities at his neighbor, who just happens to be comedian Kathy Griffin. Mezger was yelling at her and her boyfriend. And today, the board of directors at KB Home announced that Mezger's bonus is going to be cut by 25%. And they basically said, "If we find you doing this kind of thing again, you're gone."

Bill Barker: I don't know if that's a product so much of "You're getting us bad press and that could affect people's choices to buy KB Home." I think it's very unlikely to me that many people are going to fall in love with a house and then decide not to buy it because of the CEO's behavior one day, just using some foul language. And more to do with they don't want him to do this, they don't want the bad press, but this is a guy who has been, this is a recurring theme of companies that have done basically nothing for shareholders over the last decade. KB Home is yet another one which has returned virtually nothing to shareholders over the last 10 years, and it has underperformed the homebuilders, homebuilding competition. And he gets a nice salary. And if he had to walk away or be pushed out, I don't think the shareholders would shed a tear.

Hill: So you think this is the board saying, "Oh, here's an excuse we can use to slap this guy around and possibly get rid of him?"

Barker: Well, it was awfully fast, wasn't it?

Hill: Oh, yes. To go back to Equifax, where they have the data breach, I don't even know if that board of directors has met in the same room since that debacle happened, but this was in less than a week, in what amounts of just three days of the market being open, the board of KB Home just snapped into action.

Barker: You used a couple of words that basically everybody uses now and again. I don't know, there were one or two words in there that probably not everybody uses. But it was a very lightning-fast reaction, so either you give all credit to the board for really being on top of this, or you say, "Well, this is a board that was ready to slap a wrist." And I don't know. I don't know which of those. I don't actually have inside information on what the board's intent was here, but I will just say, looking at the performance of the stock, this is not a CEO that you feel you have got to keep around no matter what.

Bill Barker has no position in any of the stocks mentioned. Chris Hill has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.