Archive for the ‘CEOs’ Category
Want to Avoid Scandal at the Top? Hire a Woman!
Filed under: boards, CEOs, character, discrimination, scandal, sex |
Comments (1) There’s an antiquated quip / greeting-card slogan / bumper sticker that says, “Sometimes the best man for the job is a woman.” I say “antiquated” because in 2011, we all know that very often — let’s say half the time — the best person for the job is a woman. That’s far beyond “sometimes.” But there’s one job-related talent that seems to make women especially qualified for positions of senior leadership, and that is their apparent ability to avoid bringing themselves, and their organizations, into disrepute by involving themselves scandals.
See this story by Sheryl Gay Stolberg, for the NY Times: When it Comes to Scandal, Girls Won’t Be Boys
Female politicians rarely get caught up in sex scandals. Women in elective office have not, for instance, blubbered about Argentine soul mates (see: Sanford, Mark); been captured on federal wiretaps arranging to meet high-priced call girls (Spitzer, Eliot); resigned in disgrace after their parents paid $96,000 to a paramour’s spouse (Ensign, John) or, as in the case of Mr. Weiner, blasted lewd self-portraits into cyberspace….
Now, Stolberg’s piece is about male vs female political leadership. But the same point can be made in the corporate world. What do the names Skilling, Madoff, Boesky, and Hurd all have in common? Well in addition to referring to persons implicated in major scandals, they all have the title “Mr” in front of them. Indeed, it’s relatively hard to name a female CEO or other senior executive who was culpable in a headline-making scandal. Martha Stewart’s name comes to mind, but her insider trading had nothing to do with her executive position. (And sure, Oprah Winfrey, CEO of Harpo Productions, gave Jenny McCarthy her own TV show, but that’s a different kind of scandal.)
Of course, we have to be careful with letting anecdotes stand in for stats, here. The first and most obvious reason why my male CEOs are involved in more scandals is because there are more CEOs. According to the Globe and Mail, “Only 17 per cent of corporate officers and 13 per cent of directors at Canada’s top 500 private and public sector companies are female.” According to Catalyst (a nonprofit aimed at expanding business opportunities for women), only 30 of The Financial Post 500 companies are headed by women. In the US, the numbers seem even lower: as of 2009, there were just 13 female CEOs in the Fortune 500.
Still, it does seem that males are liable to be involved in scandals out of proportion to their statistical dominance in the C-suite. Male CEOs seem more likely to behave badly than female ones. Does this have anything to do with the documented correlation between testosterone and financial risk-taking? Hard to say. But it wouldn’t be that surprising if a tendency toward risky behaviour in one domain were correlated with a tendency toward risky behaviour in another.
So should boards of directors actually discriminate against men, given the male tendency to become embroiled in scandals? No. For one thing, the fact that “more” male CEOs than female CEOs seem to get into hot water has to be put into context: very few CEOs of either sex get themselves into the kind of trouble that makes headlines. So to say that men are more likely to get into trouble is like saying that the risk of getting hit by lightning is higher than the risk of shark attack: both risks are in fact tiny. And besides, we probably don’t want to advocate discrimination against individuals based on their membership in a group that merely has a statistical tendency towards a particular weakness. But then again, such a statistically-driven hiring bias might well be better than the entirely baseless bias that results in their being so few female CEOs in the first place.
Should Boards Monitor CEO Morality?
Filed under: accountability, boards, CEOs, character, crime, decision-making, employees, governance, leadership, privacy |
Leave a comment A Board of Directors is responsible for overseeing the management and direction of a company, and that task includes monitoring the full range of risks to which a company might be subject. But what if the company’s CEO is one of those risks? What should a board do when a CEO’s off-the-job behaviour raises concerns? The IMF’s Dominique Strauss-Kahn is a case in point. Long before his recent arrest, Strauss-Kahn’s behaviour towards women raised eyebrows. Should it also have spurred the IMF’s Board to act?
See this story, by Janet McFarland, in the Globe and Mail: When and how to confront a wayward leader
Most corporate directors find it hard enough to confront a respected CEO about work-related poor performance, but it is even harder to tip-toe into the minefield of rumours about problems in an executive’s personal life.
