Additionally, Donaldson points to a type of leadership that some could describe as “hands off,” where the CEO is more of a figurehead than the manager of day-to-day operations. This appears to be the case with Mitt Romney and his tenure as the chief executive at Bain Capital, after he moved on to manage the Olympic Games. Romney claims he resigned in 1999, yet SEC filings have him listed as CEO until 2002. During those three years, Bain started heavily investing in companies that outsourced jobs to other countries.
Donaldson says that while it might be true that a CEO is ignorant of suspect activity going on inside his or her company, he or she will still take the fall, and therefore should be aware. “We hold people at the top ultimately responsible.”
Today’s CEO
How can current CEOs avoid ending up in the same type of situation as Dimon, Diamond and Romney? Simply by being more in tune to what going on, so they will realise when something is amiss, according to Day.
“It’s not the case that a good CEO has to be the master of all things; [he or she] just needs to know how to see the signals and act on them.”
Brian Rubin, a partner at law firm Sutherland Asbill & Brennan, takes it one step further, noting that the CEO not only needs to be able to catch all budding problems, but also needs to be deeply involved if any “red flag” situations arise. Additionally, he or she needs to set a tone that the company is serious about compliance and following the rules. “It’s not good enough for a CEO just to know [a problem] has been taken care of,” Rubin says. He or she needs to “personally deal with it and follow up on it. The CEO [should not] walk away feeling uncomfortable.”
One way a CEO can stay in tune with all that is going on at his company is by having a group of top executives who are diligent and involved. “A good CEO needs to have a C-suite that is equally vigilant,” Day notes. The CEO “needs to think [more in terms of] team building than delegation.”
A “culture of candour” is how Donaldson describes the tone that CEOs should set when wanting to run an open organisation. To do this, the CEO has to make contact with people at all ranks, going down to the production floor or standing in the parking lot and talking to security guards.
Donaldson adds that another way to win over people at all levels is through symbolic significance – instituting programs that do not hurt the bottom line of the company too much, but are very important to employees or customers. As an example, he points to Starbucks CEO Howard Shultz’s offer of health care benefits to employees at all levels. “Something like this can really motivate employees and restore trust.”
Still, Donaldson says that when it comes down to it, all CEOs have to be prepared to face the same challenges that leaders have faced for centuries – outside competition, internal strife and a demanding public. “It’s not that different than Roman times, really.”
