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Bill George

Harvard Business School Professor, former Medtronic CEO

A Crisis of Leadership

The current crisis on Wall Street is being characterized in technical terms that few Americans understand: subprime mortgages, credit default swaps, mortgage-backed securities, and CDOs.

But this is not a crisis caused by the failure of complex financial instruments. This is a crisis caused by the failure of leaders on Wall Street.

The heads of firms like Bear Stearns, Lehman Brothers, AIG, Countrywide Financial, and Washington Mutual all too often sacrificed their firms´ futures in order to maximize short-term gains. This meant under-pricing of risk in exchange for immediate fees and taking on inordinate levels of debt to invest in complex, highly uncertain instruments.

Compounding their errors, these leaders were unwilling to face reality when the value of their holdings tanked, as many declined to mark these instruments to market.  Instead, they argued that their complex financial models yielded a superior valuation for their holdings. In some cases, this “mark-to-model” approach, or what Berkshire Hathaway (BRK.A) Chairman Warren Buffet calls “mark to myth,” led to their undoing as people inside or outside the firms had difficulty figuring out what their assets were really worth. Had they followed the long-term investing philosophies of Buffet, these firms would be still be around.

A financial failure?  No, this is a leadership failure.

The first job of any leader is to preserve the viability of the enterprise. These leaders focused on short-term gains and large bonuses for themselves, instead of ensuring the survivability of their companies and building them for the long-term. In this sense, their behavior mimicked failed leaders from earlier in the decade like Jeff Skilling of Enron and Bernie Ebbers of WorldCom, except there is no indication here of any illegal actions.

In contrast, five leaders of financial firms stand out for their prudent leadership as they prepared for this crisis by anticipating the impact of systemic risks and emphasizing the long-term health of their firms: Dick Kovacevich of Wells Fargo (WFC), Jamie Dimon of JP Morgan Chase (JPM), Ken Lewis of Bank of America (BAC), Lloyd Blankfein of Goldman Sachs(GS), and John Mack of Morgan Stanley(MS).

  • Wells Fargo´s Kovacevich built the nation´s leading mortgage banking portfolio by emphasizing sound lending practices and avoiding the unqualified mortgages that led to the demise of mortgage bankers like Countrywide Financial.
  • JP Morgan´s Dimon and Bank of America´s Lewis kept their balance sheets clean and healthy so that they were prepared to purchase distressed firms like Bear Stearns, Washington Mutual, Countrywide, and Merrill Lynch (MER) at bargain basement prices.
  • Goldman´s Blankfein and Morgan Stanley´s Mack built liquidity and carefully managed risks as their firms shifted to the bank holding company model.

When it comes to authentic leadership in this crisis, no one stands out more than Treasury Secretary Henry Paulson. As a member of the Goldman Sachs board since 2002, I had the opportunity to observe him at close range. Were it not for Paulson – and his adaptability, tenacity, and ability to get other leaders to face reality – the U.S. financial condition would be in far worse shape than it is.

When he took the Treasury post, Paulson never dreamed of bailing out Wall Street financial firms, because his primary focus was on restoring relationships between the U.S. and finance ministers around the world. As the crisis unfolded, he immediately stepped up to leading the country through it. Using skills honed for decades as an investment banker, Paulson was able to bring the administration and warring political parties to agreement on the $700 billion bailout package approved by the House on Friday.

Paulson is a fervent believer in the free market system, but he recognized that without U.S. government intervention, this crisis could topple our entire financial system.  We can only hope these latest moves, coupled with government takeovers of failed institutions, are sufficiently strong to restore confidence in the market and rid the economy of excessive bad debt.

This is just the latest–and largest–in the once-a-decade crises that Wall Street goes through. We shouldn´t forget the savings and loan debacle of the 1980s, the collapse of Long-Term Capital Management in the 1990s, and the bursting of the technology bubble in 2002. Yet creative financial people continue to invent new models and new instruments that create short-term gains, often without understanding the pitfalls they represent.

Many pundits blame these problems on greed, but greed is nothing new. The underlying characteristic of all these fiascos is the same: brilliant managers who thought they could out-smart the market, instead of leaders with the wisdom to build sound firms for the long-term.

The boards of directors of the failed firms bear a heavy responsibility for their failure to select the right leaders and to monitor their actions. All too often they permitted high-profile, ego-driven leaders put their image and drive for power ahead of their responsibilities as leaders.

We will never avoid these problems until boards of directors start selecting authentic leaders to run their firms known for character, substance, and integrity. These attributes are essential if we want to restore the strength and primacy of the U.S. financial system and build our economy for the long-term.

