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CEOs Under Fire

How can they respond?

It’s hardly a secret that chief executive officers of publicly traded companies have been under fire for years from nearly every direction. Some of them, such as the leaders of Enron and WorldCom, clearly deserved the heat. But other corporate leaders feel that the blistering pace of criticism from shareholder activist groups, Sarbanes-Oxley enforcers, nongovernmental organizations (NGOs), single-cause crusaders, bloggers and the media has been overdone. The key question, therefore, is this: Can CEOs do anything to improve the climate?

It may be that the condition is permanent, argued Jim Quigley, CEO of Deloitte & Touche, at a roundtable called “CEOs Under Fire,” cosponsored by Balanced Brand and Factiva. “One of the realities of the world right now is that we protect our brand in the court of public opinion,” said Quigley. “[Our] day in court is every day. The people who want to go on attack don’t want to let you collect all your depositions and get yourself ready. They want your response this afternoon.”

Increasingly, the mantra is communicate, communicate, communicate. “The responsibility of communication is truly shocking for a CEO coming from a private company environment to a public company environment,” said Robert Greifeld, CEO of The Nasdaq Stock Market, who did, in fact, help build a privately held company called SunGard Data Systems.

Greifeld said that CEOs do have the power to alter the climate in some ways. “We have a bully pulpit,” he said. “We can communicate through our investments. We can communicate to the press. We can communicate to the government in terms of what we believe. And if we do that on a constant and somewhat aggressive basis, then you don’t find yourself under fire. You can manage through a set of crises.”

This willingness-and ability- to communicate with multiple constituencies may reflect generational differences among corporate leaders, said Brian Sullivan, CEO of Christian & Timbers, the executive search firm. “Older leaders tend to lead from a bunker and tend to be command and control,” said Sullivan. “The younger generation tends to be out front and put out what the upside is. They lead more from an ��empowerment of their people’ perspective.”

Boards are increasingly looking at those skills when considering which executives to hire as CEOs. “We’re looking first and foremost for leadership,” Sullivan explained. “And communications is a larger and larger percentage of what leadership is all about today.”

Others in the room argued that CEOs can, in fact, build organizations that are better able to respond to external crises. One is to make sure everyone in the company shares common values and actually lives the values, not just gives them lip service. “In great companies like Tiffany’s or the Mayo Clinic, the companies we looked at that have been successful over a long period of time, their operating values and their stated values are actually the same,” said John Foley, who described his research in a new book, Balanced Brand (Jossey-Bass, February 2006).

If a company’s operating values are clear, that helps head off problems. “For instance, at Tiffany’s there was a special interest group that started talking about ��conflict diamonds’ and how they were funding the war in Angola,” explained Foley. “CEO Michael Kowalski said, ��Oh, my God, we can’t allow diamonds to become an issue like fur.'”

So Kowalski established an organization to start tracking where diamonds originated, so that customers could be proud to own a Tiffany’s diamond. “He got in front of the problem,” said Foley.

Another key step in preventing problems from developing into even bigger problems is responding to what is being said about one’s company, argued Clare Hart, CEO of Factiva, a joint venture between Dow Jones and Reuters that delivers news and information to companies. Those flows of information can be integrated into a company’s knowledge management system or its intranet. It’s no longer good enough, she said, for a company to monitor only mainstream media. “The blogosphere is way ahead,” Hart explained. A company used to have months or weeks to react to a murky news report. “Now, it’s down to days,” she added. “Our new tools and technology are about helping people not only monitor the mainstream media, but also the web collections, NGOs and blogs.”

But even with the best policies and the best tools, most CEOs at the roundtable felt that their positions will be hot seats for years to come. “One reason I think CEOs are going to continue to be under fire is the one corporate governance issue that remains unaddressed, and I think will forever be unaddressed, and that’s executive compensation,” said Deloitte’s Quigley. “To the man in the street, it will never make sense as long as we live or as hard as we try to explain it.”

And how information flows also seems to have gone through an irreversible change. “In an age where information moves so quickly, where any individual can have a very loud voice on the Internet, I think you end up just having to have thicker skin,” said Christopher Lofgren, CEO of Schneider National. “For any choice that a CEO makes, somebody is not going to like it.”

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About William J. Holstein

William J. Holstein