When the market is going up, much of the world treats CEOs like superheroes who are worth every penny of the extraordinary sums they command. But when fate and fortune retreat and reverse direction, these CEOs suddenly claim only to be human, an attribute with which they had previously never shown much familiarity.
It was, in many ways, a script that has become all too familiar in recent months. The well-dressed CEO appears before a committee of the U.S. Congress, says he takes full responsibility for the collapse of the company he headed, and then goes on to blame short-sellers, the housing market and a run on the bank. He says there was no need for more capital, but now, as a result of that decision, there is no company either. And yes, he, too, was worth the fortune he was paid. The problem was that, although its CEO received close to half a billion dollars since 2000, the company that prevailed for 158 years through a civil war, financial panics, economic depressions and two world wars could not survive the leadership of Richard S. Fuld Jr. So Lehman Brothers is no more.
There is a way that the spotlight of Congressional investigations and live television reveal dimensions to CEOs like nothing else can. Yesterday, it was Mr. Fuld’s turn before the U.S. House Committee on Oversight and Government Reform. A familiar pattern emerged from the hearing.
When the market is going up, much of the world treats CEOs like superheroes who are worth every penny of the extraordinary sums they command. A company’s success is seen pretty much as a one-man show. This was especially true for Lehman’s Mr. Fuld, who apparently was so crucial to the bank that they needed to replicate him as chairman of the board of directors, CEO of the company and chairman of its executive committee all at the same time. No private jet is too luxurious, no pay package is too extravagant, no amount of directorial slumber too deep that otherwise might challenge the modern boardroom Caesar. As noted on these pages last month, the CEOs of Merrill Lynch, Citigroup, AIG, Bear Stearns and Lehman Brothers’ Richard Fuld received an aggregate compensation in excess of one billion dollars over the past five years.
But when fate and fortune retreat and reverse direction, these CEOs suddenly turn humble and claim only to be human, an attribute with which they had previously never shown much familiarity. They speak plaintively about the vicissitudes of life, look for empathy and understanding –and a lot of scapegoats.So much of the world they once ruled is, they admit, really beyond their control. As Mr. Fuld testified before the Committee:
In the end, despite all our efforts, we were overwhelmed… A litany of destabilizing factors: rumors, widening credit default swap spreads, naked short attacks, credit agency downgrades, a loss of confidence by clients and counterparties, and strategic buyers sitting on the sidelines waiting for an assisted deal were not only part of Lehman’s story, but an all too familiar tale for many financial institutions.
It’s a far cry from the tone struck before by executives like Mr. Fuld. In the good times, success pretty much has only one father and that’s the CEO, according to many board compensation committee reports. Failure’s paternity has many culprits, including always short-sellers and the occasional abrupt change in the weather.
We’ve heard this song before. Conrad Black when he headed Hollinger; Enron’s Jeffrey Skilling; James Cayne, who ran the board and management of Bear Stearns for many years; and Angelo Mozilo, the subprime czar of mortgage giant Countrywide Financial all cut a swath of media adulation and investor diffidence during their reigns. But the perverse gods of markets and boardrooms insist on having their laughs. The CEOs whom they raise up to such rarified heights that they actually begin to think they are god-like themselves soon have a harsh reconnection with human frailty and imperfection when they fall back to earth with a hard thud. For some, like Conrad Black and Jeff Skilling, that sudden descent to a decidedly undeferential world comes in the form of prison time for corporate crime. For others, like Cayne, Mozilo and Fuld, a different kind of prison locks them into a sentence of personal failure and public disgrace from which there is seldom any escape, no matter how impressive their mansions and luxury condos.
If you did not know that Mr. Fuld had run one of the largest and oldest investment banking institutions in the world and that he was compensated in sums that defy human comprehension, there would be nothing in his performance yesterday to suggest that he had ever occupied such lofty office. His speech was halting, his manner often disingenuous, his memory selective, his words unevocative, his judgment unimpressive. There was no hint of insight or foresight that was any greater than that of a million middle managers, let alone a five hundred million-dollar man. Mr. Fuld, who claimed the company was in good shape one week apparently could not see even into the next, showing his vision lacked something of the reputed prescience of the Davos clan. (Mr. Fuld is a long-time attendee at the World Economic Forum, another puffed-up institution of over-hyped CEOs and hangers-on that has become an annual fashion show for the emperor without clothes.)
One more thing that might give reason to pause and reflect about the man who presided over the largest collapse of any corporation in American history: Until a few weeks ago, Mr. Fuld was a director of the Federal Reserve Bank of New York. He was elected by other member banks –and hold onto your hats for this one– to represent the general public.
The besieged state of the world’s economy seems to be in the process of separating models of genuine leadership, which emphasize value and character, from their long-reigning impostors. It has taken the worst threat since the Great Depression for Wall Street and Main Street to comprehend the depth of the scam that has been occurring under their beguiled eyes over the past number of years. Assurance of value was taken for granted; the skill and accomplishment (and need) of grandly compensated egos was not even to be questioned. Their word was gold, so we were told. What we have discovered in recent months after trillions in losses and government interventions, however, is, to paraphrase Gertrude Stein, there was no there, there.
Perhaps when this unseemly procession of failed and discredited CEOs, whose arrogance, greed and misjudgments have brought Depression era fears to Main Street and necessitated the largest private sector bailout in history, is over and the extent to which the world was taken in by the myth of their excessively compensated abilities becomes inviolably clear, we can return to a time of real leaders whose attributes include some of the most paramount and uncommon abilities of all:good judgment, common sense and two feet planted squarely on the ground.