February 2005 has been quite possibly one of the worst months ever to be a CEO. As Dan Roberts of Financial Times reports ‘103 US companies announced the departure of their chief executives in February. It was the fourth consecutive increase in monthly turnover and the first time that more than 100 chief executive changes were announced since February 2001.’ Ironically he points out; the rapidly spinning exit door at many of the biggest US companies comes during a period of record profitability for corporate America.
Consider last week’s victim – Boeing’s ethics stalwart and supposed Mr. Fix-it, Harry Stonecipher, was forced off the company’s board, just ten days after allegations about an office affair were brought to light. Another public triste was the dramatic ousting of Carly Fiorina, who led the controversial merger with Compaq. Despite being given extra time to make it work, the board felt that Carly’s strategy didn’t align with theirs.
And now, at 79 years old Maurice (Hank) Greenberg of AIG, who is a management icon in the insurance world, has fallen from grace. After such a long tenure, surely this isn’t the way he was planning to go. Greenberg was only AIG’s second CEO since the company was founded in Shanghai in 1919.
Next to roll is Michael Eisner – the embattled 20 year veteran CEO at Disney, who will be succeeded by the man he wants to take his job, Robert Iger. Likewise, Martin Sullivan will take over the reigns at AIG. True to AIG’s entrepreneurial legacy, Sullivan left school at 16 and has now worked his way up to the top at AIG. But at least Eisner has had the ‘luxury’ of succession planning, which it seems most of the publicized fallen, have not.
So is this trend evidence of the legacy that Sarbanes-Oxley will leave us? A revolving door of chief executives, who retread each others steps by being in a couple years here and then a couple of years there? Will there be more sacrifice to the short-term financial Baal rather than the long term growth god? How can executives be relieved from the temptation of manipulating the results in order to show corporate growth, when they are highly unlikely to be given the kind of tenure that allows them to design and implement new strategies for real growth? It seems that the lessons that Enron, Tyco and Worldcom were supposed to teach have instead become exercises in demonstrating how far you can stretch the boundaries, before the watch dogs will come after you.
The quest for revolving oversight has reached boards too. Just recently Nestle joined a host of other companies in mandating that presidents of the board could only tenure for three years. On the surface this seems a good thing, so that too insular companies must be permitted more external scrutiny. But then I have to wonder, who owns the mandate for the growth of the company in the long-term? Who will be a source for dramatic innovation and risk-taking to change the incumbent model of a company? Where will the next Lou Gerstner’s and Jack Welch’s come from, if their potential successors see the tumult and troubles associated with the corner office. Don’t get me wrong, I’m certainly not advocating that people should conduct business unethically or by fraudulent means, but with given the pressure to produce results with an axe hanging over your head, most people will be tempted to clutch at any means possible.
Perhaps this means that the role of chief strategist in a company becomes much more important than now. Often in large companies, positions that are termed strategy managers are often filled with resources dedicated to operations rather than real growth strategy. Starbucks’ executive team may then be good example of how to organize, with Howard Schultz as chief strategist and President and Owen Smith as CEO. Or Dell’s similar arrangement, with Michael Dell as founder and strategist and Kevin Rollins as CEO. But these two firms are entrepreneurial in spirit still and ‘young’ compared to many on the Fortune lists. Time will tell, but for now, I would offer this small advice for those in the corner office. Establish an office of the chairman/CEO, nominate your COOs, and importantly, add a chief strategist.