(I’ve blogged before about whether ‘private’ vice is a business issue. I’ve also written about whether a CEO’s divorce is a purely personal matter or not.)
McFarland quotes me in her story, but let me give a slightly fuller version of my comments here.
To start, it’s worth making a distinction. There are personal vices that are strictly personal (including most of what goes on between consenting adults behind closed doors.) And there are personal vices that are very likely to impinge upon the workplace or on performance at work. A tendency to engage in sexual harassment is an obvious example, as is heavy drug use.) But, when you’re a CEO of a name-brand organization, that distinction tends to break down. High profile means that personal vices can turn public very quickly, and affect the organization.
Also, bad behaviour on the part of those in the public eye can easily lead to blackmail, which can result in misuse of position and other kinds of bad decision-making. This is another example of why great power brings great responsibility.
On the other hand, there are lines boards should be hesitant to cross, on principled grounds. A CEO’s sexual orientation, for example, should be off-limits. This is obviously less of an issue in 2011 than it would have been in 1951, but even today a gay CEO might be seen as a risk factor (especially for an organization with a conservative customer base) but boards should take a principled stand against taking an interest in their CEO’s sexuality. The board has fiduciary duties to protect the company, but even fiduciary duties have their limits.
The last point I want to make here is that, when faced with a CEO’s bad behaviour, a Board faces more than a yes-or-no question. The ethical question here is not just a matter of whether to confront the CEO, but how to do it. A Board in such a situation needs to formulate a plan — a method of proceeding, including answers to questions like:
- Will the Chair of the Board approach the CEO solo, or should an ad hoc committee do it?
- Should they raise the issue explicitly, or obliquely?
- Should they give the CEO an ultimatum, or ask his or her suggestions for how things might improve?
- Given various anticipated responses by the CEO, how will the Board/Chair plan to react in turn?
Business, Football, and Incentives
I’m fond of sports analogies in helping to explain key issues in business ethics. In both business and sport, a useful competitive endeavour is constrained by a set of rules for the benefit of both players and spectators.
According to Roger Martin, Dean of the Rotman School of Management (where I’m currently a Visiting Scholar) the comparison is not just explanatory, it is prescriptive. According to Martin, for example, CEOs Should Be More Like Quarterbacks. In particular, he says, CEOs should be more like quarterbacks in the way quarterbacks stay focused on the real goal of the game — winning — rather than on meeting the expectations of those who speculate on the outcome of the game from the outside. QBs focus on real performance, measured in yards and touchdowns, rather than on performing well relative to the expectations of bookmakers. Likewise, Martin says, CEOs should focus on their companies’ real performance, rather than on how they perform relative to the expectations of stock analysts.
It’s tempting to run wild with sports metaphors, as the comments under Martin’s blog demonstrate. But we should not be tempted, just because we see one useful comparison, into thinking that CEOs should be like quarterbacks in all ways. You need to make the argument, on a point-by-point basis. Indeed the power of the comparison lies in abstracting away the ways in which CEOs and quarterbacks are not, and should not, be alike.
It’s also worth noting that Martin doesn’t think that the change in CEO behaviour that he advocates is going to happen magically, or even as a result of his own advice and efforts at persuasion. No, Martin is clear that CEO behaviour is only going to change in response to changes in incentives — in other words, changes in how they are paid:
…compensation is largely based in the expectations market in business and is strictly based in the real market in football. CEOs have a large portion of their compensation based on the performance of their company in the stock market, so CEOs spend their time shaping and responding to expectations. Quarterbacks have no part of their compensation based on the performance of their team against the point spread, so they focus completely on winning games.
Of course, that simple analogy needs to be fleshed out. Just what counts as “winning” in business, for example? And why are the opinions of external analysts such a bad way of measuring corporate performance? And finally, what would it look like to reward CEO’s for something other than improved stock performance, and would that lead reliably to better CEO performance on all dimensions, or just some?
(The ideas in Martin’s blog entry are drawn from his new book, Fixing the Game: Bubbles, Crashes, and What Capitalism Can Learn from the NFL. Watch here for more comments on the ideas in that book in the coming weeks.)
The Business Ethics Blog 