The Most Authentic Leader and Company? We asked. 1,132 of you answered.

We reviewed 1,132 responses to the following question and chose the best response, the most authentic leader, and the most authentic company. See our results below:

“Which CEO and/or company represents authentic leadership to you and why?”

Best Response comes in from Kurt Hoffmann of Sacramento, CA:

“Bill, my choice would be Warren Buffett. Warren displays authentic leadership in showing a real commitment (both in words and deeds) to improving “stakeholder value” over time. By stakeholders, I mean shareholders, employees, customers, the community, etc. Warren is both a great leader and a great teacher. He is an independent thinker who challenges the conventionally accepted way of looking at things, and explains his reasoning in a sound and uncomplicated way. He sometimes adds humor just to make his perspective a little more interesting and fun. When he became acting CEO of Solomon after its trading scandal in the 90’s, he told employees that if they lost money he would be understanding, but if they were unethical he would be ruthless. He sets a vision and a tone for his subsidiary chiefs, allocates an appropriate amount of capital to them in order for them to perform, let’s them operate with autonomy (although sometimes providing guidance if needed), and holds them accountable for achieving the expected results. His intense focus on increasing the book value (shareholder equity) of Berkshire Hathaway over time has changed the lives of countless families. His selfless gift of his fortune to the Bill and Melinda Gates Foundation (rather than having spent it during his lifetime, or setting up a foundation in his own name) speaks volumes about his character, his humility, and his integrity. I’ve learned a tremendous amount about business and life from his writings, and have benefited significantly from having had the privilege of attending a few of his annual shareholder meetings. As Ben Graham was his mentor, in many ways he has been a mentor to me, although we’ve never met and he’ll never know it. He definitely has my vote!” – Kurt Hoffmann

Most Authentic Leader is Ratan Tata of Tata Group:

“Chairman Ratan Tata of the Tata Group is definitely the epitome of authentic leadership in my opinion because: He has the ability to bring the Globe to India and take India to the Globe, he successfully maintains a fine balance between revenue-driven goals and CSR goals, he lives the Tata life and is a model of inspiration for young managers wthin the Tata Group. It takes only the best leadership aptitude and intuition to hold a Group consisting of 98+ companies together successfully in a unique network and Chairman Tata achieves this on a daily basis.” – Bryan D’Souza

“Mr. Ratan Tata of the Tata Group. He keeps his promises and engages positive change.” – Wendy C. Frye

“A visionary and a true leader who heads the tata conglomerate comprising of 100 group companies… Under his leadership the Tata group — once dubbed as a sleeping elephant woke up in the last decade… He has been able to lead and motivate its CEO/MD of the group companies to be ambitious and “Think Big,Think Ahead.” This resulted in the merger and aqcuisitions of Corus with Tata steel and buying in Jaguar for Tata Motors… Sir Ratan Tata is not only a true leader for his group companies but a visionary who also advises the Governmentt of India” – Rajat Khawas

“TATA has never resorted in taking the easy way and has made the group respected and profitable while inculcating the same culture across organizations…Mr. Ratan Tata is a source of inspiration to other leaders and organizations who believes in the right values” – Sudhir Chaturvedi

“I would nominate Ratan Tata of the Tata Group from India for continuous display of business leadership without compromising on ethics, values, and principles…recently, the Tatas have been embroiled, for no fault of theirs, in a political quagmire called West Bengal in India. The dignity with which they did not step into political discussions on focused on Business and CSR is noteworthy. As I write this, the Tatas have decided to walk out of Bengal citing personnel security as a strong enough deterrent against pursuing projects in the state. What struck me was this – until it involved his company directly, Mr. Ratan Tata never created hype in the newspapers nor added fuel to the fire; he watched and he acted when it was necessary.” – Sudarshan Avadhany

“In India, being a developing country, buying a 4 wheeler is everyone’s dream and the hardest for millions of families. Ratan Tata is the only person who has realised the people’s dream and promised to grant it. Now he is making the $2500 world’s cheapest car called “NANO.” Shortly, it will be available in the market.” – Susanta Roy

“He got ridiculed by the world’s automotive manufacturers when he mentioned the idea of bringing a compact car to the market for $2000. Today, that is a reality, and it will immensely change the automotive landscape of countries like India and China where growth has just reached the middle class…” – Gautam Ganguly

“Mr. Ratan Tata could easily have been amongst the top 10 richest persons in the world, but choose to create an empire that will make his ancestors proud…” – Rohit Shrivastava

