G2 On Leadership
BP, Dell, Wall Street: Where have the corporate
heroes gone? Tony Hayward, once credited for BP’s “green” turnaround, is forced to resign. Michael Dell, the revolutionary high-tech entrepreneur, is sanctioned for misleading investors. Wall Street titans, once lionized, are now reviled. Where have all the CEO heroes gone?
KLMNO
Amy M. Wilkinson is a senior fellow at Harvard University’s Center for Business and Government and a public policy scholar at the Woodrow Wilson
Center. Somehow America has forgotten that our
vibrant economy, the mass majority of our jobs, and the products we use every day are a result of strong business leadership.
When was the last time you went to the
grocery store to find fresh fruit, sliced turkey, toilet paper or deodorant? The CEOs of Safeway, Giant, Whole Foods and many other retailers enable our lives. Yes, there are leaders who have violated our trust and profoundly mismanaged their organizations. Yet, the vast majority of CEOs create jobs for more than 80 percent of America’s workers. In recent years, Google has created 22,000 jobs and put information at our fingertips. Apple has revolutionized music players and cellphones and irrevocably changed the way we interact with technology. Intel has built a computer chip that is 1,000 times as powerful, 100,000 times smaller and 1 million times cheaper than that of MIT’s mainframe in 1965. We don’t think to thank the CEO of Waste
Management when trash disappears from our curbs, but 20 million households across North America rely on the company. So where are corporate heroes? They are working quietly among us.
John Baldoni is a
leadership consultant, coach and regular contributor to the Harvard Business Review online. In December 1995,
SUSAN WALSH/ASSOCIATED PRESS
Robert Dudley, back, will become BP’s first non-British chief executive, replacing Tony Hayward, front, in the wake of the gulf oil spill.
on
washingtonpost.com This week’s business chats
washingtonpost.com/ discussions
WEDNESDAY Derrick Dortch, federal jobs 11 a.m. THURSDAY Color of Money columnist Michelle Singletary, video chat, 1 p.m. FRIDAY Cars columnist Warren Brown, 11 a.m.
Fortune conducted an interview with two titans of American business who defined those heady times: high growth, high return and high rewards; Jack Welch of General Electric and Roberto Goizueta of Coca-Cola. Both became CEOs in 1981 when their companies were underperforming. Welch transformed GE into a sleek juggernaut that dominated market segments from jet engines and locomotives to finance. Goizueta shook up the culture to focus more on the customer and in the process increased Coke’s market capitalization more than 30-fold. Neither had it easy. In their Fortune interview,
Welch said he was always “scared” that GE would not be nimble enough. Goizueta confided he slept like a baby: “I wake up every two hours and cry.” This gets to the heart of leadership.
Leadership, like character, is what you do when the choices are hard. When things are booming, it can be fun to grow the business, introducing new products and services, hiring new employees and reaping strong profit. Tough times mean facilities closings, layoffs and bearish earnings. Savvy leaders prepare for tough times always.
They delegate leadership to the front lines. This not only makes for greater engagement because people feel more in control of their jobs, it is great preparation for tough times like ours. So when I am asked where all the leaders have gone, I say nowhere. What has changed is the depiction of them as heroes.
EZRA KLEIN New paper calls TARP a success story klein from G1
changes in their own budgeting and planning.
And how is it built? What are the numbers based on?
Zandi: I’ve gone back to every recession and depression and looked at the policy efforts to address the downturn, and try to at least capture the different ways in which policymakers have tried to generate a recovery. And what we’ve done in the Great Recession, some of it is unique, but most of it has been done many times before. Tax cuts, emergency unemployment benefits, aid to state government: These are things we’ve done every single time. Alan Blinder: Different models do give different answers. That’s why we say we welcome others to try and estimate this. But you can’t make anything come out that you want. These models are fitted to real data. They’re not just made up. They describe how the U.S. economy worked in the past.
And the model says that what we did this time broadly worked. In particular, it says the financial rescue worked. In other words, George W. Bush, Hank Paulson and Ben Bernanke deserve some credit for what they did in the immediate aftermath of the crisis.
Zandi: Absolutely! I think TARP was incredibly important. The mistake was for Congress to vote it down initially. That eviscerated confidence and took the equity market down to a whole other level and exacerbated our problems. By that time, the damage was so serious that the intent of TARP had to shift. Originally, it was about buying bad assets, which would’ve been more graceful. But because of the “no” vote and the damage it did, they had to make TARP a source of capital for the financial system. The capital purchase program was ultimately the one key thing that was necessary for stabilizing the financial system and the economy.
So why is TARP so horribly unpopular then?
Blinder: People feel it was successful in ways they’re not happy with: That is, the bankers are making a lot of money now. That part of the bailout cost the government less than nothing, as the government is turning a profit on it. But in some moral sense, these bankers did not deserve to be saved. The problem was that if they went down with the ship, we were going down, too. The right way to think about the banker benefits was collateral damage in a war to save the economy. Had we not done that, things would’ve been horribly worse for everybody. So I don’t hesitate. To me, it’s not close.
