BETA
This is a BETA experience. You may opt-out by clicking here

More From Forbes

Edit Story

Why Bad CEOs Get to Keep Their Jobs

Following
This article is more than 10 years old.

Just read Adam Hartung's wonderful rant about "Five CEOs Who Should Have Already Been Fired."  The one message I extracted from all five situations - Cisco, GE, WalMart, Sears, Microsoft - is this: These CEOs may have done a good job at one point, but now - and for a while - they haven't been.  They don't seem to be doing anything that's going to change that..so, what gives?

I've certainly seen this same situation again and again over my years in business: the person leading the business, who may have been effective in the past, stops being effective.  And not for just a few months: for years and years.  And the board doesn't step in to make a change.  And I've thought - why does this happen? Do they not see it? Do they not care?

It comes down to three unfortunate truths about company boards, as far as I can tell:

- Like protects like:  People on boards are, often, CEOs or ex-CEOs.  It's a huge old boys' network. Board members want to support and protect company CEOS because 1) they wouldn't want their boards to fire them if they were in a similar situation, and 2) they like to think that their peers and buddies are doing a good job - even when they're not. It's the same dynamic that makes doctors protect other doctors, or priests protect other priests.

- Hope Springs Eternal:  When somebody used to be doing a good job, it's easy for board members to convince themselves that he'll start doing a good job again...just wait and see. It's like going to a movie, and really liking the first half-hour, and then it starts to get bad. You figure you'll just stay five minutes more, and it will get better again.  If it does, great.  Often, it doesn't. And you're left having wasted 2 hours of your life, or - in the situation for which this is a metaphor - many years and hundreds of millions or billions of dollars.

- Stick to the Tried and True:  Most people on big company boards are old. They've been in business for 30 or 40 or 50 years, and they believe that the things they did to run their businesses successfully in 1970 or 1980 are still the right things to do.  They watch their CEOs doing stuff that worked a decade or two ago, and they think, "Well, it will work eventually; he's doing the things that work."  It's simply not true.  The game has changed, permanently - and will keep changing. Most industries I'm familiar with are undergoing massive, disruptive, continuous change: consumer behavior and expectations; how the supply chain works; what drives pricing; how and where competitive threats arise - even employee expectations and response. If a CEO isn't willing to get curious, listen hard, and try truly fresh approaches...well, you know what happens.

And unfortunately, till now it's been a pretty closed system.  If I'm a shareholder of company X, and I see that the CEO is doing a terrible job and needs to be let go, how do I affect that outcome?  I, an individual, am unlikely to have much impact on the board (unless I'm Warren Buffet, or someone who owns a truly significant chunk of the company).

Which brings me back to Adam's article.  One of the great things about this new world of instantaneous world-wide communication (and it's also one of the bad things, but let's focus on the positive for a moment), is that a relatively small group of individuals can start a movement that leads to real change (think Arab Spring).  I wouldn't be surprised if a groundswell of blog posts and LinkedIn conversations - like Adam's - were to get picked up and viralized and bounced around in various other media: on TV, in the traditional print/online media, etc. And it may eventually lead to one or more of these guys being held to account for their poor performance.

It's my hope.  What do you think?

____

Want to know more about leader readiness?  Find out here.