A new rule­book

The Obama ef­fect be­ing felt on Wall Street

Finweek English Edition - - Business Strategy - FRIK ELS frike@fin­week.co.za

“DUR­ING GOOD TIMES it’s easy to find leaders; dur­ing a cri­sis – such as the one we’re ex­pe­ri­enc­ing now – it’s much more dif­fi­cult.” That’s the view of Dale E Jones, vicechair­man and part­ner of the CEO and Board Prac­tice in the Amer­i­cas of Hei­drick & Strug­gles, a lead­ing global re­cruit­ment com­pany. Jones serves as an ad­viser to boards and CEOs on is­sues such as lead­er­ship, re­cruit­ing, suc­ces­sion plan­ning, cor­po­rate gov­er­nance, com­pen­sa­tion and en­ter­prise risk. Jones is also cur­rently co-lead­ing Hei­drick & Strug­gles’ ad­vi­sory ef­forts to as­sist US Pres­i­dent Barack Obama’s ad­min­is­tra­tion about tal­ent and lead­er­ship.

We live in am­bigu­ous times and the world needs those who can lead in a cri­sis, says Jones. “The re­set but­ton has been hit on Wall Street – but things are far from clear. We now have to find bank­ing CEOs able to func­tion with gov­ern­ment in­ter­ven­tion. Be­fore, a CEO of a bank didn’t have to fig­ure in gov­ern­ment (among many stake­hold­ers) as well.

“The de­bate about how to bal­ance share­holder ex­pec­ta­tions and the pub­lic trust has also in­ten­si­fied. Be­fore share­holder ex­pec­ta­tions were para­mount to the CEO. It had to be met al­most at all cost. Now share­holder ex­pec­ta­tions have to be matched with the pub­lic trust.”

Jones gives the ex­am­ple of Chrysler, where the car com­pany’s pen­sion fund cred­i­tors were ar­gu­ing that the in­ter­ests of their mem­bers were be­ing prej­u­diced ver­sus those cur­rently be­ing em­ployed by the firm. It ba­si­cally pit­ted re­tirees ver­sus em­ploy­ees. (The funds were only briefly able to block the bank­ruptcy pro­ceed­ings through a US Supreme Court rul­ing.)

There’s also re­luc­tance among prospec­tive candidates to com­mit to fill­ing se­nior ex­ec­u­tive po­si­tions. “We’re cer­tainly not out of the cri­sis yet and the un­cer­tainty with re­gard to reg­u­la­tion, greater over­sight and just how Wall Street will func­tion in the fu­ture is mak­ing ap­point­ments dif­fi­cult. The ques­tion is be­ing asked much more fre­quently: Who would want to be a CEO? Es­pe­cially of a listed en­tity.”

Much greater trans­parency, curbed pay ex­pec­ta­tions, a new ap­proach to risk man­age­ment and changes in board as­sess­ments are other fac­tors CEOs are now forced to deal with. Many of the new pro­pos­als go some way be­yond Sar­banes-Ox­ley rules and the King rec­om­men­da­tions on cor­po­rate gov­er­nance.

The re­luc­tance among some se­nior ex­ec­u­tives to take on such daunt­ing po­si­tions is also ap­par­ent from anec­do­tal ev­i­dence. Jones tells of one call he made to a pos­si­ble CEO can­di­date for a large fi­nan­cial in­sti­tu­tion that’s now a ward of the US Fed­eral gov­ern­ment. The first words from the prospec­tive CEO were: “I wasn’t ex­actly looking for­ward to this call.” Even 18 months ago the pos­si­bil­ity of head­ing an in­sti­tu­tion so vi­tal to the US’s eco­nomic sys­tem would cer­tainly not have elicited such a re­sponse. Jones says candidates now have to look be­yond jobs and a ca­reer – it has to be a call­ing.

Jones also finds ev­i­dence of the so-called “Obama ef­fect” be­yond the board­room. “Obama has from the out­set em­pha­sised val­ues-based, eth­i­cal and prin­ci­pled lead­er­ship and stood against the in­flu­ence of spe­cial in­ter­ests. I think it has enor­mous im­pli­ca­tions for other leaders, in­clud­ing in Africa. The world needs moral lead­er­ship. I think 2010 is a great plat­form for South African leaders to show to the world and the rest of the con­ti­nent it leads for the good of the peo­ple and not sim­ply act­ing out of self-in­ter­est.”

Based in Wash­ing­ton, Jones sits on a num­ber of cor­po­rate boards and joined Hei­drick & Strug­gles in 1999. Af­ter a stint as CEO of PlayPumps In­ter­na­tional, a non-profit or­gan­i­sa­tion that pro­vides clean drink­ing wa­ter to vil­lages in sub-Sa­ha­ran Africa, Jones re­turned to Hei­drick & Strug­gles at the beginning of this year.

“I got the best of both worlds. I re­turned to Hei­drick be­cause I be­lieved the firm’s duty is to make the coun­try a bet­ter place. And I also con­vinced the firm to in­vest in PlayPumps. In the end I didn’t have to choose be­tween be­ing the NGO guy or the busi­ness guy,” says Jones. PlayPumps use a sys­tem where a merry-gor­ound a chil­dren’s play­ground also pumps wa­ter to the lo­cal com­mu­nity. The goal is to in­stall 4 000 of those sys­tems, with 1 500 al­ready op­er­a­tional.

NGO and busi­ness guy. Dale Jones

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