Category: Digital Article

I have written before about how leaders in business are coming to resemble leaders in government. Like the latter, the former are increasingly vulnerable to  those who would challenge or even revoke their ability to lead.

The cast of characters – of CEO challengers – is large. It includes, for example, newly impatient and emboldened boards, newly impatient and emboldened customers, and newly impatient and emboldened shareholder activists.

Shareholder activism is a recent phenomenon and shareholder activists were, until recently, easy to identify. Now though things are changing. Now familiar shareholder activists are being joined by unfamiliar ones – further expanding the pool of those ready, willing, and able to take on even the most vaunted of chief executives.

Previously most shareholder activists were titans of hedge funds, men such as William Ackman and Daniel Loeb who gained further fame and (usually) additional fortune by taking on companies they judged mismanaged or undervalued.  Now they are joined by a new group – single individuals acting in their own interest, who happen to own great gobs of a single stock.

A man by the name of David Sokol is an example. He owns 27% of an American community bank, Middleburg Financial. Recently Sokol pressured the bank to put itself on the chopping block – pressure that Middleburg has so far resisted. Instead Middleburg’s board offered Sokol a seat – which Sokol has so far similarly resisted. Stand-off between the bank’s leadership on the one side, and a single shareholder on the other.

Activism is clearly creeping, seeping, easing almost imperceptibly from the public sector into the private one. As one observer put it, “Activism has gone from being frowned upon, something that marks you out as a rogue or a maverick, to almost socially responsible…. Everyone else is respected for getting involved, so it is good that this is changing for shareholders too.” *

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http://www.ft.com/cms/s/0/59691690-187d-11e6-b197-a4af20d5575e.html#axzz48j0XifK2

The fear and loathing permeating democratic electorates is worldwide. Trumpism or its rough analogue is not just an America phenomenon – it is everywhere.

We see in places other than our own that the people are pissed. We see in places other than our own that democracy is being stretched. We see in places other than our own that leaders associated with establishments are in trouble. We see in places other than our own that the time of trouble is affecting not only leaders in the public sector, but in the private and nonprofit ones as well. We see in places other than our own that threats – real or perceived – such as climate change, immigration, terrorism, and economic uncertainty are driving people nuts.  We see in places other than our own that the system of liberalism we say we hold dear feels feeble.

Two days ago I wrote about the Philippines. Today I write about Austria. Austria – which, like several of its European counterparts, such as Poland and Hungary, just took a turn to the hard right.

In last month’s presidential elections, Austria’s governing party, the Social Democrats, suffered a stinging defeat in comparison with the stunning success of the right wing, anti-free trade, anti-immigrant Freedom Party.  In direct consequence, on Monday Austria’s Chancellor, Werner Faymann, resigned. The reason he gave was the lack of confidence – the lack of confidence in his capacity to lead. “The question was thus,” Faymann said, “Did I have the full support of a strong backing from the party? I have to answer in the negative.”

What happens in Austria seems to most Americans not of utmost importance. But, it is. For what is happening in Austria is happening in much of the rest of Europe (see under Denmark). And it is happening in the United States as well. The end of leadership as we have known it? Not yet. Stay tuned.

The presidential election is over. The results are in. The people have had their say. In the Republic of Philippines.

The winner is a man by the name of Rodrigo Duterte, whose claim to political fame is his longevity, over two decades, as mayor of Davao City.

Far be it from me to draw any parallels. But, I note for the record the following:

• Duterte is described as “a maverick.”
• Duterte’s campaign lacked policy particulars.
• Duterte generated a record turnout.
• Duterte is known for making “incendiary” comments.
• Duterte cursed the Pope.
• Duterte is admired for being a hard liner – for being extra macho.
• Duterte’s fierce or, better, vicious anti-crime crusades led to his moniker, “The Punisher.”
• Duterte’s fierece or, better, vicious anti-crime crusades led to his moniker, “Dirty Harry.”
• Duterte has threatened to massacre criminals and drug abusers.
• Duterte has joked about the rape of an Australian missionary. “I was mad she was raped,” he told a rally, “but she was so beautiful I thought the mayor should have been first.”

Again, far be it from me to draw any parallels. I’m just saying.

Tiny Norway – population not much more than 5 million – happens also to be rich Norway. Historically Norway was one of the poorest countries in Europe. But contemporaneously the situation is different, radically different. Contemporaneously – since it struck oil in the North Sea – Norway has more money than god.

