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How Will the Leaders of Tomorrow Recover from the Scandals of Today?

By Chip Cassano

It seems that nobody loves corporate CEOs anymore.

They were conspicuously absent when President George Bush signed into law what the Associated Press called "the most far-reaching government crackdown on business fraud since the post-Depression era," but there was still no question of who the president was talking to when he said, "Free markets are not a jungle in which only the unscrupulous survive, or a financial free-for-all guided only by greed."

Earlier, on the same day that WorldCom's $3.9 billion "overstatement" of earnings made the news, USA Today ran a front page spread reporting a survey that showed that 82 percent of CEOs—brace yourself—admit to cheating at golf. The article went on to solemnly question whether that might not be symptomatic of an "anything-goes mentality" among corporate executives.

You could almost feel sorry for them—until you remember that this is a group of men and women who, according to the Wall Street Journal, collect an average of $1.6 million each year in cash compensation, supplemented by another $5.4 million in stock options and other incentives. More disturbing, perhaps, is the perception—often justified—that those lavish salaries and benefits are unrelated to company health or profitability.

Whether CEOs deserve to be the scapegoats for public outrage over imploding corporations, sliding stock prices, and a lackluster economy, there is little doubt that tomorrow's leaders will face a changed landscape because of it.

Rosemary Hartigan

"Any legislation as significant as [that signed by the president] is going to have an impact on a company's operation," said Rosemary Hartigan, a director and associate professor in UMUC's MBA and Executive MBA Programs. "Everyone should be concerned, even if in his or her heart a CEO says, 'I know what I'm doing is right.' Boards of directors are going to change, the CEO's relationship to the board will change, and compensation structures will probably change."

Hartigan enjoys an uncommon vantage point from which to comment, having practiced law, established and operated her own business (Archai Consulting, which counted General Motors Corp. among its clients), and worked in academe. She called for a return to traditional values of honesty, thrift, and strategic planning; recommended that CEOs be trained in both ethics and empathy; and questioned whether new legislation—such as that demanding that CEOs sign off on company financial statements—would yield the desired results.

"If a CEO is dishonest, how much difference is it going to make to ask him or her to sign a piece of paper?" Hartigan asked. "In their book Credibility [Jossey-Bass, 1993], [James] Kouzes and [Barry] Posner define leadership as a 'reciprocal relationship between those who choose to lead and those who decide to follow.' This relationship is based on shared values and trust."

Recent scandals, Hartigan said, will make it far more challenging for corporate leaders to establish that trust, and may usher in an era of moral "political correctness," with business leaders and politicians mouthing the same platitudes. In the end, leaders can only be judged by their actions.

"Leaders who take a pay cut rather than lay off workers, who forego perks (such as corporate loans) that are unavailable to the corporate rank and file, and who refuse bonuses when the company isn't making a profit: these are the leaders who will gain—or regain—the trust and loyalty of their constituents," Hartigan said.