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Posted by on Jun 28, 2014 in Blog | 0 comments

HARD TIMES … For Leaders in Business (not only in government!)

It’s relatively easy to see how hard it is for political leaders to lead. While some political leaders in 21st century America have it easier than others, it’s obvious that from the president on down that times are tough.

What’s less obvious, relatively more difficult to determine, is that corporate leaders are in a similar situation. They too are experiencing hard times, finding it more difficult to lead now than they did just a decade or two ago. I don’t exactly pity them – among other famous, or infamous reasons, CEOs of large public companies tend to be extravagantly well compensated. But, make no mistake. Leaders in business are not immune from the same slings and arrows that are directed at leaders in government.

The similarity between the two is a hard case to make. While I’ve argued for decades that the differences between leaders in government and leaders in business – or, for that matter, among leaders anywhere else – are less powerful than the similarities, we still tend think them two different species, leaders in the public sector one thing, leaders in the private sector another. But followers, others, in both domains are more recalcitrant than they used to be, and quicker to pull the trigger on leaders who fail to make the grade. Moreover leaders everywhere are situated in the same larger context, in this case this particular country, the U.S., at this particular moment in time.

Consider this tidbit from the Financial Times (6/23/14): “The annual meeting [of publicly held companies] has become a venue for debate where campaigners… raise hundreds of proposals to challenge imperious chief executives on issues ranging from their pay to the environmental sustainability of their operations…. 2014 shows continuing elevated levels of activism, with many companies acceding to proponents’ demand before they reach the ballot.”

In the past few weeks alone, shareholders at Gannet voted against the use of golden parachutes for executives; Harley-Davidson lost its attempt to block the introduction of majority voting for directors; and over 50 percent of votes at Valero Energy demanded greater transparency in its lobbying. Moreover the breadth of citizen or investor activism seems to be widening. Whereas in the past it was mainly banks that attracted these sorts of high-profile campaigns, now contentious industries such as those in the energy sector receive an outsized proportion of investor attention. Even consumer companies have joined the fray; they and those who lead them are growing in popularity as targets of activists.

CEOs most vulnerable to punishment or even banishment if they make a major misstep are those who are new on the job – and to the job. Impatient boards are quicker to lose patience with recent hires, and quicker to push them out if they fail to perform. Nearly 21% of U.S. and Canadian CEOs of public companies forced out in 2013 had served less than three years, compared with just over 10% of those holding office longer. Moreover about 76% of top bosses departing for any reason last year were first time chief executive officers, up from 58% only a couple of years earlier.

Of course none of this is to say that private sector leaders should be pitied. It is simply to point out that they are anything but protected against the temper of the times, anything but protected from the same exogenous forces that put at risk their public sector counterparts.