Harvard Business School Senior Fellow Bill George examines the financial outcomes of Florida Governor Ron DeSantis revoking Disney’s special tax status and Disney’s values.
DAVE BRIGGS: It’s almost pay per view worthy, Disney versus DeSantis. It is the battle dividing Florida along party lines. But across the country, CEOs in all industries are eyeing the daily developments here, wondering how it might impact their company, how they should navigate these choppy political waters. Bill George is the former chairman and CEO of Medtronic, now a professor at the Harvard Business School. He joins us now. Good to see you, Bill.
BILL GEORGE: Thank you.
DAVE BRIGGS: Let’s go back, if we can, to the start of this mess. Disney CEO Bob Chapek wanted to stay out of the controversy over Disney’s so-called Don’t Say Gay legislation, but the combination of angry employees and former CEO Bob Iger coming out against the law. He really had no choice. He offered this relatively mild statement. How do you think he handled it?
BILL GEORGE: Well, he should have thought about all these things first, I believe. I don’t think he did his homework. We’re in a different world today. He was acting like he was back in the 1990s. In this world of 2022, you have all kinds of stakeholders who expect you to take a position, especially your employees. Employees have found their voice. And particularly, in this post-COVID world, they want to be respected, whether it’s a Minneapolis CEO when George Floyd was murdered or people on the LGBTQ+ side that want to be respected and heard from. They want their CEOs to speak on their behalf.
And when they don’t do that, as Bob Chapek didn’t, they get very upset and it leads to the kind of uproar we’ve had. And then they get to the worst case, which is a political crossfire with the politicians. And that’s the last thing any company wants to get into. And Disney is right in the thick of it, and it’s struggling to get out of this mess, as you called it.
DAVE BRIGGS: Even after the statement, he had the employee walkout. So what could Bob have done to keep them his employees happy and somehow stay out of the crosshairs of the governor?
BILL GEORGE: He should have gone back months before, talked to his board, talked to his leadership team. What do we stand for? Disney has always been very pro-family, but also very gay-friendly, if you will. And they should have made those points very clearly. And when this legislation started in Florida, they should have had a position ready to go. And they didn’t have to lead with their chin, but they should have had a position that was true to their mission and values of what Disney is that accepts everyone for who they are.
DAVE BRIGGS: So, as I mentioned, CEOs across the country are shaking a bit in their boots. What are you hearing from them, and what’s your advice?
BILL GEORGE: Well, they’re very concerned. They don’t want to get caught into this crossfire either. But they are all going back now, I think, in really thinking about, what do I stand for? What issues should I get involved in? And when shouldn’t I get involved in? And how do I avoid getting in the crosshairs of some politicians. They may get caught anyway, but if they’re true to their mission and values, this is a question of, should I get out of Russia because of the Ukraine war?
These things are coming up every way right now, and CEOs today need to know how to lead through a crisis because we go from one crisis to the next. We go to from COVID to George Floyd to Russia and Ukraine. And there’s probably another one just around the corner. So they need to be prepared to deal with these and have a position that’s true to their company.
For instance, Johnson & Johnson has taken a very clear position that we’re there to help people. And so if that means we’re going to stay in Russia, we have lifesaving drugs, we don’t want to get out. Hey, I respect that position. It goes to their credo. That’s what each CEO should do, to go true back to their mission and values.
DAVE BRIGGS: A fascinating poll came out last week showing the majority of the country is against the government punishing business over their political beliefs. But the fascinating part within this is Democrats were far more supportive of business than were Republicans. What do you make of that political dynamic we have today?
BILL GEORGE: I’m smiling because when I was a boy growing up, the Republicans were seen as the party of big business. And Democrats are seen as the party of the working class, the blue collar workers. And things seem to have flipped. And we’re much more into cultural wars. Businesses are not interested in that. They’re interested in helping their customers make a difference in their lives, whether Disney is bringing fun to people or organizations in the apparel business, bringing joy to them, or Medtronic providing good healthcare to help save lives. That’s what they want to do. But they need to represent all their employees and all their stakeholders. And I think that’s what they’ve lost sight of here.
DAVE BRIGGS: What’s fascinating is, I read this statement, and I want you to guess what party it comes from. A senator– it’s very simple. We need to see a majority of American corporations as American. They don’t act in the best interests of the country. They act in the best interest of shareholders, period. Was that a Republican or a Democrat?
BILL GEORGE: I have no idea. I probably would have normally would have guessed a Democrat today, maybe a Republican. But I’ll tell you this. It’s not just the shareholders today. It’s not just the world it was in the ’80s and ’90s, the shareholder primacy. It’s the world of stakeholders. They have to operate in the best interests of their customers. They have to operate in the best interests of their employees. And they need to find an alignment with those interests with their shareholders’ interests.
DAVE BRIGGS: That statement continued. We are, as policymakers, we need to be acting in the best interest of the country, not big business. It sounded like Elizabeth Warren, it was Marco Rubio. Stunning when I got to the finish of it. How do you think this plays out for Disney? Their special exemption wouldn’t actually go into effect until June 2023. Can they wait out the governor?
BILL GEORGE: Yes, they may have to. There’s this billion dollar question about who’s paying off the bonds, which legally have to be paid off. And if that’s not clear, I’m not sure Orange County has the money to do that, the Orlando County. And so they are going to have a continued battle. But understand the governor has different objectives than Disney. And so Disney can’t meet all of his needs because he is working a whole political angle here.
