The cult of the CEO
In the age of personality, it's not surprising that bosses of giant corporations are seen as more than mere figureheads. But do we expect too much of them? This cult of the CEO is a bad business, argues David Prosser
Tuesday 15 June 2010
One is the current poster boy for all that is so unacceptable about big business. The announcement of the other's forthcoming retirement saw him feted the world over for his corporate achievements. At first sight, Tony Hayward, chief executive of BP, and Sir Terry Leahy, the chief executive of Tesco, could not have less in common.
Yet the two men share a bond: membership of a relatively exclusive club. Both run companies that are among the world's largest, at a time when there has never been so much scrutiny of such leaders. Indeed, in an age in which the desire to personalise, to put a face to a name, has become all-consuming, these men practically are their companies.
How many Americans – or even Britons, in BP's home market, for that matter – could name another executive at the oil giant, despite the saturation media coverage of the past few weeks as the company has sought, so far unsuccessfully, to cap its catastrophic spill in the Gulf of Mexico?
Probably even fewer of us could name one of Sir Terry's senior colleagues at Tesco. You probably can't even remember the name of his successor, though it was announced just 10 days ago. Until Philip Clarke takes over, he's a non-person who will remain in the boss's shadow.
This is the cult of the chief executive. It is no longer enough to report on a company's successes or failures; there has to be a single man (or, very occasionally, a woman) to whom they can be attributed, almost always in their entirety.
Hayward is not the first business leader to find himself in the unenviable position of being public enemy number one. He is treading a path that would be very familiar to Sir Fred Goodwin, once of Royal Bank of Scotland, for example. Nor is Sir Terry Leahy the only chief executive who has come to personify the triumphs of his company. Think of Steve Jobs at Apple, say, or even a figure such as Philip Green – the retail entrepreneur, who, like many other successful business leaders, has outgrown the company he serves to become an enduring brand in his own right.
We have always identified with the people behind large companies more than with the companies themselves. The human instinct is to look for the story about another human, rather than a faceless corporation. The world of business has, in any case, produced some outstanding – in all sorts of ways – characters, beginning with the likes of the Cadbury dynasty 200-odd years ago.
Yet the need to personalise seems to have become more acute in the 21st century. There are good reasons for this. First, while the standards required may not yet be being met, it is fair to say that responsibility and accountability are more important themes than ever before in the world of business – and it takes human beings to accept these mantles.
Second, as business has got bigger – and it is only in the past 10 years or so that the emergence of China and India as economic powerhouses has given the largest companies a truly global footprint – the desire has grown to make a personal connection with what would otherwise be a nebulous, faceless corporation.
And, finally, the media has had an enormous impact. It shares the desire of its consumers to simplify complexity by identifying real people to serve as shorthand for what are, in reality, many-headed organisations; and rolling news-coverage on 24-hour current affairs channels has given it an unprecedented opportunity to quench that thirst. Where 20 years ago you might have seen a short clip of Hayward's latest unfortunate slip of the tongue on an evening news bulletin, today you can watch it replayed three times an hour on BBC News 24, Sky News or a string of rival channels, with endless talking heads ascribing ever more significance to what began as a carelessly made, throw-away remark.
The question is whether it matters that we have fallen in love with the cult of the chief executive. Well, in fact it does, particularly when you combine this obsession with another one of the assumptions of our time, that the world is a binary environment in which people are either villains or heroes – Haywards or Leahys, you might say. It's a dumb assumption – the reality of any situation is multi-nuanced – yet a ubiquitous one.
Possibly the least important reason for caring about personalising corporatism to the extent that we have is that it is unfair on the individuals involved.
The buck must, of course, stop somewhere, yet to pretend that every tiny mistake made by an organisation that employs tens of thousands of people on five continents can be laid at the door of the chief executive is simply nonsensical. Just as silly, in fact, as lauding a leader for every penny of sales racked up in a store that may be 14,000 miles from head office.
Still, weep not for these victims: the compensation for being treated so unfairly isn't bad. Hayward was paid £4m last year, roughly 25 times as much as the Prime Minister. One reason for that generous remuneration is that companies know their chief executives will be held responsible for the nail that was wanting, whether or not it dooms their kingdom or someone else's.
A more dangerous effect of the way we paint ordinary people as storybook characters is that they start believing it. Worse, they begin to try to live the fantasy. And, having told our chief executives that they are the company, it's not entirely unreasonable of them to allow such delusions of grandeur to go to their heads. Soon they're rejecting the advice, however sensible, of subordinates, and firing anyone who dares to stand up to them.
