Trying Times, True Leaders

As management practices come under question and icons fall, some CEOs stand out for the remarkable ways they're confronting critical business challenges.

Almost daily, it seems, leaders whose business achievements were being celebrated as recently as six months ago are being pushed from their pedestals, their iconic status questioned and exploits second-guessed. Kenneth Lay, the former Enron Corp. CEO; Bernard Ebbers, the founder and former CEO of WorldCom Inc.; and L. Dennis Kozlowski, former chairman and CEO of Tyco International Ltd., are among the ranks of the recently deposed. Meanwhile, questions have been raised about some of the judgments of General Electric Co.'s former chairman and CEO John (Jack) F. Welch Jr. and Percy Barnevik, the former ABB Group president and CEO who even after his retirement in 1996 was championed as Europe's Jack Welch. But at the same time -- and far less publicized than the faults of other CEOs -- there are the standout and instructive achievements of such manufacturing chief executives as Engelhard Corp.'s Barry W. Perry, Oneida Ltd.'s Peter J. Kallet and Palm Inc.'s Eric A. Benhamou. In the following pages, George Taninecz and Jennie L. Phipps tell the stories of Perry, Kallet and Benhamou, detailing the bold steps these CEOs are taking, respectively, to integrate businesses, split the company, and break with tradition. Compelling on their own, and filled with best practices and better ideas, the stories are, nevertheless, being told against a backdrop of active and intense concern about executive leadership and accountability. Whether or not the current situation qualifies as a crisis of leadership continues to be debated. Some CEOs say the media have greatly exaggerated the failings of a few people. And there have been some reporting excesses. However, the deeper, more profound and more troubling issue is the absence of public trust in U.S. business and its leaders, including the public's lack of confidence in such economic stalwarts as the nation's automakers, chemical producers, pharmaceutical firms, and oil and gas companies. A statistically significant 69% of Americans responding to a February Golin/Harris International survey said they didn't know whom in business to trust anymore. "An America that is cynical or skeptical about business generally is a serious problem -- more serious than any specific business scandal," states Rich Jernstedt, CEO of Golin/Harris International, a Chicago-based strategic communications firm. Who's to blame? In this second year of the 21st century, there is a residual distrust of business that has its origins in the management excesses of the Industrial Revolution, first in England in the late 18th century and then in the U.S. For example, stark images of greed, dishonesty and disingenuosness persist, reinforced recently by the allegations against Lay, Kozlowski and others. Especially in the aftermath of the dot-com bust, people are pointedly asking for a full accounting of business operations, observes Peter Cairo, a founding partner of Portland, Oreg.-based CDR International, an executive-development firm. "People will forgive leaders making a mistake. What they won't forgive is people covering it up." There are other reasons for stakeholders to question executive behavior, to be asking whether business leaders are truly leading. The almost-single-minded focus of many CEOs in the U.S. and the UK -- and increasingly of their counterparts in continental Europe and Asia -- on making short-term numbers is the most notable of these reasons. "Executives are tending to behave more like managers than leaders," contends Paul Taffinder, a London-based partner in Accenture's human resources practice. "They drive only the numbers -- rather than experimenting, trying new options; they react to market conditions -- rather than creating new markets; and they seek compliance from their employees to implement current plans -- rather than commitment to serve customers," he states. "Performance is not enough," Jeffrey R. Immelt, GE's chairman and CEO confessed to shareholders at the company's annual meeting in April. "When a trillion or so in new-economy market cap goes up in smoke, when advisers rate a stock a 'buy' and it goes bankrupt a couple of weeks later, when the system designed to provide confidence in the numbers falls apart, it changes things," he stressed. What to do? To build public trust during the months that have followed Enron's financial collapse, the Business Roundtable, the National Association of Corporate Directors, the New York Stock Exchange (NYSE) and even the White House have all produced guidelines for CEO and corporate behavior. Among the various guidelines recommended are:

  • CEOs personally vouch for the "veracity, timeliness and fairness" of financial statements and other public disclosures (the White House).
  • a "substantial majority" of the members of the board of directors of a publicly-held corporation be independent "both in fact and appearance" of the company's management (the Business Roundtable).
  • only outside directors serve on the board's audit, governance and compensation committees (the Business Roundtable).
  • independent directors meet periodically without other board members present (NYSE and the National Association of Corporate Directors).
  • CEO or other senior executives be replaced "when appropriate" (the Business Roundtable).
  • employees have ways to alert management and the board of directors of potential misconduct "without fear of retribution" (the Business Roundtable).
Executives of every manufacturing company -- publicly traded or privately held, within the United States or beyond its borders -- need to pay attention to these proposals because they are serious attempts to get at real leadership problems. However, no matter how well-written or well-intentioned, no code of conduct or set of regulations is by itself going to make a CEO or a company successful or trustworthy. The issue is "not so much changing the rules but making sure that people are playing by the rules," emphasizes William D. Zollars, chairman, president and CEO of Yellow Corp., Overland Park, Kans. Meanwhile, Jeffrey E. Garten, dean of Yale University's School of Management, continues to be concerned that most American CEOs construe their jobs too narrowly, particularly since Sept. 11 and the collapse of Enron. There is, for example, "no possibility that we will have a viable homeland defense unless there is a much stronger partnership between business and government, since virtually all of the assets of the country are in the private sector," says Garten. "That requires business leaders to focus not only on the bottom line but on issues of national security." Similarly, "when it comes to the post-Enron period, it's really clear that the capital markets -- the financial markets -- have some real flaws. And, in my view, it is incumbent on business leaders to help fix them," says Garten. The Yale dean's view clearly is a non-traditional take on leadership and enterprise, certainly a stark contrast to what Garten terms the "naked capitalism" of the 1980s and 1990s. Indeed, Garten seems to want to revive some of the spirit of the mid-1970s when Reginald H. Jones, then GE's chairman and CEO, and Irving Shapiro, then DuPont & Co.'s chairman and CEO, were championed for being business "statesmen." Some CEOs have caught the spirit of that time and are applying it to the business challenges they confront in the early years of the 21st century. William C. Weldon, chairman and CEO of Johnson & Johnson, for example, is one of the executives that Cairo and David Dotlich, also a CDR International founder and partner, champion for managing the paradox of growth -- achieving short-term results and assuring long-term viability -- while connecting with company insiders and outsiders. "Bill Weldon . . . is creating a very collaborative organization," notes Cairo. "J&J is a very decentralized organization, and what allows it to be successful is how [the] various parts of the organization work with one another and still maintain the autonomy that's required for them to be successful," says Cairo. Much the same can be said of the creativity of Engelhard's Perry, Oneida's Kallet and Palm's Benhamou. These CEOs, too, are leading, and not just managing, for both the short-term and the long-term. Even as they implement specific changes that have an immediate impact on their companies' structures and results, they are creating company cultures that promise to capitalize on market and financial changes yet unforeseen. They are effective leaders.
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