And that’s why I say, they don’t want to get caught up in that, but they have to run a great Disney World, I can tell you that, that welcomes everyone to their premises. And that’s the most important thing for them. And they have to make sure this doesn’t turn against them. And they probably have some legal recourse on this whole latest legislation that had to do with pulling back that special district. And there are many unintended consequences, frankly, that have not been thought through there that it will give Disney more ammunition.
A good example is Ed Bastian at Delta a few years ago, the Georgia legislature, withdrew a $41 billion– a million dollar tax break that they got on a fuel savings. They’ve been giving it for 30, 40 years. And he stood up, and he said Disney’s values are not for sale. A year later, the legislature restored that and retroactively.
So in the end, Disney didn’t really throw out– Delta didn’t really get hurt by that. So I’m optimistic that Florida needs Disney World. I can tell you that. It’s a huge revenue producer. I was just in Orlando, actually, for a soccer game, not for Disney World. But I can tell you, it’s created everything around there. They need that. And all the merchants, all the hotel owners, and all the restaurants desperately need Disney World. They– Florida can’t do without Disney World. So it’s a question, who needs who more?
DAVE BRIGGS: 70,000 plus jobs as well. Bill George–
BILL GEORGE: Exactly.
DAVE BRIGGS: –Harvard professor, former chairman, and CEO of Medtronic, it is tricky times to be a CEO. Thank you, Bill.
In private meetings and coaching sessions over the past few weeks, top business leaders have been asking a version of the same question: How can we avoid becoming the next Walt Disney Co.?
The fallout from the recent political spat between Disney and Florida Gov. Ron DeSantis has alarmed leaders across the corporate sphere, according to executives and their advisers, and heightened the challenges for chief executive officers navigating charged topics.
At many companies, vocal employees have in recent years pushed bosses to take public stands on social and political issues. Florida’s pushback against Disney has raised the stakes.
“The No. 1 concern CEOs have is, ‘When should I speak out on public issues?’ ” said Bill George, former chairman and CEO of Medtronic PLC and now a senior fellow at Harvard Business School. “As one CEO said to me, ‘I want to speak out on social issues, but I don’t want to get involved in politics.’ Which I said under my breath, ‘That’s not possible.’ ”
Some executives might be relieved. The old idea that CEOs should focus on shareholder returns and stay out of politics lingers in some corporate suites, even in a politicized age of public social-media discussions and more-activist workforces.
Certainly the consequences of weighing in appear to be changing. Lawmakers for years have expressed displeasure when companies take public stands on issues such as voting access, through critical tweets, public remarks and, in some cases, calls for public boycotts. Disney’s experience shows a willingness to go further, corporate advisers say, by challenging arrangements that have helped a company to operate.
Ron Williams, former CEO of Aetna, says, ‘It’s not enough to know what you want to do. You have to be artful in how you do it.’
David Berger, a partner who specializes in corporate governance at law firm Wilson Sonsini Goodrich & Rosati, said politicians seem increasingly comfortable taking on business when it is advantageous for them. “It used to be that Republicans especially—but both parties—liked big business,” he said. “And now what you’re seeing is both parties like to use big business as political footballs one way or the other.”
Some executives say they have learned to monitor issues that could consume public attention and increase pressure for some response. Some use employee affinity groups to help flag potentially troublesome issues.
“You make it a safe forum where people feel comfortable talking about concerns or whatever, and out of that, there’s really a kind of responsibility on our part to pick up on things that really do demand some attention,” said Nancy Langer, CEO of Transact Campus Inc., a financial- technology company based near Phoenix. “I look at that as a feedback loop for us.”
Some of the topics of employee pressure involve Republican-backed measures, such as the new abortion law in Texas and new voting laws. Democrats have pushed executives to weigh in, and Republicans have pushed them to keep out. Climate and diversity issues also are hot buttons, as is the Jan. 6, 2021, riot at the U.S. Capitol.
But Disney’s recent experience in Florida has captured the attention of C-suite executives at companies big and small, given the impact on its operations, many say.
“I think probably anybody sitting in a leadership role follows it to some degree,” said Julie Schertell, chief executive of Alpharetta, Ga.-based manufacturing company Neenah Inc., which has around 2,500 employees.
Ms. Schertell said the Disney drama reminds her as a CEO that she must look at situations from every angle. “Because I want folks to assume positive intent, like ‘Here’s what we’re trying to do, and if it feels like a misstep, let’s talk about that. And of course, correct on it,’ ” she said.
Staying silent has its own risks. Disney initially declined to take a public stance against the Florida bill, which bans classroom instruction on sexual orientation and gender identity through third grade. Disney CEO Bob Chapek told employees he didn’t want the company to become a “political football.” That sparked an outcry from some employees, and Disney reversed course and spoke out against the bill.
Washington veterans advise that building relationships with political leaders in advance, particularly in off-cycle election years, can be helpful during times of crisis. Ron Williams, the former chairman and chief executive of Aetna who sits on the boards of Boeing Co., Johnson & Johnson and American Express Co., said he counsels CEOs to find advisers who know how to navigate the political terrain.
