Whatever is wrong with Donald Trump is getting worse. A week ago, it seemed noteworthy that he was canceling a long-planned state visit because an allied government didn’t want to let him “buy Greenland.”
Now: proposals to stop hurricanes with nuclear bombs; turning a G-7 news conference into a late-night cable infomercial for Trump’s own badly struggling golf resort; “imaginary-friend” discussions with Chinese leaders that the Chinese say never occurred; orders that his officials “build the wall!” with a promise to pardon them for any laws they break in the process; and general megalomania and craziness.
Last week I argued (in “If Trump Were an Airline Pilot”) that if Trump occupied any other important position in public life, responsible figures would already have removed him from the controls. In this case the “responsible figures” are the Vichy Republicans who control the U.S. Senate, which is why nothing has happened to rein Trump in. Not one of these senators will stand up to Trump, even as he is melting down.
A few days ago, readers with military, corporate, and other backgrounds responded to the proposition that a person like Trump would already have been screened out by corporate, military, medical, or other professional systems. Here’s another round in response to that.
CEOs are worse than you think: In the previous post I quoted a reader who said that a man like Trump was par for the course in big public corporations. (“Many American CEOs are as incompetent as Trump.”) I said, in response, that it would be good to have a few more examples—apart, say, from Elizabeth Holmes of Theranos, who was able to con much of the financial and scientific world for a long time.
This reader wrote back to say: You want examples? I’ve got examples! Here is an abridged version of his reply:
I read your challenge regarding examples of CEOs who have destroyed the company and were not fired by the board for whatever reason in the face of incompetence. First, of course, scholarship:
1. Book that discusses this very same phenomenon, as CEOs are chosen for their 'charisma' vs. experience and competence. Searching for a Corporate Savior, The Irrational Quest for Charismatic CEOs (Rakesh Khurana, Princeton, 2002). In this book there is a discussion about the parameters that boards tend to use for choosing CEOs in the US. I think you'll find some of your examples there.
2. Examples of incompetent CEOs who destroyed or helped destroy their companies after being put on the job. Don't take my word for it, try this list of “15 Worst CEOs in American History.” The criteria of the list:
“Those selected for the list fall into one of two simple categories - those who ruined the companies completely while they served as sitting CEOs and those who did severe damage from which their firms could never possibly recover.”...
3. Want more current examples. Sure: Take a look at “Worst CEOs of 2018.” ...
We can talk about incompetence in another sense: Are they building a company that works for the world at large, or are they building a company to feed their egos?
You may say, it doesn't matter if they do, what matters is the result. However, I think you'll find that, if we begin to discuss the ethics of owning and managing a business, you quickly get to the 'responsibility' moment, where your responsibility is to your employees, your environment, your country, and your shareholders. In that order.
The idea that shareholders must always come first has always been ridiculous and only a small mind and small heart could accept that (cue the usual Republican assessments - take your examples from people like Mitch McConnell, a man who does not understand what made the US great and only cares about getting what he wants or what he thinks he wanted when he was 30 years younger.) Take your example as Bezos. Once you have made more money than God, what's the point of not paying your employees a living wage?...
Hope you are not counting on the genius of American Business leadership to save the country from its own present course.
To reassure the reader on the final point, I’m not looking for a CEO savior. (The main theme of the recent work that I’ve been doing with my wife, Deb Fallows, is that communities need to be their own saviors.) My point was simply: Corporate oversight, however flawed, has seemed to be more effective than what we’re getting at the moment out of the U.S. Senate.
Which leads me to …
Actually, CEOs are way better than you think! A reader whom I’ve known for a long time, and whose work involves corporate governance and CEO-search processes, agrees with the original point, and disagrees with the reader above.
My friend writes:
I’d like to offer a response to the response you received [from the reader quoted above] regarding CEO’s of public companies and the Board’s judgement on their fitness to serve (“The board at a public company would have replaced him outright or arranged a discreet shift out of power.”)...
The responder’s comments are contrary to my personal experience. For more two decades I was a Senior Partner and the Co-Leader of the [particular business area] Practice at one of the top four international retained executive search firms. My search practice was exclusively focused on C-level executive positions, not infrequently searches for CEO replacement. In a majority of my executive searches, my client was the Board of Directors.
While the typical CEO search engagement was initiated to replace the planned retirement, often a year or more in advance, I can think of at least half a dozen searches to replace CEOs whose behavior was not only harmful to the business interests of the enterprise, but also offensive to the values of the company.
These were cases of Trump-like behavior. This could be a painful process for the Board, particularly when the CEO was also a Founder who had overseen the selection of Board Directors over the course of many years.
I can think of four examples of CEO behavior so egregious that the Board recognized its fiduciary duty to shareholders to dismiss and the replace the CEO. While I won’t name the companies involved, I will say that all were Fortune 100 corporations, two investor-owned systems, a specialty manufacturer, and one of the largest [insurance-related firms]. These executive searches were conducted in strictest confidence, and only the Board was aware that the CEO was to be replaced. In contrast to your respondent’s characterization of “the medieval level at which corporate management is done,” it was clear to me and my Search Firm that in these instances the Boards acted firmly, ethically, and in the interest not only of shareholders but also of the corporation’s management and employees.
I will acknowledge that there has been a growing tendency for CEOs to recruit compliant Board Directors and undermine their independence, but I will also observe that based on many years’ experience working very closely with many of the most senior healthcare executives that the best CEOs seek strong and independent Directors on their corporate Boards. The best CEOs of the most successful large public companies use their Directors as an extension and enhancement of management talent, and they defer to their Directors when making certain critical decisions regarding the values of the enterprise and its strategic direction.
Again, in my experience, an effective Board would not long tolerate capricious leadership, and certainly would not hesitate to act to dismiss a CEO whose personal behavior violated ethical standards, even if the enterprise was doing well.
One final note: your respondent asserts, “Many American CEOs are as incompetent as Trump.” I demur. With the exception of the occasional Elizabeth Holmes (Theranos), Ken Lay (Enron), or Rick Scott (Columbia HCA) – essentially Founders as well as CEOs – my personal experience and close acquaintance with a fair number of top tier executives and Board Directors is that it takes exceptional intelligence, leadership talent, and steady judgement to lead an organization as complex as a Fortune 100 corporation.