Who are the absolute worst chief executives of 2012? At Bloomberg Businessweek, there is a report of business professor Sydney Finkelstein’s annual list of the worst CEOs.
Finkelstein’s list is a catalogue of incompetence, corruption and egotism. It serves as a reminder of just how far the reputation of business leaders has sunk since the late 1990s and early 2000s, when CEOs were treated as gods.
Back then, one major PR agency tried to cash in on this fad, going so far as to trademark the term ‘Building CEO Capital’. The idea was that the reputation of a company and its CEO were inseparable. This was true to an extent, since lousy CEOs can drag their company’s reputation down. But if it were the case that CEOs are vital to a company’s reputation, this should have forced companies to take greater care in who they appointed. Instead, there have been some spectacular failures, such as Tony Hayward at BP and Fred ‘the Shred’ Goodwin at RBS.
The cult of the CEO enabled business leaders to demand obscenely large salaries and fringe benefits, when their jobs usually involved little or no entrepreneurship or risk but were basically administrative roles more analogous to that of the head of a government department.
The CEO-as-god theory was always weak, since all leaders have feet of clay. What enables bad CEOs to survive is the absence of criticism. In Ancient Rome, when a conqueror returned and had his victory parade, a slave would repeatedly whisper in his ear, “memento homo” (“remember you are mortal”). Few CEOs would tolerate such advice today. Most business leaders feel insecure so they reinforce their egos by surrounding themselves with yes-men and generating a climate of fear. The trouble is, this culture is antithetical to the values of an open society, in which weak ideas are rooted out through scrutiny and criticism.
Whether business leaders like it or not, the open society is catching up on them. The main factors undermining the CEO-as-god are not the financial crisis or even high-profile individual failures, but the openness encouraged by the internet, a general decline in deference, and a trend to more flat and less hierarchical management structures.
The old business culture has not gone away (witness the TV programme The Apprentice, which still encourages the idea that management is basically about shouting at people). But it is on the way out. Rather than wait until business leaders fail, we should never defer to them in the first place.