On Leadership
Video | PostLeadership | FedCoach | | Books | About |
Exploring Leadership in the News with Steven Pearlstein and Raju Narisetti

Paul R. Portney
Dean/Scholar

Paul R. Portney

Paul R. Portney is Dean of the Eller College of Management at the University of Arizona, where he also holds the Halle Chair in Leadership.

Blame the Boards

Asking now what the auto industry should have done differently to elicit congressional support is akin to asking what each of us, as individual investors, should have done differently with our 401(k) accounts in the months leading up to the financial meltdown. Hindsight is always 20/20.

Rather than second-guessing the CEOs, it seems more useful to ask why the boards of directors of these companies showed so little real leadership over the past decades.

After all, for years the CEOs of what we used to refer to as the Big Three (all three of whom could now be purchased with less than half of the cash Microsoft has on hand) came up through the ranks of the companies they eventually led, or came from one of the other auto companies. Even Alan Mulally, Ford's CEO and the one exception to this rule, came from Boeing--another manufacturing company with a history of labor problems.

Think back to 1993 when IBM was searching for a new CEO. Its board turned not to an IBM "lifer" but rather to Louis Gerstner, whose previous management experience had come at RJR Nabisco, American Express and McKinsey. Not an obvious choice at all, but Gerstner presided over the almost complete re-orientation of that company away from mainframes and personal computers to the consulting model that has served IBM reasonably well for the past 15 years. Such a choice was (and perhaps still is) unthinkable given the boards of GM and Ford.

Who might the auto company boards turn to now, were they predisposed to think more creatively than they have in the past? John Rowe, the current CEO of Exelon, would be an excellent choice. Not only has he been a creative and successful leader within the electric utility industry, but he has plenty of experience dealing with federal and state legislators and regulators--a prerequisite for future success in the auto industry given the role the government will likely be playing in the industry's future.

Much more speculatively, two university presidents--Steven Sample of USC and John Sexton of NYU--also come to mind. Both have taken once mid-rank universities and vaulted them into the top tier of the world's academic institutions. Either of them would be seen as phenomenally risky choices--and rightly so, but both have the exhibited the creativity, passion, intelligence and--yes--leadership that the car companies desperately need.

Auto company CEOs have done exactly what they might have been expected to do. If we're looking to do some second-guessing, it is the car company boards to whom we should look.

By Paul R. Portney

 |  December 11, 2008; 9:34 AM ET
Category:  Economic crisis Save & Share:  Send E-mail   Facebook   Twitter   Digg   Yahoo Buzz   Del.icio.us   StumbleUpon   Technorati  
Previous: The Deadly Hand of Habit | Next: Full and Prompt Disclosure

Comments

Please report offensive comments below.



Let's have some innovative thinking to correct the lack of BOD responsibilty in corporate structure and a system to reward more corporate far-sightedness.

Posted by: Anonymous | December 15, 2008 8:16 AM
Report Offensive Comment

I have a big problem with union work places it seems they are the first to go down in flames when the eco is bad. Second, this is just a thought what about the oil people they made tons of money, why are they not helping in these situations. But, more importantly the 350 billion that went to paulson...we cant let the wall st fat cats go down but the american people we can. I think the double standards with the senate is just sicking. They put regulations on the American people but as far as the fat cats on wall st. they can go on a 400,000 dollar trip to go golfing and get more money and one person walked out with 3 million dollars but that is OK too. But the American people lets let them live on the street. you know what this seems like double standards and morally wrong. I thought that it was awful to hear Katrina victims setting on there roof tops for days was bad enough now we have senators wanting the American people to fail. All because they believe union is bad. I'm not one to fight for unions but I'm one that stands behind American people. give them the benefit of doubt!

Posted by: daisy | December 15, 2008 8:06 AM
Report Offensive Comment

I for one do not feel soory for the "Big 3". I used to drive GM's. My favorite was my 78 Chevy Nova that lasted 178,000 miles, and still gave me 20 mpg from the V-8 engine. Then I made the mistake of buying a Lumina. It was not "user fiendly". Every repair was a "difficult install". The Battery was inaccessible, and to jump it, I had to remove an enngine mounting brace. In order to service the car, it had to be taken to the dealership. I am sure that the corprate profits went up for a short period while I owned those GM products. I now drive a Toyota Tacoma and a Toyota Camry. I can actually get to the battery without removing the engine mounting frame (as was required on the Lumina). The "Big 3" have had their blinders on and their ears covered for too long. As a customer, I want a vehicle that I can service without a costly trip to the dealership. The Volkswagon Vanagon in the late 70's had 5 clear reservoirs under the hood for coolant, brake fluid, transmission fluid, oil, and windshield washer fluid. Each was an obvious color. Each could be filled at the reservoir. The cost in plastic was minimal, but the various fluids could be readily monitored. The recent "Big 3" auto designs have made the short term profits go up. I doubt that I will ever buy another GM product until I see some major changes in how they treat their former customers. Is anyone listening? Can you hear me now (that you're almost in Bankruptcy)?

Posted by: Andy Okapal | December 14, 2008 8:46 PM
Report Offensive Comment

I noted that share holder have no control over corporations. So why should boards be any better?
Adam Smith was very negative on corporations. Likely the structure of corporation can make it a piggy bank for people at the top.

Coercion, intimidation, obedience does not produce creativity. It produces "yesmen". In alot of cases it produces a social club where people are the same with little difference in opinion. It has top down structure.

My own experience as systems analyst was to come in to clean someones mess and when finished fired by the person that created the mess. You can see where this has nothing to do with any corporate board.

Happily I was able to live long enough to retire from this system and now do medical research in AIDS and put creativity to some use. This I found I can't do working for a corporation cleaning up someones mess.