“Ratan Tata has consistently refused to break the law or encourage corruption. When we see Ratan Tata refusing to pay bribes, refusing to lick politicians’ boots and refusing to bend the rules and still taking the TATAS from strength to strength, still buying the world’s best companies (Corus, Jaguar), and still reinventing the rules of the car industry — Nano Car priced at Rs 1.0 lac [$2,200 USD]… Ratan Tata is a ‘living legend’ with steely determination proving that its possible to be honest and principled…” – Anjali Jain

Most Authentic Company is Google:

“Google always comes to my mind when I think about leadership and I will tell you why. They are in a tough market (imagine media and advertising companies fighting with search engines for pennies, or even fractions of a penny, per click) but they still grow and innovate – the Android platform for mobiles – a multi-billion dollar market – and their new browser, good examples in my opinion, are something probably making a lot of executives out there lose their sleep. Beyond that one would think that given their relaxed environment the chance of success is marginal to nothing. However, what we see is a company striving at creating new products and inventing new ways to make money where others seem to struggle. That’s darn pretty good leadership to me!” – Robson Felix

“The best company is Google. Why: (1) Their quench to help and better humanity. (2) Consistent innovation. (3) Information and education accessible to ALL. (4) They are great to employees. (5) Equally rewarding to share holders.” – Jason Prescott

“For me, the example to follow is Google. A company that takes care of their customers, external and internal (employees), and keeps bringing constant innovations that it shares with the masses. Thank you Google one more time and Happy 10th Birthday.” – Alex Casteleiro

“…I am prompted to say that Google appears to be a company that exhibits authentic leadership. This occurred to me after reviewing their presentation on the launch of Chrome their new internet browser. While they are proud of the work they have done they have chosen to create a product that is malleable by others. They encourage their users to come have play with them, if you will and improve upon what they have developed. As a company that maintains a close relationship with it’s users it is clear that Google values is stakeholders the end user and takes their input seriously. More importantly Google challenges us, if not inspires us to see the way we interact with the world in ‘cyberspace’ differently. It is an ever ch
anging entity and they are at the forefront every step of the way.” – Sabrina Whiteman

“I would say Google. Starting a company with only $100,000 and building it to what it is today, and in such a short period of time (10 yrs this month) takes not only exceptional business know how, but requires genuine/authentic leadership and deep understanding of people. It is most evident in their employees´ enthusiasm for the company – all you have to do is speak to someone at Google and you will see what I mean.” – Ben J. Darling

Look Past the Political Rhetoric: It’s Leadership That Counts

For the next two weeks the American public will be besieged with political rhetoric, as voters try to decide who should be the next president. This week it´s all about Barack Obama, and next week the focus will be on John McCain. Honestly speaking, we may get a good look at the politics of these candidates, but we won´t get much insight at all into the kind of leaders they would be. What should matter is the authentic leadership of the next president, not political skills in projecting an image for voters.

We´ve been fooled before by political rhetoric. Remember the “compassionate conservatism” campaign in 2000 of George W. Bush? He proved to be neither compassionate nor conservative. In 1992 Bill Clinton ran on a health care platform of “managed competition” that turned out to be anything but competitive and almost sank his presidency. Going farther back in history, Lyndon Johnson envisioned in 1964 a Great Society and instead got us mired in Vietnam. In 1968 Richard Nixon promised to “win the peace in Vietnam,” and wound up extending the war to all of Southeast Asia until 1974.

Bottom line: don´t judge politicians on their promises. Judge them on their leadership.

What kind of leaders would John McCain and Barack Obama be as president? The good news is that both of them are authentic leaders. They have openly shared their life stories with the American people. Both have dealt with severe crucibles: McCain with his ordeal as a prisoner-of-war in Vietnam, and Obama with the absence of his father and confusion over his racial identity as a teenager. With the notable exception of McCain´s marital infidelity to his first wife, both candidates have lived lives of integrity and operate from a clear set of principles.

Before we can decide who to vote for, we need to know much more about the kind of leader each would be in the world´s most powerful office. By examining their backgrounds and their campaign organizations, we can gain crucial insights into this question.

All his life John McCain has been a solo performer: as a fighter pilot, a prisoner-of-war, a Congressional aide, Congressman, and U.S. Senator. In the U.S. Senate he has frequently stood against the Republican Party on issues like campaign financing and sided with Democrats like Senators Edward Kennedy and Joe Lieberman. Thus, he has developed the well-earned image of a maverick.

Since announcing his candidacy for president, McCain´s campaign has been anything but well-organized. His organization has experienced lots of turnover, frequent resignations, terminations, and regular shifts in focus. McCain the candidate has often agreed on strategy and positions with his staff, only to abandon them the next day. Only recently has his campaign seemed to enjoy some clarity with the addition of former members of the Bush-Rove team. In the past few weeks, they have successfully shifted McCain´s focus to attacks on his opponent and to national security issues, as his statements have become clearer and more concise.