“Companies often deal in substance, and politicians often deal with foils,” he said. “And so, you know, companies can inadvertently become a foil for different political issues. It’s not enough to know what you want to do. You have to be artful in how you do it.”
Most current CEOs rose by gaining customers or boosting profit margins, not navigating hot-button social issues, and so aren’t trained on how to respond, Harvard’s Mr. George said. They must prepare quickly.
“It is an even more challenging job,” Mr. Williams said. “Running the business turns out to be table stakes.”
While few CEOs have had to contend with major crises right out of the chute, there have been others.
In addition to Akio Toyoda, crisis-management expert Bill George points to Jeff Immelt, who had the misfortune of taking over another General — General Electric Co. — just four days before the terrorist attacks on New York and Washington on Sept. 11, 2001.
Those attacks cost GE’s insurance business $600 million and dealt a nearly fatal blow to its jet-engine business, as airlines around the world canceled orders for new planes.
“It had quite a devastating effect on their business,” said George, who teaches CEOs how to cope with crisis at Harvard Business School. “Jeff realized he had to do something about his consumer finance business and insurance business. Unfortunately, he was a little slow to do it. Mary Barra can’t be that slow. Mary has to face reality: How did this thing get hidden for 12 years?”
He gives Barra good marks to date.
“So far I like what I see. She’s being very forthright, very sincere and getting people around her to address the problem. But she’s got to get to the root core of how this happened and how it was allowed to go on for so long,” said the former CEO of Medtronic Inc.
“One rule I had at Medtronic was ‘You’ll never get fired for making a mistake, but you will get fired for covering one up,’ ” George said. “If I were advising her, I’d say that the most important thing is our customers. This company has to restore its trust with our customers. If we do that, we win. If we don’t do that, we lose. That’s the most important thing she has to do.”
Tonight President Obama addresses the nation at a joint session of Congress about his plans to expand job growth. Here’s what he should say:
My Fellow Americans:
Our country is facing a jobs crisis of major proportions, the greatest since the 1930s. This nation’s strength is based on its strong economy and the global corporations that dominated their industries and fueled growth throughout the world. But now that strength is waning, as other nations, from China, India, Singapore, and Brazil to Germany and Switzerland, threaten to outstrip us in competitiveness.
In the 1990s our economy produced 23 million jobs and three consecutive years of budget surpluses. The combination of the Bush tax cuts and spending to finance two wars and entitlement plans created an enormous debt burden that future generations will be forced to carry. The historic downgrade of the U.S. debt rating from AAA to AA+ by Standard and Poor’s is a warning we cannot ignore.
The excesses of the past decade have imperiled our fiscal stability and left 25 million Americans – 16.2% of the workforce – unable to find full-time jobs. As a result, the United States has its smallest full-time workforce – less than 55 percent – and hundreds of thousands are dropping out each month.
When I came into office, I inherited a broken economy. Our banks, insurance companies and automobile makers were on the brink of bankruptcy. We took aggressive steps to stop the bleeding, and prevented the world from depression. I launched a $893 billion stimulus package but it had limited impact on the structural jobs crisis.
A robust recovery must start with jobs growth. Recent figures confirm that jobs are not growing, and there is no indication they will return without aggressive actions on our part. Yet we continue to get pulled off course by partisan showdowns over the budget and debt ceiling.
We need to stop making it difficult to grow businesses and hire workers in America. In response to excesses of the past, we overregulated our industries. With domestic growth approaching zero and the challenging regulatory, tax and political climate, companies are investing instead in rapidly growing emerging markets in Asia, Latin America and Middle East.
As a result, the jobs crisis is more severe than ever. The U.S. has sunk further into debt, and the country has reached the limits of its borrowing capacity. Our political stalemate has paralyzed our ability to take decisive action.
Therefore, I will use the powers entrusted in me as your President to take the actions required to put Americans back to work and restore domestic growth. All these steps must be taken without increasing the budget deficit.
Here is my plan:
Restore fiscal stability by implementing the proposals of the Simpson-Bowles Commission to bring revenues and expenditures in line and reduce deficits by $4 trillion.
With the recent debt downgrade, the government cannot subsidize federal jobs; therefore, I am appointing John Bryon, my Secretary of Commerce nominee and a former CEO, as Jobs Czar to work closely with American employers, large and small alike, to stimulate domestic investment and create 10 million jobs over the next decade.
To create a positive climate for business investment like that of the 1980s and 1990s under Republican presidents Ronald Reagan and George H. W. Bush and Democrat Bill Clinton, I am ordering all federal agencies to reduce or suspend unnecessary regulations and focus instead on expanding private sector jobs in the energy, transportation, health care, information technology, and financial service industries, as well as small businesses.
To prepare unemployed Americans for 21st century jobs, I will reprogram existing funds to invest in retraining and vocational/technical education.
To make America more attractive for investment, I propose reducing the corporate rate to 20 percent, while eliminating complex deductions and credits.
For the remainder of my term, I will suspend taxes on repatriated foreign profits for corporations that reinvest their portion of the $1 trillion in cash trapped overseas in manufacturing, research, and job creation.
I will expand the number of H1-B visas, travel visas and green cards to make America an attractive place for immigrants to visit, work and start companies.
To expand exports, I will implement a free trade policy by moving ahead with free trade agreements with South Korea, Columbia and Panama, while working with nations of this hemisphere to turn NAFTA into the Americas Free Trade Agreement.
