Why CEOs Are Losing Credibility and How They Can Rebuild It

Whether the issue is a misuse of corporate power, the inability to keep one’s personal and corporate finances separate or a stunning lack of empathy with customers and the public at large, the position of chief executive officer is not currently revered the way it once was.

Take, for example, the results of a survey by Weber Shandwick and KRC Research, “The Company Behind the Brand: In Reputation We Trust – CEO Spotlight.” The firm surveyed 1,375 consumers and 575 senior executives in the U.S., the UK, China and Brazil. Among its findings:

• 49% of a company’s reputation can be attributed to its CEO’s reputation.
• 60% of a company’s market derives from its reputation.
• 50% of consumers have lost respect for CEOs and other corporate leaders in recent years.

CEO MISCONDUCT AND BAD JUDGMENT
As noted by Susanna Kim, ABC News Business Digital Reporter, CEO misconduct was the root cause for former Best Buy CEO Brian Dunn’s 2012 resignation, after an investigation determined he’d had an inappropriate relationship with a female employee. Things got worse; a subsequent investigation showed that founder Richard Schulze (Dunn’s successor) neglected to inform the Best Buy board of directors about Dunn’s alleged misconduct.

An even more spectacular example of CEO mismanagement was Lehman Brothers CEO Richard Fuld’s actions prior to the collapse of the U.S. economy in 2008. Because of a refusal to concede that Lehman was undercapitalized, Fuld put off raising desperately needed capital and clung to the mistaken belief that the U.S. government would eventually bail Lehman Brothers out of trouble. Instead, the venerable firm crashed and burned.

CREDIBILITY-KILLING BEHAVIORS
CEO credibility is undermined every day by less catastrophic errors in action and judgment. It can result from a pattern of leadership mistakes that, over time, cause other senior executives and employees to lose faith in the person at the top.

“Credibility is hard to establish and easy to lose,” says leadership expert Karin Hurt. “The sad truth is, I’ve seen really good leaders lose the confidence and credibility of their teams by making well-intentioned and innocent mistakes.”

Hurt points out several credibility “derailers,” such as:

• Using the wrong rhetoric for the situation. What leaders say matters, so the words they choose must precisely match the occasion. When they don’t, credibility suffers. Hurt describes working with a leader who told her organization, “We’re in the fight of our lives.” While acknowledging that the business situation was indeed serious, nevertheless, Hurt says, the language failed to inspire others. “The trouble was, many in her audience were literally in the fight of their lives in one way or another: the second bone marrow transplant, a dying sister, a son still in Iraq. I could see these dedicated leaders squirm when she said those words.”

• Being needlessly ambiguous. Employees understand that not all corporate information can be freely shared with them. But a CEO who tries to spin the truth, rather than acknowledge that he or she can’t divulge specific strategy, only ends up confusing his audience and sowing the seeds of mistrust.

Other credibility-killing behaviors include:

• Hearing only what you want to hear. Some chief executives nurture independent thinkers within their inner circles. Others, however, recruit “yes-men” who mindlessly reinforce what the leader says and thinks. If this goes on long enough, the CEO can no longer speak truthfully to those he hopes to lead.

• Tendency to blame others. No leader sets out to make mistakes—and some refuse to ever admit such a thing can happen. “When confronted by [their failures], they convince themselves and others that these problems are neither their fault nor their responsibility,” says Bill George, a Professor of Management Practice at Harvard Business School. “Using their power, charisma, and communications skills, they force people to accept these distortions, causing entire organizations to lose touch with reality.”

• Making it all about me. The trappings of power that come with being a prominent CEO can distract even the most grounded individual. People are always clamoring to hear about their personal history, their professional opinions and their views about business in general. Under these circumstances, it doesn’t take long for a CEO to lose that most valuable trait: humility.

“For many of us, the idea of being a successful manager—leading the company from peak to peak, delivering the goods quarter by quarter—is an intoxicating one,” notes Novartis Chairman Daniel Vasella. “It is a pattern of celebration leading to belief, leading to distortion. When you achieve good results … you are typically celebrated, and you begin to believe that the figure at the center of all that champagne toasting is yourself.”

The first step to steering clear of these career detours is to be aware of them. Keeping these bullet points handy and reviewing them every few months, along with learning from others’ mistakes, can help keep a CEO focused on good judgment.