“Lame Leader” of the Week? Does “lame” adequately convey the idiocy of Barclays recently resigned CEO, Bob Diamond?
I’m not even talking about whatever is his responsibility for Barclays’ role in the scandal over interest rate manipulation. Nor am I talking about how his own exorbitant pay packages were way out of line with Britain’s corporate culture. Nor, for that matter, am I talking about the rebukes he received from politicians and regulators, who objected to his behaviors regarding taxes.
What I am talking about is Diamond’s idiotic arrogance testifying this week before Britain’s House of Commons. Instead of doing what is right and proper, referring to his interlocutors by their full names, or by their titles, or even not at all, he called them by their first names! Can you believe it?! It’s as if the Solicitor General appeared before the justices of the Supreme Court and instead of referring to them in a manner befitting the occasion, he or she called them, “John,” or “Ruth,” or “Clarence,” or “Sonia.” It’s just not done!
That’s one of several lessons Bob Diamond apparently never learned. Listen to this exchange between Robert Siegel, host of NPR’s “All Things Considered,” and Teresa Pearce, a Labor Member of Parliament and of the Committee that questioned Diamond.
Pearce: “I was surprised that he [Diamond] continually addressed us by our first names . . . . It seemed inappropriate and showed a lack of respect.”
Siegel: “In previous parliamentary hearings, have you had witnesses who’ve addressed you as Teresa or the others by their first names?”
Pearce: “No, normally when people come before us, we give them the respect of giving them their full titles…. So, we all called him Mr. Diamond, but he called us by our first names, And as Members of Parliament in the chamber, we don’t even address each other by our names. We address each other as The Right Honorable Member of whatever you are, you know. So The Right Honorable Member for Hammersmith, or The Right Honorable Member for Oxford.… It was a very formal hearing, and [Diamond] was just inappropriate.”
Hard to imagine what Diamond was trying to prove by being so absurdly informal in this most formal of settings. That he was cool? That he was a free-wheeling American among stuffy old Brits? That he was confident and in control as his world was crumbling around him? Whatever it was, he failed dismally to do anything other than make himself look a fool.
Not quite fair to tag Chesapeake Energy CEO Aubrey McClendon Lame Leader of the Week – at least not without making clear he did not act alone. In the shenanigans that apparently constittute business as usual over at Chesapeake, McClendon’s board was manifestly complicit in what went wrong, if not explicitly, then implicitly. Hard questions are finally being asked about McClendon’s personal financial transations with firms that have a relationship to his company. More to my point, members of Chesapeake’s board are finally distancing themselves publicly from the CEO who, while ostensibly accountable to them, nevertheless was allowed to go his own way, largely unmonitored and uncontrolled. From this distance, there seems little question that McClendon was, at the least, guilty of bad judgment. Why then did his board play puppy dog for so long? Why did it, like so many other boards of so many other organizations, abdicate its responsibility and turn a blind eye to its own fiduciary responsibility? Why did board members follow the leader – rather than lead the leader? Chesapeake’s board finally got fed up all right, but only after Chesapeake’s stock plunged 27% in one month, only after pressure from shareholders, and only after their own personal well being was threatened . So in this case the most knottty question is not why McClendon strayed but how. How was he allowed for so long to be left home alone? What can and should be done about problems of corporate governance that persist – and that have their genesis in small group dynamics about which members of these small groups, boards, remain largely ignorant?
This week’s winner of the Lame Leader Award has to be Vikram Pandit, CEO of Citigroup. Pandit’s inability or refusal to read the writing on the wall – to forestall outrage at his outsized compensation – resulted in his public humiliation at the hands of his shareholders, who rejected a pay plan that would have awarded him $15 million.
Of course it’s not the first time Pandit’s reputation has taken a hit – only a month ago Citigroup failed the Fed’s stress test, measuring its potential strength in the event of major adversity. Moreover Citigroup has delivered the worst stock performance among all large banks for the last decade, while having the chutzpah to rank among the highest in executive pay. This makes it all the more surprising that Pandit so misread his situation – or maybe not. Leaders generally have adjusted poorly to this brave new world, in which watching your back is a survival skill.
Dodd-Frank requires public companies to give shareholders a say on pay. This at a moment when anger against inequity is undiminished and shareholder activism is showing new signs of life. How foolish, then, how arrogant of Pandit to imagine himself immune to the temper of the times!