Perils of the CEO

Leadership is glamorous and “CEO” is a great title to aspire for. There exists a halo around leaders and CEOs. There is also the risk of disrepute, whether fair or unfair. It may occur during the tenure or even long after — think of General Electric’s Jack Welch from the business and Jawaharlal Nehru from the political world. 

Who knows how present leaders will be regarded by history! 

I write about the risks of CEO-ship, having inhabited that stratosphere for 30 years. I survived, maybe even prospered. According to a January 8 CNBC report, the year 2019 saw a new high for CEO departures when 1,600 left, voluntarily or involuntarily.

One of the most damaging CEO risks occurs when an iconic CEO is presented as irreplaceable by the media or sycophants. Born and raised in Bengal, I was unavoidably, though happily, exposed to Rabindranath Tagore. I recall his apposite lines, “Who is there to take up my duties?” asked the setting sun. 

Listening to this, the world fell quiet, “I shall do what I can, Master,” said the humble earthen lamp. Such is the plight of the successor after a “formidable CEO”. India Inc will witness successions at HDFC Bank, IndusInd Bank, Jaguar Land Rover and Wipro. However, this article is not about succession planning, a subject that I have covered in earlier columns (Business Standard, February 14, June 7, 2019  and February 15, 2019). 

This article concerns the difficulties of parting with a CEO because a board could have made a wrong choice. Hopefully, directors possess the humility to accept their error, though such humility is rarely visible. If there is an ethical transgression, it is easy to deal, but if there is a performance or behavioural transgression, options get complex. 

In three decades as a board member, I have faced the dilemma of CEO parting seven times. In one case, the CEO’s integrity was doubtful. After extensive discussions, the directors unanimously concluded on the action. Sensitive implementation avoided corporate reputational consequences yet delivering a signal to employees about ethics. 

The other cases involving performance/behaviour required trust among directors. In each case, the recently appointed directors did not vote. It protected their personal credibility. Others with tenure meaningfully participated in the discussions. Counselling, coaching and notice followed sequentially. At the crucial board meeting, the vote by long-serving directors was unanimous. The decision was implemented with no reputational consequences. A crude test is to ensure that managers are not surprised by the board action. The message must be clear: Performance and behaviour do matter. 

The board spent as much time on decision as on elegant execution. Directors were sensitive to the devastation that employees would experience by a shock-and-awe change. The key lessons were to (i) decide through open discussions (ii) execute with grace (iii) minimise negatives for employees. I have been following CEO partings so long that I have written a book with 15 cases of CEO exits (CRASH: Lessons from the entry and exit of CEOs, Penguin, 2019). 

It is distressingly frequent that the root cause is a personality conflict. Coincidentally, but curiously, October is an inauspicious month for CEOs — Jacques Nasser at Ford (2000), Michael Obits at Disney (1996), Vikram Pandit at Citi (2012), Chris Viebacher at Sanofi (2014), Adam Neumann at WeWork (2019), Thierry Bellore at Renault (2019) and Mike Parker at Nike (2019). Beware the ides 

of October! 

In my book, I have described how Chris Viebacher joined Sanofi with the brief to make the culture less French; when he parted, according to one report, it was because he was “insufficiently French”! Thierry Bollore, CEO of Renault Group, left because his board felt he had been an acolyte of the arrested former chairman, Carlos Ghosn. Vikram Pandit was attracted by Citi to join it after his own hedge fund was acquired by it. Some months later, he was invited to become CEO of Citi. A new chairman, Michael O’Neill, maneuvered to remove Mr Pandit because he felt piqued by his plans to solve Citi’s inherited problems.  Firing is acceptable, but only as a last resort. 

Nothing is worse than a good decision that is clumsily executed. While a board has the legal right to ask a CEO to leave, it has a moral duty to do it the right way.  Neeyat matters, so does neeti. Righteous decision aligned with the right way should be the mantra. The social mores, the organisation’s culture and values, the ethical principles are significant and pertinent during decision-making and implementation.

The writer is an author and corporate advisor. He is a distinguished professor of IIT Kharagpur. He was a director of Tata Sons and a vice chairman of Hindustan Unilever. rgopal@themindworks.me