It's no coincidence that it is impossible to talk to a modern chief executive for more than five minutes before he begins using words such as vision, transformation and historic. These messianic leaders often regard actually running their companies as secondary to working on the dynamic dream of the future. It's one reason why chief executives are obsessed with takeovers, despite the huge weight of academic research that shows huge mergers and acquisitions are rarely successful and often downright disastrous.
Take someone like Tidjane Thiam, the chief executive of Prudential, Britain's biggest insurance company. He got the top job less than a year ago, but a fabulous back story – he's young, black, good-looking and smart, plus he has a CV that includes a stint in government in the Ivory Coast that was ended by a military coup – meant early lionisation was inevitable. Today, he is reduced to pleading with shareholders for his job, after failing to push through a "transformational" takeover that none of his colleagues – let alone Prudential's overpaid City advisers – quite dared to tell him was a potential disaster zone.
This is no way to run our largest companies. We create a hierarchical structure in which the culture of competition is so cut-throat and the character of leadership so self-focused, that by the time they make it to the top job many chief executives see consensus as showing weakness, and constructive criticism as betrayal. They do not defer to the counsel of their staff or their shareholders.
Steve Tappin, a leadership expert who works with a string of FTSE-100 company chief executives, and has just published The New Secrets of CEOs, a book on the way these people do it, says this is a tendency that we in Britain, almost more than anywhere else, should worry about. "The misconception of the cult of the chief executive particularly applies in this country; only in America are they more self-centred," Tappin says. Moreover, that we look for certain characteristics in our business leaders may perpetuate and accelerate the problem. "The most successful CEOs do often have a certain make-up – often they come from adversity, having had a difficult background in some way that has helped to create the DNA of a super-CEO."
In Sir Terry Leahy's case, this adversity was growing up on some tough estates in Merseyside. The character of Lord Browne, Hayward's predecessor at BP, was partly a response to his parents' wartime experiences, Tappin says, while Sir Martin Sorrell, the chief executive of advertising giant WPP lost a sibling at a very young age.
One sees his point, but this is the stuff of mythology and Tappin, in any case, points out that the lot of a CEO is often not a happy one. "The more successful have good support networks," he says. "But many of them are in long-lasting marriages that are not flourishing because their work-life balances have been so poor for so long."
Is this really the template we want for the leaders of the world's largest companies, the wealth creators upon whom millions of livelihoods may depend? Should the chief executive's office be filled only by people toughened up during a childhood brush with adversity, and only then if they are prepared to sacrifice their personal relationships for the sake of the job? No wonder so many chief executives, successful or otherwise, lose touch with reality.
It is not that there are no other models for structures of corporate governance – and we're not talking about a return to Soviet-style collectivism. "In India, a very different type of chief executive is emerging," says Tappin. "Companies such as Infosys are driven by small groups of entrepreneurial founders, much more in the style of a fellowship."
We have equivalents in this country. The mutual movement, from building societies to the Co-op, may be about to have its day. Certainly, in the past couple of years only one retailer has made the sort of positive headlines that Tesco has been getting for so long: John Lewis, a company owned by its workforce.
The mutuals have their own chief executives, of course; but working for the benefit and approval of members – whether customers or staff – seems to require a different mindset to that of the business leaders who must prove themselves to the stock market day after day. And the results have been good. In financial services, for example, the building societies that chose to convert themselves to banking status during the Nineties – Halifax, Northern Rock, Bradford & Bingley – were among this country's biggest casualties of the credit crunch. The societies that stayed mutual, notably Nationwide, have prospered.
It may be, too, that the financial crisis is forcing stakeholders in businesses to at last begin reining in the chief executives whose spells they have been under for so long. Prudential's shareholders, for instance, vetoed Thiam's big deal because it reminded them of Royal Bank of Scotland's disastrous purchase of ABN Amro, a takeover that went completely unchallenged by shareholders.
But that is probably wishful thinking. In both the City and the media, the collapse of the Prudential deal is talked of not in the context of whether the price was too high, or the target wrong, but whether Thiam can survive it. The insurer's failure was his failure.
Fine. Let us go on assuming that organisations large or small – for the cult of the chief executive is by no means limited to big business – stand or fall on whether the leader at the top turns out to be a super-hero or an arch villain. After all, if the buck stops with someone else, it's not a problem to abrogate personal responsibility. Just don't be too surprised when the heroes turn out to be flawed and the villains show their good sides. If you pretend to live in a black-and-white world, it can be shocking to be confronted by the shades of grey that all of us – chief executives too – actually inhabit.
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