Do Good CEOs Need to be Dictators?

While most people value democratic principles in government, ruling by the voice of the people may not always be the best means of corporate governance. Wadhwa’s school of thought says that having an authoritarian style can be the most effective form of leadership.

He feels that regardless of popularity,  people typically follow strong leaders who are effective in attaining their goals and who offer vision, conviction and good values. He points to a number of CEOs who have successfully led their companies with authoritarian strategies. This includes Henry Ford, who he says he had a hand in every major decision in the company and even monitored the activities of employees outside of work. Wadhwa also points to Walt Disney, who was known to regularly dictate requirements and immediately fire employees when they didn’t perform.

“I know that dictatorship doesn’t sound nice, but it is what business leadership entails. They may not agree with everything the leader decides, but as long as ethical lines are not being crossed, employees will follow directions, work hard and be loyal,” says Wadhwa.

Conversely, Joel Peterson, founding partner and chairman at Peterson Partners, wrote in a blog post that companies are not dictatorships. He says the best CEOs realize they serve many constituents, including not just shareholders and customers, but employees, suppliers, lenders and communities. Peterson says effective business leaders do more strategic tacking than simply moving ahead without insight into changing environments. Peterson feels CEOs must realize that constituents can have interests that are at odds with each other and that leaders must make the best decisions with trade offs. “It’s a style that especially doesn’t work with today’s information workers,” says Peterson.

Perhaps CEOs can have a flexible authoritarian style. Peterson says that while Steve Jobs was a CEO—who never reported to anyone—he was also known for surrounding himself with good people. “And, in his own unusual way, listening to them when it most counted. He demonstrated the essence of working with others. In the end, no CEO in any business ecosystem is an island,” says Peterson.

As reported by The Guardian, executives at Volkswagen partly blamed the carmaker’s emission crisis on the management style of former CEO Martin Winterkorn. Five former executives interviewed by Reuters and industry analysts described a “climate of fear” and authoritarianism that went unchecked. Bernd Osterloh, a member of VW’s supervisory board, wrote a letter to staff in September 2015 saying the company needed a climate where problems aren’t hidden, but can be openly communicated to superiors. “We need a culture in which it’s possible and permissible to argue with your superior about the best way to go,” said Osterloh.

Wadhwa says while autocratic styles can be effective, they certainly come with risk. He says when autocratic CEOs insist all decision making be approved by them, they can become bottlenecks. Employees may also stop taking risks for fear of making the wrong decision. And the CEO also can lose touch or veer astray when there is no one to provide constructive criticism or a system of checks and balances.

“These CEOs start believing their own press and lose touch with what made them successful. If you look at any list of defunct companies that were household names, you will find misguided autocrats at their helm,” says Wadhwa.