CEOs in Context

For several years now I have maintained that leaders – all leaders – are getting weaker and followers, others, stronger. It’s hard sometimes to make the case, particularly as it pertains to chief executive officers of America’s largest companies, where the metric typically used is pay, which, equally typically, is excessive. In fact, the gap between the pay of chief executives and average workers has never been wider.   

However if instead of fixating on pay to the virtual exclusion of everything else, we take a more expansive view of the context within which leaders lead, especially in corporate America, we can more easily see the pressures under which they now operate. We can more easily see how obliged they now are, even those at the top, to respond to forces other than the ones that they themselves generate.  

From time to time this blog will identify some of these contextual pressures, if only to step back from both individuals and institutions in order to identify components of context with which even CEOs are obliged now to reckon.   

For today these three:

  • Public Opinion. No groundswell for sure. No groundswell by CEOs to cut down on their pay packages in response to the rising tide of anger by the 99 percent at the 1 percent, especially at the ultra rich. Still, it’s worth noting that recently several chief executives have chosen to say no to earnings to which they were entitled. A couple of examples: 1) IBM’s Virginia Rometty stood to collect an additional $8 million on top of her salary and other compensation. Instead she demurred, saying, “In view of the company’s overall full-year results, my senior team and I have recommended that we forgo our personal annual incentive payments for 2013.” Similarly, Barclay’s chief executive, Antony Jenkins, turned down his bonus for the second year running, announcing, “I have concluded that it would not be right, in the circumstances, for me to accept a bonus for 2013, and I have, therefore, respectfully declined the one offered to me by the board.” What? Who would’ve thunk it?!
  • Activist Investors.  Call them what you will – corporate raiders, if you like – the fact is that they are escalating in number and in the brazenness of their attacks on CEOs who would greatly prefer they go away and never be heard from again. A single example: Nelson Peltz, who for years has toyed with chief executive officers. Most recently he has again taken on the management of PepsiCo, insisting that although the company had recently undertaken an “exhaustive” strategic review, it was inadequate. According to the Wall Street Journal, Peltz’s company, Trian Fund Management, is demanding that PepsiCo split up, spinning off its struggling beverage business (2/21/14). Moreover it is threatening that if it does not, it will begin meeting with shareholders “immediately,” and might even conduct public shareholder forums to galvanize support for the proposed company breakup. Should we pity PepsiCo CEO Indra Nooyi? Not hardly. Should we take a more complex view of the context within which she is operating? Oh yes!
  • Shared Power. Big fuss recently over Mary Barra, the first female executive of a major American car company, General Motors. There’s just one teeny-weeny problem: signs are that GM’s board has no intention of letting her have free rein. Shared power – that is, the chief executive officer having to share decision making authority with a range of others, including board members and members of their own executive teams – is no longer anything new. But it is a very big deal. And it is a very big change from times past. And in some cases it is downright intrusive on leaders, CEOs, who would actually prefer leading without being monitored at every turn. It’s too early to tell how Barra will fare in her new position, but the early signs are that she will be kept on a short leash. Above all, while Barra is CEO of GM, she is not chair of GM’s board. That position is held by Theodore Soslo, former CEO of Cummins, who has something of a reputation for being “edgy” and “not afraid to make unpopular calls” (Reuters, 2/11/14). In other words, Soslo is anything other than shy and retiring.  Again, the arrangement is not new – by now nearly half of S&P 500 companies split up the roles of CEO and chair. But of course how it plays out depends on the individual players as well as the institutional arrangements. Even under optimum circumstances, though, inevitably the CEO’s role is, by definition, somewhat diminished.

You could argue that none of these contextual pressures are, of themselves, earth-shaking. But it would be hard to make the case that taken together they are unimportant or irrelevant.


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