As your President, I am prepared to put my re-election on the line to put Americans back to work, reignite economic growth, and restore America’s competitiveness. While my plan will not please the extremes of either political party, I ask all Americans to join me in this commitment by putting their country ahead of partisan politics.
Leadership Kudosfor this week go to New York City Mayor Michael Bloomberg for his effective leadership during this weekend’s crisis with Hurricane Irene. Bloomberg was front-and-center and on the air waves urging New Yorkers to take the pending storm seriously and get out of town. Behind the scenes he coordinated effectively with FEMA, New York State and local officials as well as President Obama to minimize loss of human life and damage from the storm.
Leadership Gaffes go to President Obama’s National Labor Relations Board (NLRB) for continuing to block the start-up of Boeing’s $1 billion plant in Charleston, SC that will produce the 787 Dreamliner, America’s most promising export for the next 25 years. Boeing is proposing to hire 6,000 employees in SC – IF the NLRB will let them. There’s no law against plants in right-to-work states, as both German auto makers BMW and Mercedes have shown with their highly successful SC plants. Meanwhile, Boeing is adding 2,000 unionized jobs in Seattle. With 25 million Americans unable to find full-time jobs, why doesn’t the Obama administration step in and get this resolved?
This week’s agreement to increase the U.S. debt ceiling is no cause for celebration.
Regardless of what the spin doctors tell us, there are no winners here. The political landscape is covered with the blood of all the politicians who were losers in this “no win” battle. Among the losers are:
The President, who lost the leadership on U.S. deficits last December when he ignored the thoughtful recommendations of the bipartisan Bowles-Simpson Commission, leaving deficit reduction up to the politicians in Congress.
The Republican Party, which let itself be dominated by Tea Party extremists, ignoring the wishes of the majority of Americans, walking away from a sound agreement and demonstrating its willingness to let the country sink for political gain.
The Democratic Party, which has rigidified into the party of more spending and higher taxes while ignoring the country’s mounting deficits. It even undermined its President as he attempted to negotiate an agreement with House Speaker John Boehner.
The United States, which has lost credibility in the eyes of the world as a constructive democracy and sound fiscal system which other countries can look to for leadership of the global economy.
The last minute agreement to avoid an historic default did not solve anything. It merely postponed the disagreements and set up yet another committee to resolve these complex issues.
“Gridlock” has become the new order of U.S. politics. Politics as the art of compromise has been abandoned by the current group of politicians who are willing to jettison the country’s best interests in order to gain short-term political advantage.
This is the third time since the November elections that the country has been traumatized by political deadlock:
In a single weekend last December, shortly after the Bowles-Simpson Commission proposed a bi-partisan $4 trillion deficit reduction plan, the President and Congressional leadership went in the opposite direction. They lowered taxes and increased government spending by a combined $4 trillion, intensifying the problems that lay ahead.
In April, unable to agree on a budget for this fiscal year, the politicians once again took the country to the brink of shutting down the government. The midnight agreement involved more compromises that kept the country running on an empty tank.
For the past month the country has been paralyzed by the artificially-created debt ceiling duel. While mounting deficits are a growing concern, the politicians on both sides of the aisle were far less concerned about reducing them than they were in gaining political advantage through an historic game of “chicken.”
The biggest loser in all this is the United States and its citizens. Why? Because we are losing confidence in our elected leaders to put the interests of the country ahead of their political ideology and to reach sound agreements that enable the country to grow and produce jobs while putting the country on a sound fiscal footing.
Meanwhile, this debt ceiling tug of war distracted our leaders from the real issue: the sagging U.S. economy and jobs crisis. The U.S. continues to slip into a “no growth, no jobs” malaise, as recent GDP growth figures prove and twenty-six million Americans (16.2% of the work force) are unable to find full-time jobs. Until people get back to work and the economy starts growing, we will just continue to fight over a shrinking pie, as deficits continue to mount. The only solution to this dilemma is to get the private sector growing once again in the U.S.
However, the CEOs of companies, both large and small, that I have talked to in recent weeks are completely fed up by the political struggles in Washington. They are turned off and tuned out. They want to have no part of the debate, unless they feel that they have to weigh in to protect their best interests.
These CEOs are pragmatists, not political idealists. In the absence of domestic growth opportunities, they are looking overseas where great growth potential exists. Meanwhile, they are shedding U.S. jobs in favor of productivity gains, which are substantial. Privately, they don’t believe that the President or either party in Congress is committed to building the private sector and removing the myriad barriers that are preventing growth in the U.S.
How can this dilemma be resolved? By presidential leadership, in which President Obama puts himself and his re-election on the line by taking a series of actions to restore private sector jobs and growth while cutting the deficits. President Obama is an extremely smart, savvy leader who knows what to do. Now he must take the political risk to do it because the risks to the country of inaction are far greater.
This is the second portion of an excerpted guide I wrote for my Authentic Leadership class on Why Leaders Lose their way. On the heels of the recent scandals, I believe we must reexamine what motivates inappropriate behavior from leaders at the top of their game.
How can we avoid the pitfalls of falling into the same traps of so many leaders who have lost their way? It starts with devoting ourselves to a lifetime of personal development that strengthens our inner life and keeps us grounded throughout our lives.