Through all this, McCain operates more like an entrepreneur than an executive: outspoken, direct, and creative, but often leaving a trail of messes that need to be cleaned up after him. Projecting McCain into the White House, one could expect a few clear messages emanating from the president, who would react quickly to crises. However, this would likely be accompanied with lots of turnover and instability in his cabinet and White House staff.

In contrast, Barack Obama got his early training as a community organizer. He has translated that experience into a massive field team that reflects a bottoms-up, empowered organization. His key central staff members have been with him since the beginning of his campaign, as his team has experienced virtually no turnover, dissention, or organizational problems. Obama himself set the standard of operation at the outset, telling his people he wouldn´t tolerate dissertation and internal squabbles, earning the label, “No Drama Obama.”

As his candidacy progressed, he has expanded his central team and successfully married it to his field organization. His organization looks more like a growing corporate organization like Google or Intel: a strong central core married to a creative group of individuals building off the internet.

Projecting this forward into the White House, one would expect a disciplined staff around Obama, linked to empowered people throughout the government carrying out multiple initiatives. Taking on a broad set of initiatives, Obama´s messages would be more nuanced and more complex than McCain´s. Whereas McCain is a pragmatist, Obama is a visionary.

How would these two men respond to the pressure of surprise events like September 11, Hurricane Katrina, or the Cuban Missile Crisis? McCain would rely heavily on his own instincts, rather than the advice of his team, and would be decisive and possibly impulsive. Obama, in contrast, would quickly gather a group of experts around him, listen carefully to their advice, integrate it into his own thinking, and make decisions that were more nuanced.

Comparing these candidates to previous presidents, McCain will operate more like Harry Truman or Ronald Reagan, while Obama will operate more like John F. Kennedy or Dwight Eisenhower.

In deciding their choice for the next president of the United States, voters should ignore the rhetoric and determine what kind of leader our country needs at this crucial time in our history.

Another Leader Loses His Way

John Edward’s confession of marital infidelity is a sad, but common, story: outstanding leader gets caught up in his power, and loses sight of why he is leading in the first place. If Edward´s situation were unique, it wouldn´t be worth a column. But so many leaders lose sight of their True North, it is worth probing the question, “Why?”

Just in the past two years, we have witnessed:

  • United Health Group William McGuire forced to resign and give back hundreds of millions in stock option gains due the backdating scandal;
  • Merrill Lynch CEO Stan O´Neal losing billions of dollars and placing his entire firm in jeopardy;
  • New York Governor Eliot Spitzer admitting he secretly arranged a liaison with prostitute in Washington, DC;
  • Siemens Chairman Heinrich von Pierer acknowledging his firm had paid over $2 billion in bribes that he “knew nothing about”;

These examples are hardly unique. Many leaders get so caught up in the spoils of leadership that they lose sight of the reason they are leading in the first place. They commit the cardinal error of placing their personal interests ahead of their institution. As Peter Drucker wrote, “Leadership is not about money, fame, and power. Leadership is responsibility.”


Leaders have a special responsibility to preserve and build their institutions. They should be role models for all their stakeholders as well as for society at large. This is an awesome responsibility, but certainly not too much to expect from our leaders.


After studying both successful and failed leaders, I have reached the conclusions that the difference between success and failure is not competency, characteristics, or ability to lead. In fact, all of the leaders I have studied who have failed did not fail to lead others; rather, they failed to lead themselves.


The only discernable difference between successful and failed leaders is how well grounded they are within themselves, which includes a high level of self-awareness and an understanding of their motivations.


Successful leaders know who they are. They like themselves and are proud of their life stories. They have dealt with difficult times, faced their own failures, and admitted their weaknesses and vulnerabilities. People often observe “they are good within their skins.” Beyond that, they feel an inner calling to lead with a clear purpose in mind.


Their rewards are not external symbols like compensation, rising stock price, acclaim of the media, or admiration of the powerful. Instead, their reward comes from the knowledge that their leadership enables their organizations to make important contributions to the world. They find their fulfillment in the success of their teammates and the contributions they can make through others.


Admitting their weaknesses, they focus on their strengths, while surrounding themselves with others who make up for capabilities they lack. They are always striving to develop their leadership. They are open to constructive feedback about their shortcomings and ways to improve. They operate from a clear set of beliefs, principles and values, and understand the purpose of their leadership.


