Leadership lesson for firms
RAndom power grabs. incredible comebacks. Rampant egos. epic acts of treachery and improbable ascents to high office: they are all as much a feature of FtSe 100 boardrooms as of the latest tory leadership contest.
in business, the main cause of disaster is not hostile markets or unforeseen ‘black swan’ events, but the human fallibility of leaders.
Fortunately for shareholders, most companies are more careful about selecting and keeping their leaders than the tory party.
Succession planning is taken very seriously. Boardroom grandees and a battery of headhunters normally dragoon a long list of outside and internal candidates.
not all corporate handovers run smoothly. But processes should be in place, as are safety nets in case of an unexpected departure. A trussian tenure of just 44 days is unthinkable in the corporate world, no matter how execrable the Ceo’s performance.
the average lifespan of a FtSe 100 chief executive is just under six years, which is around twice as long as either Boris Johnson or theresa may spent in downing Street.
if any company were to emulate the tories and sack two bosses in disgrace in a matter of months then contemplate bringing back the first one it would be a strong sell signal, to put it mildly. Business leaders have been watching events in Westminster with the same appalled fascination as the rest of us.
many of the businesses listed on the FtSe 100 are international and are led by chief executives from overseas. they must be wondering what on earth is going on in their adopted country.
executive priorities being what they are, some will be thinking about how much better off they might be with a job paid in dollars rather than an enfeebled sterling.
THeRe are lessons businesses can take from the unedifying psychodrama. most obvious is the importance of creating a cohesive corporate culture. Any company that allowed itself to descend into a teeming hive of dissent and division like the tory party would find shareholders unforgiving.
Strong governance is another. leaders who flout the governance rules are indulged by investors – and voters – while they appear to be delivering, but when they falter they are likely to find themselves friendless. Weak boards are exposed in times of difficulty.
investors might also reflect on the personality of corporate leaders, and whether they are serving their own interests ahead of the company and its stakeholders.
one of the most interesting chief executives i have interviewed over the years was Chris Wiscarson, who tried to complete a clean up at the failed pensions giant equitable life several years after it was brought to the brink of ruin by earlier managers.
His conclusion after sifting through the wreckage was that the blame did not lie with complicated annuity guarantees as per the usual diagnosis on equitable’s downfall, but with sheer hubris.
Chief executives, he said, should be made to take regular psychological tests to spot signs of megalomania and to check whether they are keeping in touch with reality by listening to regulators, colleagues, ordinary customers and staff. not a bad idea, in business or in politics.