To get started, let’s return to the question posed earlier, “What is your purpose for becoming a leader in the first place.” “What are you passionate about?” “What really excites you and turns you on?” “Do you find the intrinsic purpose of your work fulfilling, or is it just a job?”
This may require a reframing of our role from the hero or savior into a servant of the people we lead. This requires a great deal of thought and introspection to bring our egos in line, as most of us go into leadership roles in response to our ego needs in the first place. But which ego needs? The external gratification of people telling us how great we are? Or the internal satisfaction of making a difference in the world through our leadership? Through wealth, fame, prestige, and visible power? Or the deeper knowledge that if you do good work and serve others, that this will be your reward, and the external rewards will be “the frosting on the cake.”
To develop themselves for increasing levels of responsibilities, leaders need to continue their development in seven areas, 1) personal disciplines, 2) managing stress, 3) building relationships, 4) connecting with their communities, 5) focusing inward, and 6) finding balance in our lives.
Being effective in your work and staying sharp to make complex decisions under pressure requires personal practice and discipline. It may be surprising to young leaders to learn that the habits they establish early in life will continue with them for the rest of their professional lives.
Taking care of your body through eating healthily, exercising regularly, and getting your required level of sleep is an important part of being an effective leader. It is difficult, if not impossible, to think deeply and clearly when you’re tired, out of shape, overweight, and stressed out. Some people turn to chemicals to make them feel better, to give them a lift out of depression. But it doesn’t work; they’re just digging a bigger hole for themselves.
Leading is high stress work. There is no way to avoid the stress of being responsible for people, organizations, outcomes, and the constant uncertainties of the environment. The higher you go, the greater your freedom to control your destiny, but also the higher the level of stress involved. The question is not whether you can avoid stress, but how you can control it to maintain your own sense of equilibrium.
Managing stress requires discipline. Some people practice meditation and/or yoga to center themselves and relieve stress. Others find solace in prayer. Some people find they can relieve stress by taking a long run. Still others find relief through laughing with friends, listening to music, watching television, attending sporting events, reading, going to movies, or watching the performing arts. It doesn’t really matter what you do, as long as it works for you to manage the stress in your life and enables you to think clearly about your work and personal issues.
Building Relationships: Who Will Be There to Help?
Ask yourself the question, “Who in my life influences me in profound ways? How do I stay connected to them?” Few of us can stay centered all by ourselves. We depend upon the people in our lives to keep us grounded – those who know us best and to whom we will really listen. For many of us that person is our spouse or our partner in life, because they know us better than anyone else. They are not impressed by our titles, our prestige, or our growing accumulation of wealth. In fact, they are worried that these outward symbols may be causing them to lose the authentic person they were attracted to in the first place. In their presence it is difficult to use our false self or our dominant tendencies to avoid having them hold a mirror up to us that reflects our true behavior.
But we shouldn’t put the entire burden on our spouses or partners. All of us need mentors. A mentor is someone whom we turn to for advice and counsel when we are facing difficult decisions or irresolvable dilemmas. It is someone with whom we can be completely honest. A reliable mentor can be counted on to be completely straight with us, and help us define our truth and develop action plans to change if we are dissatisfied with our leadership or our lives.
Having a group of close friends who serve as your personal advisors can be also invaluable. They too are not overly impressed by your external success, because they know you well enough, and care enough about you, to confront you when you are not being honest with yourself. A team of professional advisors, be it your board of directors, your colleagues, or others in your line of work, can also be a great source for sharing your problems and seeking honest consultation on how to address them. In your organization it is more than healthy – it is essential – to have one or more “honest critics” who are prepared to challenge your ideas and action, to help you see the other side or the way others will view your actions.
Connecting with my Community
Another means for staying grounded, and developing compassion for others, is through direct community service. Examples include tutoring inner city students, working in a homeless shelter, reading to the blind, befriending people in need, and connecting with the lives and needs of people with limited economic means. Direct contact is infinitely more important and rewarding, but also less comfortable, than chairing the board of the United Way or a social service organization. The reasons for this are obvious: as we progress in our professional lives, it is easy to lose touch with the lives of ordinary people. Instead of becoming more compassionate, over time our hearts become hardened. By engaging with our community, we remain in touch with the real world.
Understanding our role in the world is the most personal and profound area of our leadership development. Many people turn to their spiritual and religious practice to engage these issues, either privately or with like-minded people. Some seek the answers through a process of introspection. Others explore them through discussions with the people closest to them in their lives. Still others choose to ignore these questions altogether until confronted with an overwhelming dilemma, a personal tragedy, or a life-threatening illness.
Finding Balance in our Lives
Finally, we stay grounded by regularly rebalancing our professional lives and our personal lives. There is no doubt that the time commitments of leading major organizations can absorb all our time and emotional energy, leaving little left for ourselves or for those closest to us. This poses an enormous danger: the very act of working ever harder distorts our judgment and our ability to think clearly, and accentuates the risk of losing our way. We have a continual need to recalibrate what our behavior says about what is most important in our lives.
But keeping ourselves grounded through personal disciplines, developing close relationships, and maintaining a reasonable balance between our professional and personal lives can provide the basis for long-term success in whatever venue we choose for leadership. It positions us to discern the authentic purpose of our leadership and to draw satisfaction from its intrinsic rewards.