Failed leaders, on the other hand, often feel a sense of deprivation or emptiness within. They use aggression and power to mask these feelings, which in turns separates them from others. They need admiration and adulation of those around them and the outside world. Titles, compensation, and perquisites are symbols of power they need to make up for the emptiness within.


When they stumble and are criticized, they turn inward and become bitter toward their critics, rather than seeking to use that criticism to improve their leadership. They resist negative feedback and surround themselves with sycophants who reinforce them in spite of their shortcomings.


How can leaders avoid losing their way? It isn´t easy, but it can be done. First, they need to examine their life stories and the crucibles they have experienced in their lives in order to understand why they want to lead and their calling to lead. Next, they need to develop self-awareness – the ability to see themselves as others see them – by getting honest, in-depth feedback from people who know them well.


They should focus on understanding their “True North” – their beliefs, values, and reasons for leading. Then they need to take steps to cope with the pressures of leadership and resist its seductions. That includes building support teams of people who care about them and will offer feedback when they start going off track. Finally, they need to focus on leading an integrated life so that their work life and personal and family lives are in relative balance.


If leaders do these things, they can engender the trust required to empower others to step and lead. As a result of building organizations of empowered leaders, their institutions achieve superior performance and the satisfaction of making a positive impact on the world through their leadership.

Follow the Oil Money . . .

Just yesterday, I paid $4.80 per gallon for regular gas in San Francisco. But as cruel as it sounds, the biggest problem with skyrocketing oil prices is not the high cost at the pump.


Far more serious is the massive wealth transfer that high oil prices are creating from the United States to not-so-friendly governments like Russia, Iran, Nigeria, and Venezuela. Sensing their increased power in the world, leaders of these “new rich” nations are distancing themselves from the U.S. and moving steadily away from democracy, as their leaders accumulate massive personal wealth.


This wealth transfer has staggering implications for the relative power of the United States in the world. A nation´s strength is based the strength of its economy, much more than its military might. Witness the collapse of the old Soviet Union in the 1980s. If our country´s leaders do not respond aggressively to skyrocketing oil prices by reducing consumption and increasing supply, the power and influence of the U.S will inevitably decline, coupled with comparable reductions in our standard of living.


Spending last week in Russia, I was struck by the aggressiveness of Russian leaders in reasserting their power. The signs were everywhere: the forced takeover of TNK-BP (British Petroleum´s joint venture), aggressive messages from Russia´s leaders to “respect our power,” and the more than one hundred billionaires in the country who rank among the world´s wealthiest people. Even Russian sales of General Motors´ gas-guzzling Hummer are up 60%.


The U.S. has had no energy policy for the past decade. Instead, we ignored the desperate need for conservation, let energy markets follow their own course, and denied the linkage between U.S. foreign policy and the price of oil. Instead of addressing these issues, Republicans and Democrats are locked into a decades-old argument: should we expand supply or reduce demand through conservation? The answer is obviously both.


The U.S. desperately needs an integrated energy policy, but the intransigence of the politicians only ensures the stalemate will continue. Instead of devising comprehensive solutions, politicians focus on finding scapegoats for the high gas prices. It is the oil companies? The speculators? In the tradition of American politics, there must be someone responsible whom politicians can make the scapegoat.


Before we can solve these problems, we have to face economic realities about oil prices. At the present, oil supplies are well balanced with the worldwide demand. The increase in oil prices from the low $50s in January, 2007 to $140 per barrel today is not being driven by current supply-demand imbalances, but rather byexpectations of rising demand coupled with expectations of supply limitations.


Speculators – and there are plenty of them around the globe – are simply betting that long-term imbalances will occur. For all the talk about controlling speculators, it is impossible to legislate their behavior. Speculation in future prices is normal behavior for investors in all markets, but it is not the same as market manipulation.

The only way to bring down the price of oil is to increase supply and reduce demand. It is not an “either/or” choice.

Let´s start with demand. While U.S. demand for energy is not increasing significantly, there is much more we can do to reduce energy usage without hampering economic growth. Here we can learn a great deal from the Europeans, who make energy conservation a way of life.


The obvious starting point is gas consumption. For decades U.S. automakers have successfully lobbied against increases in fuel efficiency, while the Japanese and Europeans moved ahead with hybrids and more efficient vehicles. Now the chickens have come home to roost. U.S. auto sales dropped 20 per cent last month, as Detroit shutters plants making gas guzzlers.


The technology already exists to increase fuel efficiency from the U.S. average of 24 miles per gallon to the 40+ mpg achieved in Europe and Japan. Comparable improvements can be made in industrial efficiency as well as consumer energy usage if governmental standards are mandated and the next president leads a national campaign for energy efficiency.


