JP Morgan's Jamie Dimon: A Leader Steps Up

In these days when corporate executives are keeping their heads down and trying to stay out of trouble, it is refreshing when one CEO steps up to a challenge and a broader responsibility. In taking over Bear Stearns, the failing investment bank, just hours before it would have been forced into bankruptcy by a proverbial "run on the bank," JP Morgan CEO Jamie Dimon took on a broad public responsibility to keep financial markets from unraveling and apparently made a very attractive purchase for his institution.

Not that Dimon acted alone. He had a little help from his friends - namely, Secretary of the Treasury Henry Paulson and Federal Reserve Chairman Ben Bernanke - who urged Dimon to step to the challenge of taking over Bear and agreed to guarantee up to $30 billion in failing mortgage-backed securities.

Having watched their shares fall from $170 per share a year ago to the $2 settlement outraged Bear´s shareholders. On the other hand, media pundits like CNN´s Lou Dobbs called it a "corporate bailout" and charged the Bush administration with enriching Bear´s executives. Not exactly, Lou. Thirty per cent of Bear Stearns´ shares are held by executives and employees, who saw their value decline by more than 98 per cent in the last year.

The reality is that there are many more legitimate claimants to a firm like Bear than just its shareholders, especially when its equity value is collapsing. Investment firms will heavily leverage their equity - in Bear´s case, more than 30:1 - and the lenders and a wide array of counterparties all have a stake in the financial health of the firm. I believe that Paulson and Bernanke acted wisely to negotiate a settlement that kept Bear from defaulting on its debt obligations while letting the equity holders take the largest financial hit. After all, they were responsible for the position that Bear Stearns got itself into this past week, and they should pay the price. By the way, this responsibility should also mean that Bear Stearns executives like CEO Alan Schwartz and former CEO James Cayne, who held the top slot until this past January, should not receive any termination or change-of-control payments as a result of the sale to JP Morgan.

March 15, Launch of True North

This is a day that I have been waiting for the last two years, as today marks the launch of my new book, True North. I am finally back in Minneapolis after a week with our family in the Galapagos and then teaching a dozen classes at HBS and Elon University this week.

This noon I will be giving an address on "Leadership in the 21st Century" at the Westminster Town Hall Forum in Minneapolis, which will be broadcast on public radio. (A copy of my talk is available here you would like to read it.) Wednesday night we will host a panel discussion at the Minneapolis Public Library with eight of our interviewees on how their life stories and their crucibles have shaped their leadership.

Yesterday I taped the NOW Show with David Brancaccio that will air on public television across the country on Friday evening, around 8pm EDT. David´s interview got into everything from executive compensation to changes in Sarbanes Oxley, the future of capitalism, and the challenge of choosing the right leaders to run companies.

You might also be interested in this week´s Fortune "Most Admired Companies" issue (March 19, 2007) that includes long excerpts from True North on the leaders of its featured companies: Howard Schultz of Starbucks, Kevin Sharer of Amgen, Anne Mulcahy of Xerox, and John Donahoe of E-Bay.

Now that the book is on the market, I would love to get your feedback on its themes and ideas, and especially the ways in which they apply to you and your life.

And please encourage your friends and colleagues to pick up a copy of True North.

Sincerely,

Bill

(For copies of my other Bill George speeches, click here: True North and Authentic Leadership Speeches)

The Spitzer Affair

The shocking news of New York Governor Eliot Spitzer´s liaison arranged by a prostitution ring offers yet another tragic example of how powerful leaders get so caught up in their egos that they lose sight of their True North.

Governor Spitzer should resign immediately and save himself the embarrassment of being forced from office. He has violated the public trust he was elected to uphold. As an aggressive pursuer of wrong-doers on Wall Street and in the corporate world, Spitzer has no justification for attempting to hold others to a higher standard than he holds himself.

Back in 2004, Spitzer spoke with revulsion when he announced the arrest of sixteen people operating out of Staten Island. He said then, "This sophisticated and lucrative operation with a multi-tiered management structure was, however, nothing more than a prostitution ring."

How carefully did he check out the prostitution firm he hired to provide a call girl to take the train to Washington to meet him in his suite at the Mayflower Hotel? Might this firm have been run by shady operators who could have blackmailed him in exchange for favors or contracts from the State of New York?

The experience of John Whitehead, the former head of Goldman Sachs who was running the Lower Manhattan Redevelopment Commission, typifies Spitzer´s aggressive tactics in attacking other leaders. Two years ago, Spitzer personally attacked Whitehead for writing an op-ed in the Wall Street Journal. The op-ed criticized Spitzer for accusing Hank Greenberg, who was chairman and CEO of AIG at the time, of being a crook, without bringing charges against him. According to Whitehead, Spitzer called him that same afternoon and said, "You and I are now at war. You have shot the first bullet, but I will shoot the last one. You will regret that you ever wrote that article. I am coming after you."

One disappointing reaction to this tragedy comes from Senator Hillary Clinton, who seems ever mindful of placing political calculations ahead of her principles. When asked about the sex scandal threatening her political ally, Clinton carefully sidestepped questions. "I don't have any comment on that," she said. "Obviously, I am sending my best wishes and thoughts to the governor and to his family."

Spitzer did many good things as Attorney General and Governor of New York, but they do not excuse his behavior. What happened to this 48-year-old rising star, who seemed to have the perfect home life? None of us will ever know the secrets of his heart or the lust that dominated his emotions. What is evident that he lost sight of his True North - the values and principles he has lived with throughout his life - and was seduced by his power and the apparent thrill of pushing the limits. As a result, he abandoned his judgment and lost his bearings.

This is indeed a sad situation for Governor Spitzer, for his family, and for the people of New York who voted to give him their trust. Hopefully, he will recover in the future to contribute his enormous skills to society - a wiser and better grounded person.

Elected leaders in the public sector and in the world of business have a special responsibility to uphold the trust placed in them. They are - or should be - role models of behavior that the rest of society can admire and emulate. Of course, leaders have failings and weaknesses, just like the rest of us. All of us make mistakes. However, this does not excuse the violation of the public trust that characterizes the Spitzer affair.

As citizens, we deserve better, much better, from our elected leaders. If is our responsibility, with the support of the media, to make a closer examination of the character of our leaders before they are given the power and to assess how well they practice their values. Surely, character is a lot more important test than the promises they make or the images they create.