Save Us from CEOs

It would have worked out if we’d just stayed the course, the chief executive said. Everything would have been fine if people had had more faith. We failed because we were attacked by people who wanted us to fail.

Bush in Iraq? No, Jeffrey K. Skilling in court.

The former Enron CEO, on trial for multiple counts of conspiracy and fraud, told the court yesterday that Enron’s slide into bankruptcy was caused by a loss of faith. Thomas Mulligan writes for the Los Angeles Times,

The defense contends that Enron was in great shape in the fall of 2001 but its slide into bankruptcy was caused by a sudden loss of faith by creditors, akin to a run on a bank. The creditors, according to the defense, were spooked by erroneous media coverage stirred up by short sellers — stock-market players who try to profit by betting that companies’ shares will fall. …

… “I am devastated because the company was brought to its knees unnecessarily,” Skilling said Thursday.

Enron got caught using, um, creative accounting practices to hide losses and make some parts of the company look profitable when, in fact, they were not.

Several prosecution witnesses, including the one-time heads of the broadband and retail energy units, previously testified that by the spring of 2001, those businesses were dead in the water. They said Enron officials tried desperately to cover up the units’ woes because they were a big part of the “growth story” the company was selling to Wall Street.

But maybe Skilling is right. Maybe, had Enron not been caught, those units someday would have begun making a profit. And then everyone would have made money and lived happily ever after.

And maybe Iraq will settle down and start being a good little nation any day now. All we have to do is stay the course.

Are we seeing a pattern here? I believe we are.

Awhile back the nation was seized with a cultlike admiration for celebrity CEOs. William Greider wrote in The Nation (July 2002):

The cult of the CEO (as some business gurus now call it) promoted a celebration of testosterone and greed that has coarsened the culture and damaged economic life in severe ways. The adoration of corporate executives–those with a tough-guy disregard for their employees and social norms–seems to be receding now, along with stock prices and disappearing profits, but it does resemble a utopian cult, in which the followers obsessively worship a few strong guys said to possess superhuman qualities.

Not everyone was taken in. In my experience the worker bees in the office cubicle hives were more likely to wonder if the guys in the penthouse office suites had any brains at all; hence the popularity of Dilbert.

If you’ve been around for awhile you’ve probably noticed that CEOs tend to come up through the ranks of sales and marketing departments, or maybe corporate finance. Or maybe, like Donald Rumsfeld and Dick Cheney, they move back and forth between plum government jobs and CEO positions without much in the way of hands-on, private-sector business experience at all.

Once I read about a CEO who had actually worked his way up through engineering, which the article writer acknowledged was practically unheard of. I have seen a few product development people move up pretty far. But if you’re in production or manufacturing, fuhgeddaboudit.

In other words, the more your job involves producing a tangible product, the less likely it is you’ll ever be a CEO.

CEOs tend to be salesmen. And above all else, they exceed in selling themselves. That’s how they get where they get. Although I take it on faith they aren’t all incompetent, this 2002 article in Harvard magazine by Craig Lambert documents a number of horror stories of CEO blunders. He also argues that the CEO Cult was largely a cult of personality; star CEOs have charisma. And charisma, among other things, is impervious to rationality. Here Lambert quotes Rakesh Khurana, a Harvard PhD and author of Searching for a Corporate Savior: The Irrational Quest for Charismatic CEOs, which explores the messianic appeal of charismatic chief executives.

The trend toward charisma may have started when “the idea took root that if a firm was doing poorly or well, it was because of the CEO,” Khurana explains. “Previously, CEOs were about as well-known as their chauffeurs. But something happened when Lee Iacocca was credited with single-handedly saving an American icon. Most people forgot about the $2-billion federally guaranteed loan to bail out Chrysler, or the United Auto Workers’ givebacks. Iacocca made other CEOs look bland–there was even talk of drafting him for president. The image of a CEO changed from being a capable administrator to a leader–a motivating, flamboyant leader with a new task. In the late 1980s and early ’90s, business tried to redefine itself; it was no longer about the profane task of making money, but concerned with vision, values, mission—essentially religious terms.”