Do you think it was well-designed?
Blinder: TARP should’ve come with more strings attached — a lending requirement, for instance. If banks were going to get this money, they should’ve had to lend with it. I would’ve put restrictions on banks’ ability to pay dividends, and tougher restrictions on executive pay. I also think it was a very big mistake for Secretary Paulson to force this money on banks that didn’t want it. I can hardly say his theory without laughing: He wanted to reduce the stigma of taking it. The market knew who was strong, and the strong banks, like JP Morgan, went to the media and loudly said that the government is forcing this down our throats.
And what about the stimulus? Famously, the Obama administration predicted it would keep us beneath 8 percent unemployment. That obviously didn’t happen. Does that mean it was a failure?
Zandi: The original forecast was just a bad forecast. The unemployment rate was already at 8 percent by the time stimulus passed. We just didn’t know it because the data lags. What really matters is what the unemployment rate would’ve been if we didn’t do stimulus, and in my view, it would clearly have been higher.
If the response to the crisis was effective, then why do we
seem to have stalled out in recent months? Since May, the recovery has been lagging, hiring hasn’t been very strong, and there’s a general sense that the economic momentum we saw earlier in the year has dissipated a bit.
Blinder: Well, I know why it is, though it pushes the question back one level: Given the growth of GDP and the amount of spending that’s come online, the number of jobs created has been puny. That’s mitigating the usual virtuous circle where spending creates jobs and those people spend and that creates jobs and so on. That process is going on, but not at the level we expected. That pushes the question back to how come there’s not more hiring. My speculation is that it’s doubts about the durability of the recovery and firms not wanting to hire more permanent workers until they’re more confident this is for real.
So what would you do going forward?
Blinder: I would do two things, both aimed at jobs. I would do the so-called new jobs tax credit on a much bigger and better scale than the HIRE Act, which was a baby step. The second thing I would do is a WPA-like program of temporary, direct, public hiring. People could work in parks, in maintenance, the many paper-shuffling jobs there are in government. You could save a lot of state and local jobs that would otherwise be terminated. Zandi: If the unemployment rate was peaking at 7 percent, I’d say no worries, no need for more stimulus. But I’m nervous about 9.5 percent unemployment when you have a zero percent interest rate and a huge deficit. If we’re all wrong and we go into recession, we’ve got no policy response. So I think it’s prudent to err on the side of doing too much rather than too little. And we can do that. We’re not Greece or Britain or Germany. We have a 3 percent 10-year Treasury yield. We have always solved our fiscal problems, and the world has faith we will solve our future ones. So we have the resources.
kleine@washpost.com
color from G1
departing staff members were not replaced even though the agency was given additional responsibilities. The Nevada Consumer Affairs Division was shut down because of budget cuts. The Consumer Affairs Program in Virginia Beach is down to one investigator. As they face budget cuts, the
agencies are experiencing big increases in the number of consumer complaints. The average increase last year was 23 percent, although some agencies had even more significant jumps. Hawaii’s Department of Commerce and Consumer Affairs said complaints there increased 62 percent. Sham offers to help consumers save homes from foreclosure were the
fastest-growing complaints last year. Others related to the recession included aggressive debt-collection practices, bogus business opportunities, job scams and investment schemes. “At the same time that consumer vulnerability to fraud has increased due to the economic recession, the abilities of those entrusted with protecting consumers from scam artists have been severely curtailed,” Sally Greenberg, executive director of the National Consumers League, told a Senate subcommittee during a hearing on the economy and fraud. “Much of the day-to-day consumer protection work in the United States is performed at the state and local level. State and local consumer-protection agencies, never a darling of appropriators even before the economic crisis, are now seeing their budgets cut to the bone or worse.” Most important, when
agencies lay off workers, the exiting staff members take crucial expertise with them. “Staff members often develop specialized knowledge over time —for instance, about home construction, jewelry grading, auto repairs or mortgage agreements — and it is difficult for others to fill their shoes,”
MOLLY RILEY/REUTERS
Even as federal officials discuss consumer protection, funding for local protection agencies is drying up.
according to the joint report. It’s especially troubling that
educational outreach is getting the ax in many local areas. The more people know about fraud, the better equipped they are to fight it. U.S. agencies such as the
Federal Trade Commission are charged with helping consumers, but there’s an important distinction between what most federal agencies can do for individual consumers and what state and local consumer- protection agencies can accomplish in mediating individual complaints. What these agencies do is
vital. The joint report noted that among those agencies responding to the survey, more than 300,000 individual complaints had been investigated and almost $110 million in restitution or savings for consumers had been provided. Other programs that save consumers money weren’t even included in the $110 million figure. For one, the Summit County Office of
Consumer Affairs in Ohio created a foreclosure assistance program, which saved homeowners nearly $87,000 through loan modifications and corrections to their escrow accounts in 2009. Just think how much more
money could be recovered if consumer-protection agencies had adequate budgets and staffing. But as is often the case, the people in power were shortsighted, and they waited too long to put in budget restraints elsewhere to preserve these agencies. As a result, the desperate budget-slashing hurts the most vulnerable consumers.
singletarym@washpost.com
Readers can write to Michelle Singletary at The Washington Post, 1150 15th St. NW, Washington, D.C. 20071.
