Monday, March 16, 2009

CEO as leader

At a recent presentation I talked about how you create superior competitive advantage through innovation and the culture that you need to install to enable a company to be truly innovative. The role of the CEO as leader is absolutely critical to building an innovative culture.
An innovative culture is one that gets the best problem solving and innovation from everyone in the company. To do that you need a culture of Trust, Engagement, and Empowerment (TEE). We talked about the steps you need to be willing to take to lead a company into this culture.
While each of the steps are simple, having the will to take them is the principle obstacle facing CEOs. So one member of the audience as the following two question. "Given several CEOs behaviors around the bailout, from flying corporate jets, to taking big bonuses, is it possible that many of the most senior executives in large companies today are the wrong people to really lead a company to put it in place a culture this truly innovative and thus will give the company the best opportunity to be the competitive powerhouse in the industry?" He added "Isn't there a role for the Board of Directors in all this?"
It is a great question. First of all, I think there are a few truly exceptional CEOs who have the ability to be true leaders in their companies. But otherwise, you look at the the perks; the enormous salaries these people seem willing to take; the arrogance and sense of entitlement that is displayed; and some of the other stuff that we've seen in the banking and insurance world lately makes you believe that perhaps many of the individuals in these positions are the wrong people to be leading these companies. It may go much deeper than that. It may be that the Boards of Directors are made up of such people and operate to the benefit of each other rather than to the benefit of the stockholders; and the employees; and the customers and suppliers and the community at large.
Stockholders should be much more critical of boards. But every stockholder has a vote irrespective of how long they've held the stock. Where large blocks of stock are traded by institutional investors who are looking for short-term lifts in stock price, their short term interest will likely conflict with the interests of long-term investors (and employees, customers, suppliers, and the community itself). But they control huge blocks of votes. Perhaps the rules around voting rights should be amended to requires stockholders to hold a stock for two years before being able to exercise a vote.
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