This meant “importing the sacred into the profane,” explains Khurana, who uses the German sociologist Max Weber’s works on charisma as a touchstone. Charismatic leadership, which grows from a personal magnetism that inspires devotion, reaches its apotheosis in religious cults. Its ascendance in corporate life is “a throwback to an earlier form of authority that proved to be very unstable,” says Khurana. “Weber said that charisma and rationality cannot coexist. The progress of Western civilization has been a movement away from charismatic leadership toward rational authority invested in laws and institutions. After Hitler and Mussolini, Americans were rightly skeptical of charismatic leaders. Separating the individual from the office is one of the great victories of Western society.”

Over the years I’ve observed that groups will defer to members who are sure of themselves. Most of us have fears and doubts about our abilities and decisions; it can be a relief to let the guy with no fears and doubts make the decisions. And once the leader-follower relationship is established, it’s very hard to break even after the leader screws up and the followers have lost faith. If you’ve been around the block a few times you’ve probably seen this yourself.

For that reason, self-confidence trumps knowledge and competence nearly every time. An absolute faith in his own correctness will propel a man’s career a very long way. And once a guy has a reputation for gravitas and competence he has to screw up big time before those around him get a clue he may really be a fool — or, in current office parlance, “a real Dick Cheney.

I’ve been speaking of the CEO cult in past tense, which isn’t entirely correct. I’m sure there are a lot of real Dick Cheneys still running companies. And the cult lingers on in the Bush Administration.

Ellen Goodman writes in today’s Boston Globe,

After manipulating this faucet of fear, the president then defended the war in the name of national security, casting himself as the country’s father-protector. In short, he sold himself as the person we needed to protect us from the fear he provoked. Welcome to the protection racket. And lest you forget, his reelection campaign was run by the same racketeers. George W. was transformed from a conservative who was compassionate to a commander in chief who was unflappable. John Kerry was accused of the unmanly crime of nuance and caricatured as flip-floppable. We were subjected to an endless strongman debate with Arnold Schwarzenegger leading the attack on ”girlie men.” …

… There’s something to be learned in the Bush debacle. Beware the call of the old manliness. Beware the man who ramps up the danger and offers himself as hero and security blanket. And beware the leader whose unwavering, unflappable, unnuanced, and unjustified confidence in the face of risk becomes our disaster.

In her column, Goodman argues that the same overconfident, risk-taking, hypermasculine behaviors that we look for in our leaders are the same attributes that our enemies look for in their leaders. Our he-men demand that we look to them for protection from their he-men. Testosterone creates a self-perpetuating protection racket.

Manliness is defined by Harvey Mansfield as ”confidence in the face of risk.” I was reminded of a book I read years ago — sorry I can’t remember the title — in which the author defended obscenely high salaries for CEOs (which are even more obscene now) because CEOs take risks. His examples of lower-paid jobs that didn’t involve “risk” included firemen and policemen. I kid you not. Some of these guys really are living in their own fantasy world in which they’re the superheros.

They’re confident in the face of risk not because they’re brave, but because they’re bleeping delusional.

Let’s go now to Bob Burnett, who posted “George Bush — Failed Christian, Failed CEO” at Huffington Post.

Dubya’s carefully crafted image as America’s “CEO President” ignores the reality that he has consistently been a failure as an executive. He’s made dreadful mistake after mistake, but never learns from any of them. As an oilman, baseball executive, governor, and now as President, George Bush has been a figurehead executive, the public face of an enterprise where the real power lay somewhere else. His oil businesses were notable disasters, although he never suffered financially, as friends of the Bush family bailed him out. Because George W was buffered from reality throughout his adult life, he never had to come to grips with his failures. The lessons he didn’t learn are painfully evident in the occupation of Iraq, where Bush has committed each of the classic CEO mistakes and hasn’t recognized any of them.

Among these mistakes was invading Iraq with no plan for occupation. Further,

When their projects go disastrously off-course, CEOs find it difficult to pull the plug. Typically, they plead for more time; insist that they see the light at the end of the tunnel. President Bush claims, “The progress in the past year has been significant — and we have a clear path forward.” Beleaguered CEOS argue that to even talk of shutting down a project demoralizes those working on it. President Bush maintains, “It would send the wrong message to our troops — who need to know that we are serious about completing the mission they are risking their lives to achieve.”

And Enron’s floundering divisions would have turned a profit eventually, and then everything would have been just fine.