Norway’s profits from oil get deposited into a “sovereign wealth fund.” The fund is ginormous: it has assets of some $870 billion, making it one of the world’s largest investors, with positions in more than 9,000 companies.

Until recently, Norway’s wealth fund has been passive rather than active. As one observer put it, if a company did something the fund didn’t like, “it sold the shares and walked away.” That was then. Now the fund is involving itself in matters of corporate governance – notably though not exclusively in the high stakes game of executive pay. This week it announced that it will no longer tolerate companies that spend shareholder money on exorbitant executive pay. Moreover, it intends to go public. According to the Financial Times, the fund is on the “lookout for an example of bad pay to launch a position paper that lays out its principles for what it expects on the subject from its 9,000-plus holdings.”

In recent years CEO’s have been under fire from various directions. But executive pay has remained as sky-high as sacrosanct. The fact that Norway’s sovereign wealth fund is scrutinizing the issue and planning to publicize its findings signals that times are changing. While CEOs are not in danger of going hungry, they are in danger of having their slice of the pie shrink.

Definitions of revolutions differ one from the other.  And revolutions differ one from the other. Some revolutions, for example, are bloody and others are not.

But all political revolutions have at least four things in common. First, they are an overthrow of the previously existing order. Second they are directed from below against those up top. Third, they are driven by anger so intense and relentless it ends in upheaval. Finally, they require leadership, generally a single political figure who previously was an outsider, who promises a brave new world.

What has happened in America in recent months is a revolution – a revolution against the Establishment, a revolution against the political Establishment, and a Revolution against the Republican Establishment. Make no mistake about it: Donald Trump has led an American revolution.

No coincidence that Trump’s success yesterday among Indiana Republicans was mirrored by Bernie Sanders’s success yesterday among Indiana Democrats. Unlike Trump, Sanders is not likely to clinch his party’s nomination for president. But to have this previously anonymous Socialist give Hillary Clinton a run for her money is a reminder that whatever the ultimate outcome among Democrats, they crave change, just like Republicans.

Trump’s victory is not the end of leadership. But it is the end of American leaders as we have known them – and it is the end of American followers as we have known them. The former have been destabilized and the latter reenergized.

If you were hiring a contractor to build your house, presumably you’d hire one with experience building. If you were hiring a driver to drive your car, presumably you’d hire one with experience driving. If you were hiring a tailor to make you a suit, presumably you’d hire one with experience tailoring.

But for some reason this minimum standard – “experience required” – does not apply to hiring a leader. It certainly does not apply to hiring an American president.

My objection to the projection of Donald Trump on the national stage has nothing to do with psychology or ideology. It has everything to do with his lack of experience – his complete lack of experience as a political leader.

He would insist that he has been a leader and he would be right. He has been a leader, in business, and a successful one at that. But I would no more suggest someone for American president who had not a lick of experience in government than I would suggest someone for the New York Yankees who had not a lick of experience playing baseball – whose only experience in sports was playing for the New York Jets.

Nor is this time the first time. Last time around we voted into the Oval Office a man who had government experience – but not much. Barack Obama was elected president of the United State after having served in the U.S. Senate for just over one half of one term.

There is no other occupation that requires so woefully little of those who profess to practice it. It’s nuts when you think about it – that so many of us are willing to entrust the national welfare to a rank amateur.

To follow the scandal at Volkswagen is to be stunned anew, stymied anew, by our ignorance of bad leadership. We know no more about bad leadership now than we ever did – a miserable discredit to any of the ostensible experts. A miserable discredit to anyone even vaguely related, anyone in the hard sciences, the social sciences, anyone who presumes to study the human condition.

Volkswagen has already admitted to equipping some 11 million cars worldwide with software that enabled it to cheat on emissions tests. And the costs have already been huge: personal costs, professional costs, political costs, consumer costs, climate costs, reputational costs, and obviously financial costs, which will in the end be staggering.

How could this have happened? How could Volkswagen’s leaders and managers get themselves, their company into such a miserable mess? Did they not know right from wrong? Did their greed to succeed color their judgement? Did they really think that they could indefinitely get away with wrongdoing on such a massive scale?

There will, of course, be case studies aplenty of how this all came to pass. But they will all be inadequate to the magnitude of the task at hand. What this case merits is nothing less than a massive, expensive, and enduring commitment to unraveling how what happened did.

Bad leadership is a disease. It’s not a physical disease. It’s a social disease no less invasive or destructive than its physical counterpart. Unless and until we recognize the parallel, bad leadership will remain incurable, impossible to root out in the future any more than in the past. Sad. No, tragic.