Major increases in energy demand over the next decade will come from China and India. China, for example, is building 438 new coal-fired electrical plants – one per week – that are highly inefficient and will create an environmental disaster. Chinese growth in auto production will result in more cars on its roads by 2016 than the U.S. The only way the U.S. can influence this situation is to clean up our own house by setting new standards for energy efficiency with advanced technology, and providing the Chinese and Indians our technological expertise.


On the supply side, both presidential candidates are urging increased research investments into renewable sources of energy. I would go further and propose a National Institute of Energy (NIE), built on the model of the National Institutes of Health (NIH). The NIE should be funded at $20-30 billion per year from the savings in reducing war expenditures in Iraq. NIE would lead government investment in a wide array of energy technologies, fund research at the leading universities and private research institutions, and encourage start-up companies to develop these new energy sources into cost-effective vehicles.


Cellulosic ethanol, hydrogen, clean coal, nuclear, solar energy, wind power, and geo-thermal are just a few of technologies where genuine research is required to make these energy sources safe, cost-effective, and scalable to mass production. Without this basic research, these renewable sources will continue to account for only a small fraction of the world´s energy demand. This approach is far better than subsidizing high-priced alternatives, as the U.S. has done with corn-based ethanol, wreaking havoc in corn prices.


In reality, no matter how much research goes into renewable energy, these sources can supply only a small fraction of the world´s growing energy demand in the next twenty-five years. We simply cannot wait that long to expand supply. Instead, the U.S. and Canada should open up sources of oil and gas within North America and in off-shore waters. With today´s technology, these sources can be explored with minimal environmental impact. This will keep these funds at home, instead of putting another $4-5 trillion into the hands of less friendly governments. Just the announcement of new sources being opened up will put a significant dent in oil prices.


The same goes for restarting the U.S. nuclear program, our best intermediate option. The French nuclear program, funded aggressively since the 1970s, accounts for over 80% of French electricity. Nuclear energy presents issues with waste storage and safety assurance, but these problems can be solved, as the French have done, if we have the national will.


Only an integrated energy plan like this one can restore our economy and stem the flow of U.S. dollars into the coffers of foreign governments.

Does the Business Community Need a New Political Agenda?

The likely nominations of Republican John McCain and Democrat Barack Obama all but ensure major changes in Washington in the next four years. With the 2008 election intensifying, business leaders need to engage more vigorously in the national debate. It is time to be proactive in shaping the debate, not just in lobbying for our self-interests.

The consequences of the 2000 and 2004 elections suggest business leaders should be careful about what we wish for. All too often, seemingly obvious choices have long-term outcomes that have not been adequately considered:

  • In 2000 we wished for tax cuts and got large deficits and widening income disparities.
  • We wished for fewer regulations and got the subprime crisis and mammoth losses on Wall Street that forced firms to raise capital from sovereign wealth funds.
  • We wished for a weaker U.S. dollar so we could export more and got rapidly escalating oil and corn prices as foreign governments preferred holding commodities over dollars.
  • We supported invading Iraq and found our country trapped in a war we don´t know how to end and a $2-3 trillion price tag.
  • We wished for a free enterprise health care system and wound up with health care costs that make our companies non-competitive and 45 million uninsured citizens.
  • We abandoned the Kyoto treaty instead of renegotiating it and lost vital time as the global environment worsened.

As a result, trust in the president and the Congress, as well as business leaders, has fallen to the lowest levels of our lifetime. That should be a source of grave concern.

In every election, candidates promise great things to many constituencies in order to get elected. The danger in this election is that voters may get so upset with the current mess that the political pendulum swings too far the other way, causing politicians to devise hasty solutions that result in unintended consequences. (Does anyone recall the thirty-day legislation that produced Section 404 of Sarbanes-Oxley?)

The good news is that both parties are poised to nominate authentic leaders for president. These two candidates seem prepared to engage in an intense debate about what´s best for America for the next decade, instead of focusing on minor issues, false charges, and gimmicks.

The next president needs to face the realities of our current situation and level with the American people by describing the problems as they really are. Then we need presidential leadership to engage all of us in concerted actions to get America back on track. Business leaders should participate vigorously in this debate, going beyond our self-interests to focus on what is best for the country. We cannot sustain business success unless America is strong and our economy is healthy.

Business leaders should offer the new administration and Congress a thoughtful platform of implement policies and programs that will restore America´s economic strength and our standing in the global community. This requires us to address the broader issues that will ensure competitive companies, healthy markets, and equitable rules of engagement.

