The real corrupt persuader lives in the executive suite
By Frederick W. Wackerle
Crain's Chicago Business / Opinion
June 24, 2002
Arthur Andersen has informed the government that it will cease auditing public companies as soon as the end of August, effectively ending the life of the 89-year-old firm. A Chicagoan born and raised and in business for more than 40 years, I regarded Andersen as the gold standard of professional behavior.
Much of the government's obstruction-of-justice case was based on the concept of a "corrupt persuader" being responsible for Andersen's document shredding. But where does the real corrupt persuader reside, and who is initially responsible for driving such behavior?
This tragic event places sharp focus where it really belongs, on board governance and corporate CEO behavior, not just public auditing.
The buck stops at the desk of the corporate CEO. He or she is the head of the company and the driver of culture. If the CEO is a cheater, the management team follows. If the chief financial officer bends the rules, the subordinates in the financial team carry them out. If the company's operating methods stress short-term results over long-term performance, ways will be found to cut corners.
In the end, corporate hubris can kill a company.
Unlike hubris, corporate narcissism can be healthy, and most CEOs possess narcissistic personalities, which makes them outstanding leaders. But there is a fine line between healthy narcissism and hubris. And this behavior is what drives the CEO — and the board — in relationships with outside auditors and law firms.
Does your CEO possess any of the following personality traits? Must win at any cost. Possesses an enormous need for power. Insists on maintaining clear-cut authority. Stifles communication. Enjoys unrealistic self-confidence. Is totally independent. Likes to be alone. Can withdraw from family and friends easily. Thrives on pressure. Has flexible values.
This type of CEO feeds the need to be "on top" by having weak subordinates. He sees himself as larger than anyone, and has the tendency to be a bully, feeling that the world revolves around him. This arrogance is a killer.
Furthermore, he maintains total control of the board of directors by withholding information and blocking board exposure to the management team, company performance and potential successors. Board members who owe their board seats to the CEO are reluctant to challenge and question such behavior. Otherwise, how can we explain debacles such as Enron, Tyco, Kmart and ImClone?
So, it's time for all stewards of corporate governance to examine themselves before pointing the finger at the auditor that had the opportunity to "take a stand" and caved.
Certainly, a $100-million-plus annual auditing fee can cause one to pause before risking the revenue. What a price to pay for the loss of a gold standard!
But the Enron board members had an opportunity to put a stop to unethical business practices and bad management behavior. The CEO and the team of henchmen got away with their dirty tricks, even after a courageous subordinate confronted the CEO . . . who, in turn, did nothing.
And the board of directors knew. No bones about it, they knew. They couldn't have been ignorant of all the facts. They suspended the company code of ethics in order to allow a deal that would have violated that code.
So, where does the "corrupt persuader" reside? He resides in the personality of every unhealthy CEO, every weak board of directors that condones ineffective corporate stewardship. Outside professional services firms are as equally guilty when they back away from straight talk.
These are the dark days of modern business, and the last thing we need is government interference. We need more straight talk.
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Frederick W. Wackerle advises CEOs and boards on management succession and is author of "The Right CEO."
©2002 by Crain Communications Inc. |
