It was a week that illustrated how not to be a leader.
The CEOs of the big three auto makers appeared before the United States Congress, and showed a level of ill preparedness on even rudimentary questions about their bailout pleas that would have incurred the ire of a fifth grade teacher. Their separate arrivals in three luxury private jets reminded us of when Robert Nardelli, then head of Home Depot, cut off shareholder questions at the company’s annual meeting after 60 seconds. He also insisted that no director attend the event. He has since taken his unique skills, which saw Home Depot’s stock plunge in value and its workforce decimated in morale, to Chrysler. The results speak for themselves.
The board of Citigroup, which we recently discussed here and here, remained largely invisible as the company faced one of the fastest and most costly meltdowns in share value in modern history. Citi’s executive chairman, Sir Winfried Bischoff, who received more than $6 million to do that job in 2007, could not find time in his busy schedule to provide investors with anything more reassuring than a statement indicating support for CEO Vikram Pandit even though shares fell through the floor after that proclamation. Back in Washington, Treasury secretary Henry M. Paulson Jr. remained resolute in his decision not to seek legislative approval for the remaining half of the $700 billion bailout fund. This was after announcing that he was not going to use the funds for their originally advertised purpose, incurring the wrath of law makers, Wall Street, editorial pages and the credit markets the plan was designed to bring back to health.
Common to these headline grabbing missteps is the utter failure on the part of these leaders to see where they are going and what is needed to avert disaster. The automakers misread market trends over decades and failed to overcome a level of institutional arrogance that makes the Vatican look humble. Citigroup’s board took a big snooze as it ignored the hazards of risk and allowed successive CEOs to pursue an agenda of over leverage that promised fortunes in their pockets before long-term outcomes were ever determined. Those outcomes have now begun to be counted and they have the shadow of 1929 hovering over them.
As a society, we entrust our well-being, our future and often our lives to our major corporate and business leaders. In the process, we accord them enormous deference and many wind up living idyllic lives. It should not be too much to expect that they will be observant of the shoals and alert to the perils as they steer the ship to which they have been entrusted, occasionally looking out the window to see if they are on course.
What we saw this week, and consistently throughout this economic crisis, has been the example of the non-leader: people who repeatedly get it wrong, who prove themselves to be out of touch and, ultimately, are first to put themselves into the lifeboat while everyone else is left to cope with the consequences of their shortsighted navigation. Giant institutions of business and government provide their heads with all the resources they need to do their jobs effectively, and when they fail, it generally takes an uncommon level of arrogance and misjudgment.
These qualities were in abundance this week, to the great detriment of American investors, taxpayers and workers, which is why we find the actions of the heads of General Motors, Ford and Chrysler, the board and CEO of Citigroup, and the Secretary of the Treasury to be the Outrage of the Week.