For the better part of her tenure as German Chancellor, Angela Merkel could do no wrong. She was that popular at home. She was that respected abroad. And she was so successful at wielding her low key approach to power that she effectively led not only in Germany, but in Europe. For the most of the last decade it was Merkel, more than any of her European counterparts, who was the fulcrum on which the continent turned.

Those days are now over. The worm has turned. Ever since Merkel put out a humungous welcome mat for Middle Eastern migrants a year ago, her domestic approval ratings have dropped and her foreign policy creds have diminished. This was exacerbated in the last week when her new best friend forever, Turkey’s autocratic president Recep Tayyip Erdogan, put the squeeze on her. Knowing that he had gained the upper hand in containing the flow of migrants, which had become Merkel’s highest priority, he insisted that she permit prosecution of a German comic who had had the temerity to insult him. To the dismay of fully two thirds of Germans, the Chancellor buckled under heel of the president.

My point is not to remark on Merkel’s original decision to allow more than a million migrants to settle in Germany in one year. Nor on her subsequent decision to make a pact with the devil – Erdogan – to get him to help her staunch the flow. Nor is it even on her decision a few days ago to compromise on free speech, to permit prosecution of a comedian to go forward.

Rather my point is to point to the perils of power prolonged. Merkel has already been chancellor for ten years. She is tired and so are her followers. The large majority of Germans who for a decade were putty in her hands are putty no longer. Their patience is wearing thin and their desire for new blood in the Chancellor’s office is becoming palpable.  If Angela Merkel wants her reputation as a great global leader to remain intact, she had better clean up her mess as rapidly as possible and then scamper on out of the public eye.

As anyone who knows me really or virtually will not be surprised to read, it’s been hard for me to keep my mouth shut – hard for me not to blog!

So I will blog, periodically, episodically, today about one of the most under-appreciated and least-discussed trends in global business. It’s the decline of the CEO – the diminishment of his (still, almost always, “his,” not hers) power, authority, and influence.

I am not saying anything startlingly new. In fact, I blogged about just this subject on December 21^st. But in recent weeks have been fresh reminders of a trend now so strikingly in evidence it’s beginning to amount to a game changer.

I will spare you a list of examples that have piled up even in the last few months. Instead I will mention only two.

The first is what’s been going on in Sweden. After a property scandal, Swedbank lost both its chairman and chief executive officer. Another bank, Nordea, was called “shameful” by Sweden’s prime minister, Stefan Lofven, for helping clients with offshore investing. (Nordea’s transgression was made public by the leaked Panama Papers.) In 2013 was a boardroom shakeup at TeliaSonera, the telecommunications company, over corruption in Uzbekistan. And in 2015, the forestry group, SCA, ran into trouble over the use of corporate jets by executives and their families.

Such upheavals are all to the good. Corporate governance in Sweden is working as it is intended to work. In so far as is reasonably possible, it is keeping management on the straight and narrow. How? By giving Sweden’s investors control over the composition of boards – as opposed to giving such control to the boards themselves. While this confirms the effectiveness of a system in which, for once, the fox is not charged with watching the hen house, it similarly confirms that greed is pervasive, even in the fantasyland that is Scandinavia, and that, increasingly, there is a willingness to throw the rascals out.

The second example of the decline of the CEO is what happened just this week at BP (formerly British Petroleum), one of the world’s “supermajor” oil and gas companies. Angry shareholders mounted an unprecedented protest again the company, rebelling against a 20 per cent pay rise for CEO Bob Dudley. Who could blame them? The board’s decision to pay Dudley nearly $20 million for 2015 came hard on the heels of a miserably bad spell for BP – the company recorded its biggest ever financial loss, axed thousands of jobs, and saw its share price crater.

What was BP’s board thinking?! Was it aching for a breaking?! Board members beware! Your failure to read the handwriting on the wall is much more likely than it used to be to result in your collective rejection and individual embarrassment.

I AM WRITING A BOOK ABOUT LEADERSHIP.  YES, YET ANOTHER BOOK ABOUT LEADERSHIP! AND ABOUT FOLLOWERSHIP… AND ABOUT CONTEXT!

I’M GOOD AT WALKING AND CHEWING GUM AT THE SAME TIME. BUT  I’M LESS GOOD AT WRITING A BLOG AND A BOOK AT THE SAME TIME.

SO FOR THE TIME BEING I AM GIVING UP BLOGGING  – WHICH, DURING THIS CAMPAIGN SEASON, IS AKIN TO GIVING UP CHOCOLATE.