Posted by: Arthur Gittleman | December 14, 2008 4:05 PM
Report Offensive Comment

Computers and printers: articles, news about news and printers and scanners, monitors, computers. New products mouse and keyboards, computers. And printers.

Posted by: Jessica | December 12, 2008 5:29 PM
Report Offensive Comment

when you have a system where the CEO picks the board and the board picks the CEO, it isn't surprising that things don't go well. Ten million bonuses for management, and $75 bucks an hour for laborers, and full pay for unemployed is all over the top and not sustainable. Blessed be it if they go broke quickly and we can move forward to recover from the damage it will cause.

Posted by: rural guy | December 11, 2008 11:23 PM
Report Offensive Comment

Blame the board, surely. But "the boards" for many if not all of the US corporations have become rubber stamps for years. So let's blame all the BOARDS - including the one that allowed George W Bush, years ago, to borrow money from the company to drill dry holes.

More than that, blame the congress as well. Does any one recall for how many decades they have sided with the auto companies to kill mileage standards, emission standards, etc.?

Blame the American public. They are the ones who want the big SUVs and even Hummers. They are the ones who want cheap gasoline. When the Europeans were paying over $5.00 a gallon and we were moaning and groaning about $2.00 a gallon. Energy independence was the battle cry during Nixon's days - remember Nixon. But we are not willing to pay for it.

Blame the Media or the so-called opinion leaders. Where were they all these decades?

What the Republicans want is to dismentle the auto unions. We don't have to get into whether that is good or bad here but to pretend they are doing otherwise is a lie. Has any one read the article in the Times yesterday about the labor cost differential between the Big Three and the non union auto workers in the south? Go read it and decide for yourself who is to blame.

By the way, Henry Ford increased the wage of his workers not from the goodness of his heart but so that they could afford to buy the cars he made. Think about that. But then the problem is the Big Three don't seem to know how to make cars that the American public wants to buy. But that is a different story.

Posted by: SK Chan | December 11, 2008 7:10 PM
Report Offensive Comment

I agree with the basis of this article. However, may I interject, or maybe digress, a bit? The current state of affairs with BODs and CEOs indicates that they are merely the lightning rods in our economy today because they are the most visible. We made them what they are! If we think this through, they are only the most visible results of how our entire country has become one of everyone trying to maximize “profits” at the cost of “others”. We have become too preoccupied with our rush to claim our illusive PERSONAL ENTITLEMENTS without considering how and what the long-term repercussions might be for all of us. At the risk of sounding like an alarmist, we are re-living the “Fall of the Roman Empire”. We have become too “fat”, too “complacent”, and too “full of ourselves”! We have been trying so hard to make things easier for our children, as compared to one or two generations ago, we have forgotten to preserve the CORE values that made us as powerful as we once were – those values of personal pride, integrity, and responsibility. We have entrusted our decision making behavior to these corporate and/or union leaders because we are too “busy”, don’t want to make the time, don’t have the knowledge or training, and don’t want to take the heat for making wrong moves. As such we, as the owners and stockholders and consumers who comprise these boards of directors, are indirectly responsible for the actions of these CEOs that we select to “run” our businesses to make the profits for us - and we agree to pay them well for it. So now we are crucifying these “representatives” to whom we have abdicated our responsibilities. My point is that we all must share some of the personal responsibility for what we have become. We all must make the necessary sacrifices and changes to get our country back on track – EACH OF US! With a very large measure of good fortune, WE ARE ONLY ENTITLED TO WHATEVER WE HAVE PERSONALLY STRIVED TO ACHIEVE! THERE IS NOT AND NEVER HAS BEEN SUCH THING AS A FREE RIDE! Think about it!

Posted by: last2makesense? | December 11, 2008 4:52 PM
Report Offensive Comment

Non-human CEO's. Use software to run the day-to-day meta decisions at a corporation, reviewed by active professional boards who will be held accountable for thier oversight.

Software CEO's = No prima donnas. No corruption. No overcompensation. No substance or personnel abuse problems. No sleep. Total access to corporate data and communications. And an immediate presence everywhere there is a LAN connection running the CEO program. The boards only have to make sure the program runs to optimize corporate resources.

The boards will need to be made up of knowledgeable individuals who can be authorized, upon majority decision, to modify the CEO software.

Look, anything is better than the current management at the US auto companies.

Posted by: roboturkey | December 11, 2008 4:39 PM
Report Offensive Comment

And it is long past the time to revamp the compensation structure for both Boards and CEOs, to make realistic "pay for performance" links, and to get at least some truly independant folks on the Boards.

Posted by: Oy! | December 11, 2008 1:58 PM
Report Offensive Comment

It's both the boards AND the CEO's; arbitrarily absolving CEO's wont solve ANYTHING. The CEO of GM had the nerve to say on Hardball with Chris Mathews the other day that the manufacture of giant SUV's an V8 cars had nothing to do with the meltdown of GM, after we spent the entire summer paying $4 for gas. This kind of mismanagement and Bushian attempt to escape responsibility for these decisions necessitates the firing, without any parachutes, of any company company that accepts taxpayer money to save their business.
As for the corporate boards, it's absolutely correct to place blame with them - after all, they're the ones who approved of the CEO's, their anormous salaries, and by extention all of their bad decisions.Actually, these boards should be sued by the shareholders and forced to pay a personal price for such bad oversight, in order that future boards will be forced to do their jobs.
But under no circumstances shoud these boards and CEO's be allowed to escapre from this mess unharmed - in fact some of these people shoudl probably be jailed. Only then will these people understand that the decisions they make can ruin lives.

Posted by: jeffc6578 | December 11, 2008 12:22 PM
Report Offensive Comment

The comments to this entry are closed.

 
RSS Feed
Subscribe to The Post

© 2010 The Washington Post Company