Corporate titans and their feet of clay

Crash: Lessons from the entry and exit of CEOs

R Gopalakrishnan

Portfolio Penguin, Rs 499, 280 pages

Many bigwigs in the Indian banking sector have seen their reputations scarred over the past year for transgressions ranging from corruption to dereliction of duty. For ordinary citizens conditioned to regard corporate kingpins as demigods, their fall from grace causes as much wonder as news of their outsized pay packets and glitzy lifestyles. Against this backdrop, R Gopalakrishnan, former executive director at Tata Sons, has penned a timely book, replete with case studies, on why chief executive officers (CEOs), often hired with much fanfare, are shown the door some years later. 

Sometimes, the author postulates, the fault lies with the CEO himself. Power is intoxicating and can impair a leader’s judgement. A person who has enjoyed a long and successful run tends to overestimate his prowess while underestimating the risks in an endeavour. When adversity strikes, he is taken by surprise, which is what happened to Edward John Smith, captain of the Titanic. Those in positions of power also sometimes lose their ability to listen. The loss of touch with ground realities means they are often the last to get the bad news.     

At times, however, the CEO also becomes a victim of circumstances. One crucial point the author emphasises is that improving his company’s financial performance is only half the job done. The other, equally crucial, part for a CEO is to nurture his relationship with the board, its chairman and promoter family. In the 1990s, John R Walter was hired as CEO of AT&T. He won over employees, the managers and even the media, but did not focus on developing a relationship with the person whose approval mattered perhaps the most for his survival — chairman Robert E Allen. He ended up paying dearly for this lapse. In this context, the oft-drawn analogy between corporations and tribes is an apt one. The young warrior who brings home the hunt must allow the elders to partake of the food first and show deference to them. If he fails to do so, he runs the risk of being ousted from the tribe.        

The strategic course a CEO adopts could prove to be the right one in the long run. But boards have limited patience. If results are not forthcoming in the short to medium term, they sack the CEO, which is what happened to Carly Fiorina. The merger of HP with Compaq did prove successful eventually. But by the time this became apparent, Ms Fiorina, its architect, was long gone.      

How then does a CEO avoid these corporate minefields? One piece of advice Mr Gopalakrishnan offers is that CEOs must treat their boards not as an obstacle to be surmounted but as a sounding board. They must tap into the experience of its members, and solicit their views on critical matters. Actively developing one’s listening skills helps, as does having a spouse who is willing to tell the leader about the flaws that may have crept into his character and conduct. 

A close reading of the case studies offers further answers. Perhaps the most viable survival trick for a CEO is to develop a reputation for being a person who delivers results. Even if he falls prey to machinations within his current office, he will eventually find another job, or another job will find him. Jamie Dimon was elbowed out of Citi due to differences with his erstwhile mentor Sandy Weill, but has since gone on to become one of the most well-regarded leaders within the US financial industry. Negotiating a golden parachute at the time of employment, too, can provide insurance against the risk of things turning sour at a new assignment. 

Finally, given the randomness one witnesses in who succeeds and who fails, it does seem that to enjoy a long and successful stint, a CEO needs a generous dose of luck, too. As these lines from the Bible remind us: “I returned, and saw under the sun, that the race is not to the swift, nor the battle to the strong,… nor yet favour to men of skill, but time and chance happeneth to them all.”  

One shortcoming of the book is that the writer has offered all his insights in the early chapters. Perhaps he should have provided some, even brief ones, at the end of each case study. In their absence, the reader is sometimes left with questions like: Was the CEO to blame in this case or was he treated unjustly? Is there anything he could have done differently? What is the takeaway for me?     

Nonetheless, both potential CEOs and those at lower rungs of the corporate ladder will benefit from reading this book. The sooner a person develops an awareness of the pitfalls of the corporate playfield and learns to skirt around them, the smoother his ascent through the ranks is likely to be.