The entity we call the “Bush Administration” is a perfect storm of CEO cultism; a near-pure distillation of chest-thumping, risk-taking, steely-eyed, self-deluded arrogance; a collection of losers who couldn’t lose, who bluffed and bullied their way to the top and who now are trying to bluff and bully their way out of the disasters they’ve created through sheer joy-ride recklessness.

Until very recently I haven’t given serious thought to whether Bush would finish his second term, but now so many chickens are coming home to roost — and they’re big, mean, ugly motherbleeping chickens — I am giving it serious thought. Outside of Washington the pool of Bush Bitter Enders is shrinking fast. Most people aren’t even listening to Bush any more. Yet we face massive problems, not all of Bush’s making, that will take more than banners and bluster to manage.

We’re on a trajectory now that, I think, could result in Bush’s (and Cheney’s) impeachment or forced resignation before 2008. That trajectory depends in part on events outside of anyone’s control, so it could change. We’ll see.

Meanwhile, retired generals have finally worked up the courage to take on Donald Rumsfeld:

Retired Major Gen. John Riggs told National Public Radio that Rumsfeld had helped create an atmosphere of “arrogance” among the Pentagon’s top civilian leadership.

“They only need the military advice when it satisfies their agenda. I think that’s a mistake, and that’s why I think he should resign,” Riggs said.

Advice? Manly men don’t take advice. If you have absolute faith in your own judgments, why would you take advice? If we just give it more time, we’ll see the light at the end of the tunnel, and then everyone will know that Rummy and Dick and George were right, after all. And they have no doubts they were right.

And maybe William Bennett would’ve made up his $8 million in gambling losses if he’d had one more weekend in the casinos. Ya never know.

Update: See also Paul Krugman, “Weapons of Math Destruction.

16 thoughts on “Save Us from CEOs

  1. When Reagan became president, I had hoped that at least his foreign policy team could keep up the momentum that Carter had managed to develop, not just in the Middle East but also in the areas of human rights in South America and other places. I figured they could because many of them had experience as big shots in international business.

    They were miserable failures at it.

    I realised then that in business they were used to dealing with people whose primary interest mirrored theirs (making money by any means possible) and getting deals through bribes and kickbacks. This just doesn’t work most of the time in international diplomacy. And in fact business methods in government don’t translate well in government even at home — it doesn’t mean that an experienced business exec couldn’t be good at effective, helpful politics, but to do so they have to be flexible in their approach and methods. Most aren’t — not the ones who wind up in rightwing government, anyway.

  2. Oh please, you’ve got to tell me who the author was who thought the jobs of police officers and firemen were lower risk than CEO’s. I guess golden parachutes are more dangerous than I must have thought. Whew, glad I don’t have one!
    I’ve got to find out who the complete idiot is who wrote that. Can anyone really be that stupid? Can that person really have had the opposable thumbs necessary to write a sentence that idiotic? Then again, looking at some of our “leaders” in this country, I guess it could be any one of them…
    America’s leaders: Stupid is as stupid does.

  3. Oh please, you’ve got to tell me who the author was who thought the jobs of police officers and firemen were lower risk than CEO’s. I guess golden parachutes are more dangerous than I must have thought. Whew, glad I don’t have one!

    I’ll try to remember. I actually met the arrogant prick once. The book was published by Prentice Hall ca. 1994-95 while I was freelancing for PH. But right now I’m drawing a blank on both the title of the book and the name of the author.

  4. “Manly men don’t take advice” hahaha…..ever been in a car with a ‘manly man’ driving who gets lost but refuses to stop and ask directions?! I have experienced that several times.

    Manly boy-man ‘mad-cowboy-diseased Bush refuses to admit he’s lost….

  5. The myth that Republicans appear competent on National Defense EXPLODED with the first plane that hit the world trade center on 9-11-2001.

    I have seen that people do not want to call companies and tell them why they boycott companies and ask for a progressive agenda, so then just avoid buying from these companies and spread the word. I will tell the Speaker of the House and the Senate majority leader and the CEOs of these companies listed below that their profits will silently lessen until an agenda listed on gets acceded to by the Republican Party in a press conference and then passed by congress and signed by the pResident. So just do this and I will do the rest of the work for you. You have no petitions to sign, no phone calls to make, just stop buying products from these Republican contributors and to tell others as well to stop. Thank you.

