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Bill George

Harvard Business School Professor, former Medtronic CEO

Take a close look at the new generation of corporate leaders

Since the fall of Enron nearly a decade ago, I have been critical of many corporate leaders.

It wasn’t just convicted criminals like Jeff Skilling of Enron, WorldCom’s Bernie Ebbers, Tyco’s Dennis Kozlowski, or Qwest’s Joe Nacchio. I was more distressed over the 100-plus CEOs whose companies had accounting “adjustments” that ranged into the billions of dollars, including formerly great companies like Bristol Myers and Xerox.

This was my generation of CEOs, most of whom grew up in the era of John F. Kennedy idealism. We vowed we would do better when we were in charge. Much as I hate to admit it, as a group we did worse than our predecessors. We were CEOs in the 1990s when we had the wind at our backs, with escalating stock prices and the media treating CEOs like rock stars. Then it all blew up with Enron.

There were lots of exceptions, of course: IBM’s Lou Gerstner, GE’s Jack Welch, Intel’s Andy Grove, Microsoft’s Bill Gates, and Berkshire’s Warren Buffett deserved their rock-star status. But far too many placed their stock prices and self-interest ahead of their companies’ long-term health, while taking excessive bonuses for laying off thousands of employees.

Many sold their souls to Wall Street to hype their stock options and ended up destroying the shareholder value they created. Along the way they breached the trust of customers, employees and society, not to mention shareholders left holding the bag.

Just as trust in corporate leaders was recovering, Wall Street’s game boomeranged to destroy icons like Citigroup, Merrill Lynch, AIG and Lehman. That launched a frantic hunt for the culprits. This time, fewer actual criminals were found. But we passed legislation to constrain all corporations, as the economy struggled to recover from the Great Recession. Sadly, trust in corporate leaders sank to an all-time low and still hasn’t recovered.

Overlooked in the search for scapegoats is a new reality: The CEOs appointed since the fall of Enron are an extraordinary group of leaders. They are diligently restoring their companies to greatness through values-centered leadership that is producing sustainable performance. They learned not to kowtow to Wall Street as their predecessors did. Rather, they are providing 21st-century leadership to make their companies highly competitive on a global basis by investing in people and capital.

There are some striking things about these new leaders: They were mostly chosen from within their organizations, not by headhunters seeking rock stars. In contrast to many of their predecessors, they were not selected for their charisma, style and image, but for their character, substance and integrity. Their compensation is based on their companies’ long-term performance, not on their short-term stock prices. More importantly, they are focused on creating long-term value for their customers that will ultimately benefit their employees, long-term shareholders, and society at large.

Who are these leaders? Nationally, take a close look at IBM’s Sam Palmisano, PepsiCo’s Indra Nooyi, Ford’s Alan Mulally, Avon’s Andrea Jung, ExxonMobil’s Rex Tillerson, Facebook’s Sheryl Sandberg, Merck’s Ken Frazier, Wal-Mart’s Mike Duke, and McDonald’s Jim Skinner. With exceptions of Mulally, who spent more than 30 years at Boeing before joining Ford in 2006, and Sandberg, who worked at Google before joining Facebook three years ago, these leaders grew up within their organizations and learned what is required to create sustainable value for all stakeholders.

Here in Minnesota we are blessed with the finest group of leaders we have had in the past 40 years. The leadership, character and performance of CEOs like Cargill’s Greg Page, Ken Powell of General Mills, UnitedHealth’s Steve Hemsley, Ecolab’s Doug Baker Jr., U.S.Bancorp’s Richard Davis and Target’s Gregg Steinhafel is extraordinary. All of them were promoted from within and are investing in the long-term health of their companies, building strong competitive positions globally, and providing values-centered leadership to their organizations, while achieving outstanding near-term results.

Former Vice President Walter Mondale once told me he consulted Goldman Sachs’ renowned CEO John Whitehead to find who the values-centered corporate leaders were. Whitehead’s response: “You should start in Minnesota. They’re all there.”

Not quite all of them. But one of Minnesota’s great strengths is the leadership of our corporations. It has kept our economy healthy for four decades as other states have declined. The salient characteristics of Minnesota’s corporate leaders include their commitment to corporate and community values, their willingness to invest for the long term and the ability to build sustainable organizations that prosper by being competitive in the global world.

 


Originally Posted in the Star-Tribune May 7, 2011