Specifically, we should advocate for:

  • A fiscally responsible federal budget that strengthens our long-term competitive position in the world economy.
  • Free trade agreements that enable U.S. companies to compete around the world while insuring our employees are fully competitive and have secure futures.
  • A focus on innovative products and services to strengthen exports and provide domestic jobs.
  • An education and training system that enables all citizens to have productive jobs providing livable incomes.
  • An energy policy that reduces consumption, improves efficiency, and increases the proportion of supply from North American while creating breakthroughs in renewable sources.
  • An efficient and competitive health care system that covers all citizens.
  • A foreign policy in which the U.S. collaborates with other countries to restore world peace and strengthens our military without repeated military incursions.

A tall order? It is indeed. This agenda must be challenging because the problems are so great. We may not get there in the next four years but, to quote author Stephen Covey, we need to “begin with the end in mind,” so that we know we are heading in the right direction and making progress in getting there.

That´s the only way we can restore the confidence of the American people in business and political leaders. And it is best way to insure America and its business community is strong and vibrant.

Is President Clinton Prepared to Lead?

An open letter to President Bill Clinton:

You are facing one of the leadership challenges of your life. You need to decide whether to put the interests of the United States and the world ahead of your personal interests. Doing so means setting aside getting your wife elected and maintaining control over the Democratic Party.

Only you – not former President Jimmy Carter, not Al Gore, not any other Democrat – can convince your wife that the country´s best interests dictate that she should abandon her failed attempt to become the country´s first female president. It is far more important that both of you dedicate the next five months to uniting your supporters behind the election of Senator Barack Obama as the next president of the United States.

That´s what leadership is all about.

No one can doubt that you have been a great leader for the U.S. and the world during the past sixteen years. The contrast of your presidency with that of President George W. Bush is so painful that it doesn´t merit recounting here. Yet through all of President Bush´s failed attempts to repudiate your accomplishments as president, you have stayed above the fray and dedicated yourself to make the world a better place, using your personal foundation as a vehicle. In so doing, you have gained the admiration of leaders throughout the world, including many of your former detractors.

One of your greatest qualities as president was facing reality: in 1994 you recognized that you had to abandon your wife´s flawed health care plan in order to save your presidency. On welfare you faced the reality that the welfare plans of the Democrats´ New Deal weren´t working and joined with Republicans to implement the welfare-to-work plan. On trade you faced the realities of globalization and supported free trade agreements like NAFTA and GATT, even while sacrificing the political support of the labor unions. On immigration you faced the reality that expanding visas for legal immigrants was critical for innovation, especially in the high tech industry. Your brilliant economic policies ignited to the greatest period of growth and innovation since the post-war period and even created a surplus for the federal budget, a dramatic contrast with President George W. Bush´s mammoth deficit spending.

Now you need to face the reality that your wife has already lost her bid to become the first woman president. The ultimate outcome of the primary campaign has been known since Senator Obama won ten consecutive elections in March.

All too late, Senator Clinton tried to remake her image from a Washington elitist who gained experience as your spouse into Rosie the Riveter, a tough-talking fighter who has endured sniper fire and advocates complex solutions for the working class and the elderly. To derail Obama´s campaign, she teamed with John McCain in attempting to pin an elitist label on Obama, who grew up with a single mother on food stamps and gave up the potential for the lucrative career as a Wall Street lawyer to work in the projects in Chicago´s south side.

Hillary played up racial fears about Obama by highlighting his associations with Reverend Jeremiah Wright and Louis Farrakhan and suggested that this devoted Christian was not a Muslim “as far as I know.” As she became more desperate, she reopened fears of September 11, threatened to “obliterate Iran,” and pandered to the electorate with her summer gas tax holiday that she knew would never come to pass. These actions earned her the support of Rush Limbaugh, whose crossover Republican voters, eager to keep these attacks on Senator Obama going, likely provided the margin of her slim victory in Indiana.

Regrettably, the result of her “scorched earth” campaign to destroy Senator Barack Obama´s bid to become the first non-white president has only helped Senator John McCain´s election bid and provided him with free video clips for the fall campaign. By pitting whites and Hispanics against blacks, old against young, blue collar against white collar, and women against men, she has employed the politics of “divide and conquer” instead of calling for national unity to restore our country to its former greatness.

If you really want to help our country, you will convince you wife to stop dragging out the inevitable and get behind Obama´s campaign to defeat John McCain while there is still time. Both you and your wife have proven themselves to be dedicated campaigners. Now you need to work just as hard to elect Senator Obama.

Although your time to lead the country has past, there is so much you can still do to help the world. But your most important leadership task now to help Barack Obama become your logical successor, because Obama is the only person who can unite the country to face the ever-increasing problems of the economy, racial divides, education, health care, energy and the environment, and poverty, while getting our troops out of Iraq and rebuilding our relationships with the rest of the world.