    Walmart, Wendy’s, Outback Steak House, Dominos Pizza, Red Lobster, Olive Garden, Eckerd, CVS and Walgreens, Curves for women health clubs, General Electric and Exxon/Mobil.

  6. Thanks Maha,
    Please try to remember. I promise, I won’t buy the arrogant pricks book if it’s still in print. I’ll take a risk and steal it. Take a risk?!? Hey, maybe I am CEO material, after all!
    Keep up the great work.

  7. Massive egos & testosterone overload. Reading about the bunkerbuster test called Divine (?) Strake (what’s up with that name?) to be done in early June with 700 tonnes creating a large mushroom type cloud near Las Vegas made me think of “manly” men’s penis worship. What could be more of a testosterone rush for these kind of guys than the sight of a gigantic mushroomn cloud? I call it the big wienie syndrome.

  8. Maha, you hit the nail on the head as always. Megacorporate CEO’s are all style and bluster, no substance. Every study I’m familiar with shows no correlation between performance and “compensation”. And as for risk, needless to say those fat cat prima donnas are only risking other people’s money.

    I used to work for Ciena Corporation, whose CEO, Gary Smith, was named the most outrageously overpaid CEO in the US. He drove the company and the stock price into the grond – from $200 to $2 in four years – while taking home tens of millions a year. There was one time he came out to our location in Silicon Valley to give his yearly royal audience with the peasants, and one of my colleagues asked him about this disparity. Smith was fuming and cut the meeting short. A few months later he closed the location and laid everybody off. I’m not saying it was related, but this guy was definitely a major league A-hole so I wouldn’t put it past him.

    It’s amazing how these CEO types can be so arrogant, fondly imagining that they exude the magic qualities “charisma” and “leadership”, unrelated to any actual competence, and that the “little people” hang on to their every word for inspiration. It’s the modern equivalent of royalty. And you know what happens to royals in the end – they go insane through inbreeding, or they get the guillotine.

  9. I once worked for a guy who loved the image of Bush as the CEO president. Finally we’ll get some things done through a strong, decisive, manly man. This boss was a minor tyrant, who surrounded himself with yes-men and mediocrities, and who constantly made poor decisions, because he could trust noone but himself, while blaming others for his failures. I left, because I got tired of cleaning up after his messes, and I got tired of the monologues, the unwillingness to learn from others, and the insecurity this guy had around people who were smarter than he was. Seeing this in my workplace was a real education into the pathology you wrote about.

    My question is, what are the pathways to derail this process? Are there positive examples we can work to put into practice? Does a system have to fail massively – as Nazi Germany, or Enron did – before the sick culture and the persons embodying it can be replaced.

  10. Yawn….all comments are so, so, so true…..

    So what?

    I and my posse knew all this shit years and years ago. Git off da damn internets and git on the phone to yer Congressperson and tell ’em you want Bush gone right now! No waiting…no bloviating…run the Worst President Ever out of town. And call ’em every week until it gets done.

  11. A. Citizen: Dear, done. What’s your next plan?

    And I really resent people who imply I haven’t worked hard enough to get rid of Bush.

  12. If your congressperson is a republican, he’ll just tell you to piss-off…in a kinda nice way. We need to replace ’em in the midterms, then perhaps there is a chance. Until then, I’ll keep on bitchin’ to keep what sanity I have left.

  13. Maha, Excellent analogy and analysis in your message. As always, you’re paying attention with a keen eye to the deciets and in doing so helping others understand the dynamics of the fraud thats been perpetrated upon them by the Bush administration. You’ve done an excellent job of ripping the mask off of Bush and his handlers so that we can see them for the charlatans they are. Your efforts and hard work are apprieciated.

    I’m not confident that Bush will be held to account before his presidency ends because the people who have the power lack the courage to defend our democracy. There is no backbone in congress as a whole. What’s the gestation period for a spine?

  14. Beautiful, Maha–listening to the NPR reports about the Enron trial and Skilling’s testimony, I kept hearing the same things and style BushCo have used since their campaign began for BushBoy.

    They play the “sincerity” role and just lie and lie and lie and dare the listener to make any objection. “Compassionate Conservative” anyone? Honest entrepreneur? I just can’t believe they’ll continue to get away with it.

    Incisive entry. Great.

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