In Business Are CEOs Up to the Job?

Listen to Are CEOs Up to the Job? (19/08/2010)

In the distant days when I started reporting on business for the BBC, I cannot remember interviewing any Chief Executive Officers. CEO was an American expression, suggesting the dash and dazzle of the corporate boss as a decisive change maker, zooming about the sky doing good things for high rewards.

Here in sober old Britain we had managing directors; in fact the banks did not even have MDs, preferring the 19th century term Chief General Managers.

In those days, in the 1970s, bosses managed businesses (where the unions and the regulators would allow them to).

They had started at or near the bottom of a company, and in most of them they moved up gradually step by step to a top job in their late 50s, seemingly inherited from the system.

That is how it used to be, or seemed to be.

These days it is different. Management has become a profession in its own right; bright young people cluster in business schools to take away bright and shiny MBAs, giving them (they hope) a fast track to the very top of the corporation.

Public

When the going is good, corporate leaders are heroes. They take home huge rewards, they make the covers of the magazines, they are praised as visionaries for the way they use other people's money to restructure their businesses.

They are the public faces of their company. They give an organisation a human, or semi-human, face.

But are they up to it? A procession of recent corporate debacles suggests that many CEOs soon get out of their depth when the going gets tough. The credit crunch recession has shown up the slenderness of their skills.

The banks and car companies they lead have needed huge bailouts from governments to survive. The takeover strategies they pursued have gone wrong at a cost of hundreds of millions.

Shareholders have put their trust in them and been confounded.

It makes you wonder if they can do the job, despite the way they are rewarded for being corporate superstars (even when they fail).

I heard from one man who has his doubts about the capabilities of CEOs. Steve Tappin runs a London-based consultancy called Xinfu ... the Chinese for trusted freinds.

Xinfu says it is the first global confidante for CEOs, and Steve and his colleagues have helped some of the best known bosses in business in many countries, not just Britain.

Steve Tappin tells me that he thinks two thirds of company CEOs are not up to the job ... they lack the ability to inspire others to build a corporate ideal.

Fall

This is a serious assertion, but it is not altogether surprising. As they go up through the corporate ladder, managers tend to wrap themselves in protection: qualifications, outsourced reports, hired consultants.

They make themselves ever remoter from the outside world the company is operating in, and even from the things the company makes and does. They have company drivers and corporate jets.

They need bonuses to motivate them, because the job itself is not enough. They are insulated.

And when they fall, their fall is insulated too, with a contractual payout, a short time in the wilderness, and another job in another industry.

Whether two-thirds of all the CEOs are like this, I have no idea. But they do have one important use which is very relevant indeed when disaster happens.

When things go wrong, then they take the representational blame, so that (like BP) the company can find the breathing space to recover its reputation.

It is not very inspiring role, but maybe CEOs are worth their money ... just so they can be scapegoats when the going gets tough.

Listen to Are CEOs Up to the Job? (19/08/2010)

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For more programmes visit the In Business programme archive.

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