There is no guaranteed path to become a good leader. It is a process requiring a lifelong commitment to personal development, so that you will be prepared to confront the enormous complexities leaders face and, under tremendous pressure, to fulfill your responsibilities honorably and successfully. The challenges are great, but the satisfaction of knowing you made a positive difference in the lives of others is even greater.
David Sokol, Mark Hurd, Greg Mortenson, Eliot Spitzer, and Rajat Gupta. The list of talented leaders at the top of their game losing their way continues to expand. All of these leaders were highly successful in their respective fields and had promising careers ahead of them. For this reason, their behavior is especially perplexing and raises many questions:
What causes these leaders who have been known for their integrity and their leadership to engage in unethical activities?
Why are they willing to risk great careers and unblemished reputations for such ephemeral gains?
Is this simply greed, as many have suggested, or is something deeper going on?
Do they think they won’t get caught, or could they honestly believe their elevated status puts them beyond the law?
Did they get caught the first time they did something inappropriate, or have they been building to this for a long time with lesser actions paving the way?
Despite myriad news articles, I have yet to see one that illuminates what led to such unusual behavior by such successful people. To be clear, I’m not taking a position on the legality of their actions, but rather examining the root causes of their actions.
After the fall of Enron, WorldCom, et. al. in 2003, I became very troubled by what had happened to so many of our corporate leaders. In 2004 I wrote a paper for my new class on “Leadership and Corporate Accountability” at Harvard Business School titled, “Why Leaders Lose Their Way.” I’ve excerpted pertinent examples below, which seem very pertinent to today’s cases:
Part I – Why Leaders Lose their Way
In the seemingly never-ending revelations of corporate scandals that have been exposed since the fall of Enron, the media, politicians, and the general public have taken to characterizing their leaders `as “bad people,” even to the point of considering them evil. The rest of our leaders have become suspect, as corporate executives are tied for dead last with used car salesmen in terms of the public trust. These overly simplistic notions of “good leaders” and “bad leaders” only serve to cloud our understanding about the nature of leadership in the business world and how good leaders can lose their way.
Very few people go into leadership in business to cheat or do evil things. Yet all of us have the capacity to do things we deeply regret unless we develop the means of staying centered within our leadership. These leaders are not bad people; they have just gone astray.
Before anyone takes on a leadership role, they should first ask themselves two fundamental questions, “Why do I want to lead?” and “What is the purpose of my leadership?” These questions are simple to ask, yet the process of seeking answers to them is profound and may take decades, even a lifetime, to answer.
If the truthful answers to the first question are simply power, prestige, and money, these leaders may be at risk of relying on external gratification as the source of their fulfillment. There is nothing wrong per se with desiring these outward symbols as long as they are combined with a deeper desire to serve something greater than oneself, such as to be responsible to those you are leading and to serve them. That’s where the deeper sense of inner satisfaction comes from, not from having money, prestige or power.
Leaders whose singular goal is the quest for power over others, unlimited wealth, or the fame that comes from success tend to look to others to give them a superficial sense of satisfaction and to attest to their greatness, if not their goodness. In public, as well as in private, these individuals exhibit ego-centeredness. As their names appear more frequently in the media, they start to believe their own press. As leaders of institutions, ultimately they come to believe that they are the institution and that the institution cannot survive without them.
Most leaders don’t start out this way. Yes, they like to be fairly compensated for their accomplishments and to have the material pleasures that come with them. Being given added power reinforces their success, and they enjoy the prestige that goes with it. But along the way, their success in these realms can go to their head, and they start seeking more and more external success until they cannot get enough. It is at this point – at the height of their power, their fame, and their material wealth – that they are most susceptible to losing their way, if they haven’t already lost it. Their string of successes creates a deep desire to keep it going, just as they feel more and more like imposters in their roles. Out of fear of losing their status and stature, they are prone to doing increasingly bizarre and even illegal things.
Losing Touch with Reality
Let’s examine how this happens. By focusing on external gratification instead of inner satisfaction, leaders find it difficult to stay grounded. They begin to lose touch with reality, even if the ability to define reality accurately was a key quality that brought them success in the first place. Typically, these leaders reject the honest critic who holds up a mirror to them and “speaks the truth to power.” Instead, they surround themselves with sycophants who tell them what they want to hear. Over time, these leaders lose the capacity for honest dialogue, as others learn not to confront them with reality or the truth.
Let’s look deeper into the root causes of these behaviors. Losing touch with reality, which is one of the most common and dangerous traits of successful leaders, often results from the lack of introspection about who they are. Underlying these tendencies may be an insatiable craving for success caused by a burning desire to overcome narcissistic wounds from childhood. These wounds may have been caused by perceptions that their parents did not love them, they are not good people, or the trouble they had in making friends in their early years. So they try ever harder to keep their string of accomplishments going so the external world will view them as highly successful.
. . . and Fearing Failure
The other side of the coin of craving for success is a deep-seated fear of failure. Many leaders get to the top by imposing their will on others, even to the point of destroying people that stand in their way. By the time they reach the top, they may be paranoid that someone else waiting in the wings to knock them off their pedestal. This is akin to the “King of the Hill” game that little children play in the schoolyard. Thus, these leaders can develop “the imposter complex,” caused by a deep insecurity that they really are not good enough to hold such a powerful leadership role and that any day now someone is going to unmask them.
