CEOs try to restore credibility
Gathering reveals misery, frustration
By HOPE YEN
Associated Press
Nov. 21, 2002, 12:14AM
NEW YORK -- As Cyrus Freidheim tells it, there "couldn't have been a worse time" than this year to become CEO of a big American company.
Before he became chairman and chief executive officer of Chiquita Brands in March, he said: "I was respected. I'm not respected anymore. I was trusted. I'm not trusted anymore. No one wants my job and everyone is angry."
Freidheim's misery had lots of well-heeled company Wednesday, when he addressed other corporate chief executives at a conference in the city's most expensive hotel.
He and his peers sounded sometimes hurt, sometimes contrite and generally humbled as they puzzled over ways to rebuild investor confidence after a year of accounting scandals.
Nearly 150 CEOs gathered in New York for Chief Executive magazine's annual two-day conference at the St. Regis Hotel, known for its personalized butler service, thousand-dollar guest rooms and Louis XV-style furniture.
The agenda covered various topics, including technology and work force productivity, but the issue of damaged corporate credibility hung over the meeting.
Indeed, as a sign of the embattled times, the magazine said its CEO of the year, Citigroup Chairman Sanford Weill, had backed off giving a keynote address today, on the advice of his attorney. But a Citigroup spokeswoman said Weill canceled because of a scheduling conflict.
Weill is facing questions about whether he asked a star analyst with the company, Jack Grubman, to upgrade his rating on AT&T Corp. shares -- and allegedly win business for Citigroup and oust a boardroom rival -- in exchange for help in getting Grubman's kids into an exclusive Manhattan school. Weill denies doing any such thing.
"Many CEOs don't understand the magnitude of this crisis of confidence, since we leave action to the regulators and do nothing," said Gerard Kleisterlee, chairman at Royal Philips Electronics.
"As a group, we've been all talk and no action," he said. "We, as CEOs, need to focus on running companies for long-term value and sustainability. We need more accountability and less celebrity."
The proposals for action varied, from reducing executive pay and avoiding celebrity outsider CEOs in favor of more homegrown talent, to resisting shareholder pressure to gain short-term results at the expense of long-term growth and investment.
But many agreed that the past year, which featured criminal indictments and bankruptcies at Enron and WorldCom on allegations of improper accounting, represented CEOs' greatest challenge ever amid terrorism fears and the economic downturn.
Kleisterlee urged a move away from the celebrity culture fostered in the 1990s, which tends to cast CEOs as miracle workers who focus on short-term gains. That view tends to drive up executive pay unnecessarily while hurting the company's long-term growth, he said.
Instead, he said executives must devote time to training new company leaders at a time when CEO turnover is high and when studies suggest that company bureaucrats who move up the ranks may perform better and be less likely overpaid.
"A company is a reflection of the CEO role and not the other way around," said Kleisterlee, whose annual compensation at Royal Philips is more than $900,000. "We either start doing it or risk being legislated into it."
Still, some CEOs were uncertain how much they could actually do.
"You're only as good as the team around you. If I failed, it's because I misjudged the quality of the people with whom I was working," said John Gutfreund, senior managing partner at CE Unterberg, Towbin & Co., who described himself as one of the older CEOs at the conference.
"There's no way a CEO can be omniscient," he said.
Stephen Cooper, chairman of restructuring company Kroll Zolfo Cooper who is serving as interim CEO of Enron as it seeks to emerge from bankruptcy, said company boards also need to become more independent and be packed with fewer cronies and golfing buddies of the CEO.
"There's a little bit of larceny in all of ourselves. If we don't have independence, some people will take advantage," he said.
Cooper also cited several flaws he's seen in failed CEOs, including unrealistic ambitions and blindness to trends.
Then, when the corporation gets into deep trouble, they fail to see it.
"At the end, they go into denial," he said. |