Comments and questions are welcome, but because of the volume of mail, personal responses are not always possible. Please note that comments or questions might be used in a future column, with the writer’s name, unless a specific request to do otherwise is indicated.
Sir Andrew Likierman is dean of London Business School. He is also non-executive chairman of the National Audit Office and a non-executive director
of Barclays Bank. When asked about the quality he wanted most
in his generals, Napoleon replied, “Luck.” On this score Tony Hayward would not have got a job with Napoleon. Of course it could be argued that he failed to rise to the PR challenge, but the roots of the blowout problem were sown long ago when safety standards were set. Michael Dell, on the other hand, has been much more the master of his own destiny. And if you name a company after yourself, you’re creating quite some expectations about your own personal performance and behavior. The common thread that binds Hayward and Dell together is that both their companies have long been the subject of admiration and emulation. That makes their fall from grace even more galling to the rest of us. If we can’t even trust the people we are emulating, what does that say about our own judgment? But the mistake is ours, aided and abetted by the press. Individuals are put on pedestals, giving rise to unreasonable expectations, only to be cast down when things go wrong. We need to be careful about what we expect, and learn from the mistakes of leaders as well as from their heroics.
So where have all the heroes gone? The same
way as the heroes before them. Those who have the spotlight of publicity and fame come and go. We should look and learn, while reminding ourselves that uncritical admiration is probably best avoided after the age of 5.
Warren Bennis is
professor of business at the University of Southern California. Just about every decade I write a heated screed
mimicking the ’60s flower song wondering where all the “leaders have gone.” My latest attempt was in 2002 when Enron
and Ken Lay were making headlines. I started with a long-forgotten Kipling poem: But I’d shut my eyes in the sentry-box. So I didn’t see nothin’ wrong. The gist of my ’02 piece can be stated simply, and its thesis is, if not identical, then remarkably similar to the BP disaster. Ken Lay’s failing was not simply his myopia or cupidity or incompetence. It was his inability to create a company culture open to reality, one that discourages workers from delivering bad news— just like Tony Hayward, who didn’t want to hear the concerns of the oil drillers marooned on that catastrophic rig, Deepwater Horizon. How can an organization be honest with the public if it is not honest with itself? I asked. I do not believe that the CEOs of today are any worse or better than they were, let’s say, a hundred years ago. It’s just that the stakes are higher and more of us are affected by the dominance of a free-market economy. The question remains: Will our corporate heroes or villains of the future learn from the sentries who didn’t see nothin’ wrong?
SUNDAY, AUGUST 1, 2010
Erika James is the Bank of America associate research professor of business administration at the University of Virginia’s Darden School.
The outrageous acts of indiscretion and impropriety that we witnessed throughout much of this decade are inexcusable. But just as it is inappropriate to say that those CEOs were merely heroes who fell from grace, it is equally inappropriate to suggest that the men and women who are admirably leading corporations are heroes. They are not. Rather, they are humans who have a big job, and who, in order to do that job well, need and deserve the support of their leadership team, their board, their family, and a host of other stakeholders. They do not need to be put on a pedestal.
Todd Henshaw, a professor at Columbia University, is academic director of Wharton Executive Education. I’m sitting on Omaha
Beach conducting a “recon” of the sites my colleague and I will use as a classroom for the next few days with a group from Wharton MBA for Executives. As I walked around, I thought to myself how impossible this mission must have seemed before the assault, and how many times the campaign must have been in doubt when the outcome was in question. I marveled at how wide the beach is at low tide. I walked the cliff ’s edge at Pointe du Hoc and thought about the men scaling the 100 feet under machine gun fire. I saw the remains of the artificial port envisioned and built at Arromanches, an innovation that enabled the entire invasion. “Corporate heroes?” It’s difficult for me to put
those two words together. In Normandy, I saw the names of heroes inscribed in stone on monuments, but in most cases these men who changed the world are nameless, anonymous benefactors who gave Europe another shot at freedom. These are heroes. How did these men prepare themselves for the almost impossible mission? How did they overcome the fear of death? How did their leaders help them understand what was being asked and required of them? How did they have the confidence to overcome the wide beaches, high cliffs, enemy fire, the inevitable doubt that emerges when men are thrown into chaos? I have no idea why we would ever use the term “hero” to refer to a corporate executive.
Excerpts from On Leadership, a Web feature exploring vision and motivation by Steven Pearlstein and Raju Narisetti. To see videos and read the entire panel’s comments, go to
www.washingtonpost.com/leadership.
THE COLOR OF MONEY Consumer complaints rise as resources dwindle
Fast Forward will return. ROB PEGORARO
Fast Forward
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