To prove that they are not imposters, they drive so hard for perfection that they are incapable of acknowledging their failures and their weaknesses. When confronted with information demonstrating their failures, they try to cover it up or to create a rationale that convinces others these problems are neither their fault nor their responsibility. Often they will look for scapegoats on who they can blame their problems, either internal to their organization or on the outside. Through the combination of power, charisma, and communications skills, they force others to accept these distortions, causing entire organizations to lose touch with reality.
Making Big Mistakes
At this point leaders are vulnerable to making big mistakes, such as violating the law or putting the very existence of their organization at risk. In their desperation to keep their success going, they may wind up stretching the rules beyond legal limits. In some cases their distortions of reality and powers of persuasion enable them to convince themselves and others they are doing nothing wrong. Or they believe they can outsmart the enforcers of laws. Some rationalize that their deviations are acceptable because they are seeking to create a greater good.
In examining the behavior of leaders at this stage, one may conclude that they lack a moral compass, a sense of their “true north,” that keeps them centered. Some may have had a moral compass originally, but lost sight of it as they got caught up with external gratification.
The Loneliness Within
It is lonely at the top. No one doubts that. When you’re in that position, you know that the lives and fortunes of so many people rest in your hands, and you are ultimately responsible for what happens. If you fail, many will be deeply hurt. You try to deny that loneliness, which may lead to avoiding the anxiety of facing reality. You shut down your inner voice, because it is a constant reminder that long ago you abandoned your true self. It is just too painful to confront or acknowledge, but it returns to you in your dreams as you try to resolve the irresolvable conflicts rustling around inside your head.
. . . that Can Lead You Astray
Lacking connection with your own inner voice, you start listening to all the voices pressuring you, thinking that if you can satisfy them, all will be well. But their advice is often conflicting, or too painful to face. So you choose to listen only to those voices that reinforce your views. Meanwhile, your work life and your personal life are growing more and more unbalanced. Fearing failure, you favor your work life, even to the point of saying, “My work is my life.” You lose touch with those closest to you – your spouse, your children, and your best friends – or you co-opt them with your point of view. Eventually, you lose your capacity to think clearly about important issues.
By now your little mistakes have turned into major ones. No amount of hard work can correct them. In your desperation you keep digging yourself a deeper and deeper hole. The collapse is near. When it comes, there is nothing you can do to avoid it. You attempt to stave off the consequences, but societal powers overwhelm you. You are trapped. The tragedy of your behavior is unfolding to its ultimate conclusion. There is nothing you can do.
Who are you? You could be one of those executives facing prosecution for their actions. Or just a former CEO forced to resign “for personal reasons.” But “you” could be me, as we are all subject to these tendencies, in greater or lesser ways. We may not face a plight as severe as these leaders, but we can all go this route.
The Mark Hurd situation can only be considered a tragedy for everyone involved.
Hurd is one of the most outstanding leaders in the U.S. In 2005 he took over an ailing technology giant and restored it to greatness in just five years. He refocused HP on its original mission and values and built the company around its strengths – technology, customer service, and managerial discipline. He built a much stronger organization with excellent leadership at all levels, and unified a dysfunctional board of directors.
During a short span, he turned HP into the world’s largest technology company and expanded its revenues to $125 billion and nearly $9 billion in profits. The markets rewarded his leadership, and HP’s market capitalization has doubled during a period in which the S&P declined in absolute terms. He leaves behind a company that is demonstrably stronger than it was when he took over.
So what happened here? Did the HP board act “in a cowardly manner,” as Oracle CEO Larry Ellison charged in his letter to the New York Times?
No, the HP board acted in a unified manner to address an extremely difficult situation. Most likely, the board was blindsided when it received the letter from Jodie Fisher charging Hurd with sexual harassment. The board did the responsible thing in conducting a thorough investigation that concluded there was no basis for the sexual harassment charges, but that Hurd had violated basic HP employee policies regarding expense reporting and other issues.
Should the board treat Hurd differently from other HP employees that had committed similar indiscretions? Its answer was “no,” that the values and principles of the company had to take precedence over any individual, no matter how well he had performed or how valuable he was to the company. So the board’s unanimous decision was that Hurd had to resign. Reports out of the company indicate that HP’s global employee base was overwhelmingly in support of the board’s decision.
As much as the HP board doesn’t want to go through yet another CEO search, at least this time around it has excellent candidates both within and outside the company. Hurd has built a strong executive team with several excellent successor candidates. If the board chooses to go outside, it will have outstanding applicants lining up to be considered for the top job in Silicon Valley.
The question remains, how did an exceptional leader like Hurd let himself get into this position? We’ll never know how Hurd let himself get into this position, nor is it ours to judge. But his greater error was to dig the hole deeper. This is a classic case of Murphy’s Law of Compound Loss; i.e., when something goes wrong, individuals often compound their problems by trying to cover up the initial problem. For example, President Richard Nixon’s cover-up of the Watergate break-in is what compounded his problems and led to his resignation.