Filling the Shoes of Your Predecessor

Question: Are you prepared to step up to fill your predecessor´s big shoes? When you get that opportunity, how will you stay focused on your True North and not get pulled off course by the pressures and seductions?

Answer: Stay grounded and never lose sight of your roots.

Recently, we have seen an ongoing succession of leaders self-destruct because they lost control over their egos – the latest being New York Governor Eliot Spitzer. These leaders think they are the institution, and they are the sole reason for their organization´s success.

In contrast, authentic leaders know who they are and where they come from. They don´t get caught up in their egos, nor do they think leadership is having legions of followers. They recognize their job is to unite their troops around a common vision and values and empower them to step up and lead.

Goldman Sachs CEO Lloyd Blankfein stepped into enormous shoes when Henry Paulson became Treasury Secretary. Serving on the Goldman board, I watched as Blankfein deftly took over the reins without missing a beat. In two years he has put his distinctive stamp on the firm, expanding its footprint around the globe and developing quality relationships with everyone from government leaders around the world to inside Wall Street players.

Son of a postal worker, Blankfein stays grounded by constantly worrying that Goldman´s enormous success today could lead to big problems tomorrow. That´s how he sensed early signs of the sub-prime crisis and shifted his firm away from its perils just as his competitors were expanding their risks.

General Electric CEO Jeff Immelt faced a similar challenge in succeeding “CEO of the Century” Jack Welch. Immelt says, “I had one good day as CEO – September 10, 2001 – before the roof caved in.” The attacks of September 11 impacted a number of GE´s businesses, yet Immelt was undaunted. Recalling earlier challenges in his career, Immelt said, “At times like these, you´ve got to be able to draw from within. Leadership is one of these great journeys into your own soul.” Immelt focused on making GE more innovative and more customer-focused and launched Ecomagination to unite GE´s energy-related businesses.

IBM CEO Sam Palmisano replaced an iconic leader in Louis Gerstner, who saved IBM in the 1990s. The down-to-earth Palmisano didn´t try to emulate Gerstner, but decided just to be himself. He transformed IBM into an “integrated global network,” focusing the company´s best talents on solving difficult customer problems. To unify his employees around this new vision, Palmisano engaged all 350,000 employees in an on-line “values jam” to create core values – dedication to customer success, innovation and trust. Palmisano´s efforts are paying off as IBM´s revenues and earnings are growing and its stock price soaring.

Target´s new CEO, Greg Steinhafel, is also taking over from an enormously successful predecessor. Target became the first retailer to compete toe-to-toe with Wal-Mart, making discount “cool” and the Target bulls-eye ubiquitous. Asked how his leadership differs from his predecessor´s, Steinhafel replied modestly, “This isn´t about me. It´s all about the brand.”

Xerox CEO Anne Mulcahy stepped into very different circumstances when her predecessor was forced out as the company facing possible bankruptcy. With Xerox´ organization imploding, Mulcahy rallied her troops around “restoring Xerox to a great company.” As she endured incredible pressure from bankers, shareholders, and the SEC, former CEO David Kearns asked her, “Do you believe those lies about you in the media?” “No, David,” she replied calmly. “Good,” he said. “Then don´t believe it either when they call you the savior of Xerox.” In spite of Xerox´ remarkable recovery, Mulcahy has never lost her humility.

In our research for True North, authentic leaders described the things they do to stay grounded:

1. Stay humble, and don´t get caught up in the perquisites of your office. The best thing we did at Medtronic was to eliminate all officer perquisites back in 1993.

2. Don´t lose sight of your roots, and remember your life´s most difficult times. We learn a lot more from our failures than our successes. Starbucks´ founder Howard Schultz still visits Bayview Housing Projects to show his daughter where he grew up in Brooklyn.

3. Build your support team, starting with your spouse. Throughout my career my wife Penny has been invaluable as a counselor and supporter. So has my men´s group that has met weekly for more than thirty years.

4. Don´t lose sight of your intrinsic motivations. Money, fame, and power will never bring you the satisfaction that making a difference in the world does.

5. Lead an integrated life: be the same person at home, at work and in your community. As Jet Blue founder David Neeleman said when he stepped aside as CEO, “Never lose sight that your family is what´s most important.”

6. Remember: leadership isn´t about you. As GE´s Jaime Irick says, “You´ve got to understand leadership is about serving the folks on your team.”

Bill´s bottom line: staying grounded is the best way to keep focused on your True North.

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.



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