The Chief Executive Officer of a company is charged with the responsibility of making decisions that promote the growth and success of their company. CEOs of Fortune 500 firms bear an even greater responsibility, as they are often perceived as the leaders not only of their respective companies, but of American business in general. Correctly or otherwise, their success becomes their company’s success, and in tandem with each other, their thoughts and actions become a blueprint for American industry.
The outsized roles of CEOs make it just as important for us to study the failures of American businesses as we do the success stories. While it is said that a wise person learns from their mistakes, an even wiser one learns from the mistakes of others, thereby (in theory) avoiding them.
With that in mind, let’s take a look at three characteristics of highly effective and successful CEOs, by also taking a hard look at the ones who failed to demonstrate these attributes, to the detriment of the firms they were charged to lead.
It seems intuitive that simple, straightforward honesty and integrity should be the calling card of every CEO, and indeed, many successful businesses can boast of CEOs who bear this as a hallmark of corporate governance. For example, Mary Barra took over as CEO of General Motors on the heels of a $900 million settlement in which GM acknowledged its failure to report a common safety defect in its cars over a ten-year period. After meeting with the families of those affected by her company’s misconduct, Barra established a Speak Up for Safety program to encourage employees to report workplace safety issues.
Barra has earned a reputation for her efforts to promote transparency and accountability in her ten-year reign as Chair and CEO, advocating for diversity and inclusion in the workplace, as well as the creation of policies to address complaints of sexual harassment and discrimination.
The Flip Sides: Fraud and Deception
Unfortunately, a CEO doing her job effectively and with integrity isn’t the stuff of headlines in American media. Fraud and deception, on the other hand, can and do attract a lot of attention, even if it’s the wrong kind.
Ask the average businessperson to name the five most honest CEOs in America today, and you’re unlikely to generate much of a discussion. The five biggest frauds, on the other hand? The names and companies will flow like water.
Was it Kenneth Lay and Jeff Skilling, whose questionable actions seemingly fraudulent led Enron from a company with $100 billion in annual revenues to a declaration of bankruptcy less than a year later?
Bernie Ebbers, who similarly led WorldCom from the peak to the valley before his convictions for fraud and conspiracy resulted in WorldCom’s 2002 bankruptcy?
Dennis Kozlowski, whose massive theft of company assets transformed Tyco International from a market darling to eventual bankruptcy?
Elizabeth Holmes, whose biotech startup Theranos was the darling of Wall Street until its featured technology was revealed to be built on a series of bogus claims and fraudulent studies?
The object lesson for dishonest CEOs is clear: the company may prosper for a time, even rising to the point of dominance, but will eventually be brought to its knees, often ceasing to exist. The very real costs to investors in, and former employees of, Enron, WorldCom, Tyco, Theranos, and other such firms are still being felt today. If only as a means to ensure the long-term success of any company, to say nothing of virtue for virtue’s sake, the culture of deception in America’s boardrooms appears to be on the decline now.
The Chair and CEO of Berkshire Hathaway, Warren Buffett, publishes an annual letter that has become required reading for investors of any level of expertise, from managers of multibillion-dollar hedge funds to Mom & Pop investors. The reason (besides his unparalleled decades-long record of success) is simple enough: unlike the writings of many CEOs in his field, Buffett’s annual missive to his shareholders spends as much time speaking plainly of what he got wrong as it does expounding on his wins for the year.
Buffett has explained bluntly to his shareholders that his ignorance about tech stocks probably cost his investors millions, if not billions, of dollars by his refusal to buy stocks like Amazon and Google, famously noting that he regrets that he was “too dumb” to appreciate Google, even while one of his primary businesses (GEICO) paid them hundreds of millions in advertising fees. Buffett’s humility extends to his lifestyle as well, as he continues to live in the same home he bought for $31,500 decades ago in Omaha, and eschews most creature comforts, preferring instead to earmark his massive wealth towards multiple philanthropic pursuits.
. . .And Hubris
Of course, for every humble leader like Buffett, there seems to be someone whose picture is vying to appear in the dictionary next to hubris. To be clear, there is sometimes a fine line between the brand of healthy self-confidence necessary to lead a multibillion-dollar corporation in the 21st century, and the brand of hubris in Greek mythology that found Icarus ignoring his father’s warnings and using his newly-made wings to fly too close to the sun. In the latter case, the rapid descent back to earth was fatal; so too is the fate suffered by many executives (and their companies) today.