Hurd could have acknowledged his liaison in the first place and wound up with only a reprimand. Instead, he compounded his problem by submitting inappropriate expense accounts. Then, when the HP board initiated its investigation – which it was compelled to do by Fisher’s letter – Hurd made an agreement with her that kept her from cooperating with the board’s investigation. In business, we call this “hush money.” In criminal law the proper term is obstruction of justice. After his resignation was announced, Hurd allowed his close friend, Larry Ellison, to defend him by attacking the HP board.
In spite of his recent actions, I continue to believe Mark Hurd is an authentic leader who lost sight of his True North. No matter how authentic they are, all leaders make mistakes. When this happens, the key is to recognize that you alone are responsible. By having the self-awareness to see how you strayed off course, or by accepting honest feedback from people who know you well and care about you, you can acknowledge your problems and return to the course of your True North.
Hurd is as human as we all are. He’s facing the music for a personal failure, but this is far from his last chapter. Mark Hurd is only 53 years old. He has nearly half his life ahead of him. If he acknowledges where he went wrong, he can come back to lead other organizations and continue to make a positive difference in the world through his leadership.
As the minutes ticked away in the U.S.’ decisive World Cup match against Algeria, U.S. superstar Landon Donovan was determined not to permit a repeat of the U.S. 2006 World Cup disaster, when the Americans went home without a single victory. As his teammates felt their 2010 dreams slipping away, Donovan knew the soccer hopes of the nation rested on his shoulder. This time he could not fail.
As the U.S. saw chance after chance denied by the tenacious Algerian defenders and a lone goal disallowed on a missed call by the referee, even the neutral announcers declared the U.S. deserved to win. This time around an older and wiser Landon Donovan knew deserving success and achieving it are two different things.
Taking an outlet pass from his keeper, he raced down the hundred meter field, looking more like a track star than the crafty midfielder he is, and played the ball forward to teammate Jozi Altidore. When the Algerian keeper pushed away yet another shot, Donovan didn’t hold back. Moving forward toward the goal, he pounced on the loose ball and drove into the back of the net. Pandemonium erupted in the stadium and throughout the U.S. as the entire team piled on top of Donovan’s prostrate body.
When the game ended two minutes later, Donovan buried his head in tears. All he could say to the announcer was “We worked so hard the last four years, we couldn’t let this opportunity slip away.”
What enabled Landon Donovan to rise to this leadership moment? The answers can be found in the disappointments he has suffered from the 2006 letdown, to disappointments playing in Germany and a failed marriage in 2009.
Since he was a teenager, soccer watchers have seen Donovan’s potential to become America’s first world-class soccer player and fulfill the dreams of American soccer lovers. After a solid debut as a 20-year-old on the 2002 U.S. World Cup team that reached the quarter-finals, Donovan was expected to lead the Americans to even greater success in 2006.
It never happened. More than any sporting event in the world, the World Cup is an intense national competition that requires both mental and physical toughness. In 2006, Donovan hadn’t learned what that required. Nor was he prepared to step up to the leadership role expected by his teammates and his country.
Needing a win against Ghana to advance to the Round of 16, the U.S. instead lost the match and was eliminated. Donovan and his teammates earned only a single point in three games. Donovan himself had a rough ride, as he went scoreless and was criticized by U.S. fans for a soft, directionless performance.
Things didn’t get any easier for Donovan after the Cup. He endured difficult stints playing professional soccer in Germany where he only occasionally saw time on the pitch. He endured a difficult breakup with his wife and additional professional strife when news broke of a rift with world-renowned David Beckham, Donovan’s L.A. Galaxy teammate.
But Donovan did more than just “play through” the tough times. He dug deep into the root cause of his problems, and used his self-exploration to grow as a player, a person, and a leader. He even took up meditation to become more introspective.
Donovan told FanHouse.com that his recent struggles made him realize that all-important leadership lesson: the buck stops with him. “I am in control of what I do,” Donovan said, “and before, I thought different things determined how I would play or how I would respond or how I would act on the field.”
That sort of take-charge leadership style has propelled Donovan to new heights. He received the MLS MVP award in 2009 and won the championship with the Galaxy. On the world stage last week, as the U.S. stared at a 2-0 deficit at halftime against Slovenia, Donovan’s new calm and resolve showed through. In the third minute of the second half, he ignited a U.S. rally with a perfectly slotted ball from an impossible angle. When the U.S.’ winning goal was called by another erroneous call, he shrugged it off, saying, “We will focus on what we can control.”
Landon Donovan has learned from the searing pain of his personal crucibles. Rather than deny his disappointments, instead he used them to become a more mature leader, ready for the burdens of leadership placed on his shoulders by his teammates and his country. As the pressure mounted, he played through fatigue and disappointment and somehow kept going at a tireless rate.
When the opportunity presented itself, he didn’t flinch or choke. As he said, “in that instant, time just stopped,” no doubt as he recognized the chance to overcome the pain of the past and achieve his goal. Afterward he even thanked his ex-wife on national television for her help.
Was Donovan lucky? Not exactly, unless you believe (as I do) in Oprah Winfrey’s definition of luck as “preparation meeting opportunity.”
Now Donovan leads the U.S. team against Ghana on Saturday in the playoff round, with a chance to revenge the difficult 2006 loss. He is a battle-tested leader, who has learned to share the pressure, excitement, and joy of the World Cup with his teammates and now-loyal fans. As the Italian and French superstars head for home, Landon Donovan has learned from his crucible and is ready to lead with confidence.