It’s the Leadership, Stupid
These past few months have seen the greatest turmoil in the worldwide credit and stock markets most of us have ever experienced. With depression-like drops in equities and recession-like layoffs, foreclosures and bankruptcies, nearly everyone has been too busy bailing water to blame the Captain… until now.
While much of the culpability for the current economic crisis will surely be laid at the feet of a lame duck president, government regulators, and greedy real estate speculators, the real origins of today’s woes are the misguided leaders of the once great companies that are at the center of this mess. Though we may lose sight of this during a tumultuous presidential race and our own personal issues, history will show that we are on the brink of an economic disaster driven by personal greed and virtually nothing else.
Of course, Richard Fuld (former CEO of bankrupt Lehman Brothers) and Daniel Mudd and Richard Syron (former CEOs of credit-crisis-causing Fannie Mae and Freddie Mac, respectively) will undoubtedly argue that all of their moves were designed to help others (shareholders and homeowners). They’ll claim, as other White Collar criminals before them have argued, that they were not made aware of the risks associated with their mismanagement. In fact, if these men are able to avoid prison, they’ll surely be back at the helm of something, making millions because of their connections and not their leadership.
It’s Time for Change
If Barack Obama had one thing right in the presidential race, it’s that we need change in this country. Not necessarily political change (hasn’t Obama’s party been in control of Congress throughout this mess?), but Leadership change.
Boards of publicly traded companies too often choose the ineffective or ill-equipped to run their enterprises. When times are good, they allow their management teams to run amuck in their excesses. Perks are one thing – in fact, they’re vital to attracting and maintaining the right talent – but foolishly spending the shareholders’ return is something entirely different. Most boards, it seems, look the other way and do not demand accountability until it is too late.
It’s Time for Accountability in Leadership
The “perp walk” of Dick Fuld and his ilk that is sure to come will not be enough to satisfy the AskTheManager editors that we’re making the right changes for American business. While Fuld will most likely be held accountable in criminal proceedings, he is not alone in the culpability department at Lehman. Lehman Brothers did not fail because of one man’s inability to manage himself out of a paper bag. The Lehman board is every bit as culpable and should be help every bit as accountable as Dick Fuld.
Board seats are coveted, cherished, and often financially rewarding. You cannot simply “apply” to become a board member – you have to be invited. While many board members posses a terrific track record running some of the most successful companies in the world, too often board members are unqualified boobs who happen to have friends in the right places.
Given this, perhaps we can create a new saying in American business: Those who can, do. Those who can’t, serve as CEO. Those who can’t serve as CEO, sit on the board.
The Next Perp Walk
Civil remedies alone are not enough to properly shock board members into acting responsibly (or turning down board posts they’re not qualified to hold). It’s time for change in the way we treat board members in America. It’s time we introduced them to the criminal justice system.
Collecting a six figure paycheck for showing up to four meetings a year and allowing an unqualified CEO to pull the wool over your eyes is more than irresponsible – it’s reckless. In the past, reckless actions like we’ve seen from the Lehman board and others have only led to a short term decrease in share value. Today, they’re helping to fuel the greatest economic fire since the 1930s.
It’s time we put a few of these board members in jail. Only then could clear out some of the most ineffective boards of all time and staff them with shareholder advocates, committed to service and dedicated to driving leadership through their management teams.