Sears was literally a household name in the latter half of the 20th century; virtually every family had items both large and small that they had bought from this ubiquitous department store, and the arrival of the Sears catalog was an event in many households. While the development of the internet certainly played a role in the death of this once-prominent retailer, the arrival of CEO Eddie Lampert probably played a larger one.
Lampert’s exuberant insistence on cost-cutting included the scaling back of the very retail presence that had made Sears a household name, and by the time the embattled corporation tried to reverse course and re-establish itself, the damage was done. Sears filed for bankruptcy in 2018, and the bankrupt estate of Sears Holding Corporation successfully sued Lampert and other insiders for $175 million to bring an end to the Chapter 11 saga.
A similar story can be found in the fate of erstwhile retailer JCPenney, whose new CEO, Ron Johnson, came to the franchise in 2011, fresh off a successful run at Apple. Johnson’s tenure has been accurately characterized as “one of the most aggressively unsuccessful tenures in retail history,” as he failed to appreciate or even acknowledge the JCPenney brand.
Upon arrival, Johnson began his tenure by firing many existing JCPenney executives and installing a fellow Apple executive. Ignoring the discounting culture that pervaded JCPenney, Johnson ordered an end to the couponing and other value strategies that were pervasive at the stores, but discovered too late that the loyal JCPenney customer base actually enjoyed their search for a bargain. Johnson was fired only two years later, and JCPenney never fully recovered, although a stripped-down version of the company still exists with a substantially reduced footprint today.
At the end of the day, successful leaders understand that the common denominator between the companies they are charged to lead, the companies and individuals that are their current customers, and those they hope to convert to customers, all share the common bond of humanity.
Empathy and compassion are crucial qualities for CEOs; they inspire confidence and help build relationships with employees and stakeholders, and build a positive professional environment where everyone can thrive. The results of having such a CEO speak for themselves.
For example, since taking over as CEO of Microsoft in 2014, Satya Nadella has preached the importance of empathy and emotional intelligence, not only in multiple interviews but in the day-to-day operations of the company. He has worked to create a more inclusive and supportive work environment, and under his leadership, Microsoft has enacted policies such as paid parental leave and flexible work arrangements that are specifically designed to assist employees in establishing a healthy balance between their personal and professional lives. It’s no accident that Microsoft has seen a dramatic increase in employee satisfaction during Nadella’s tenure as CEO, and the company is widely viewed as more innovative and successful under his leadership as well.
. . . and The Lack of It
CEOs who lack these qualities can not only damage their companies’ reputations but also alienate their customers and employees. Consider the case of Meta Platforms, formerly known as Facebook. A 2021 leak of internal documents from a whistleblower painted a grim picture of a company whose employees were frequently frustrated by constant restructuring, resource scarcity, and shifting corporate priorities, all of which led to high employee turnover and low morale.
Asked about the attrition rate on an open forum Q&A, CEO Mark Zuckerberg denied that attrition was higher than usual, but also noted that “if you [as an employee] disagree with FB, it’s time for you to move on.” This autocratic approach stands in stark contrast to Nadella’s empathetic and inclusive methodologies running Microsoft.
Unfortunately, Zuckerberg’s private persona seems to mirror what the public has seen of him as well, as Facebook has come under sharp criticism for its alleged knowledge, but failure to act on, a range of societal issues, from its detrimental impact on its users’ mental health (especially teenagers) to the destabilization of democracies, both domestic and international.
In Congressional testimony, Zuckerberg’s responses were widely characterized as bland platitudes designed more to appease Senators who were considering regulation of his company than a sincere acknowledgment of his company’s shortcomings and willingness to address them.
These examples highlight the importance of honesty, humility, and humanity in leadership. CEOs who lack these qualities can damage their companies’ reputations, alienate their employees and customers, and ultimately do infinite damage to the bottom line.
On the other hand, leaders and CEOs who embody these critical traits can build strong relationships and create a positive work environment, leading to better business outcomes and greater long-term success.