Matthew Lynn Why a celebrity boss can be a problem
Sir Martin Sorrell has been deposed at WPP. Carlos Ghosn is making a torturous exit from Renaultnissan. At this rate, it is going to be hard to fill all the panels at Davos in a couple of months’ time, and the next television discussion on the role of business in society is going to struggle to find any talking heads of real stature. Both men were among the world’s most celebrated chief executives, trotting from TV studio to conference hall, offering their opinions on everything from globalisation to diversity to climate change and the impact of technology on society.
Is it a coincidence that they have both fallen in the same year? Not completely. In fact, while a measure of celebrity can be useful for a company, raising its profile and communicating on issues that affect its stakeholders, it can also be a warning sign. Too much fame shields the CEO from scrutiny, allows them to accumulate too much power and masks a decline in the actual business. It should be a red flag for shareholders – and there are at least three more high-profile business leaders out there that they should be watching very closely right now.
“If Davos was a person, it would be Carlos Ghosn,” ran the headline on a Bloomberg Businessweek
profile of the auto industry tycoon last year. In loving detail, the piece described his globetrotting lifestyle, meeting constantly with prime ministers and presidents and offering his view on just about every issue impacting the global economy. This week of course, Ghosn was arrested in Japan amid allegations of misuse of company funds, and while he is clinging on at Renault he has been fired at Nissan, and one of the world’s largest car manufacturers has been plunged into an almighty crisis. Sorrell was in many ways a similar figure. Personally charming, and furiously driven, he was a master of the Davos circuit, and a familiar voice on Today, yakking away about every subject under the sun. And yet earlier this year he too was dramatically ousted amid a blizzard of allegations relating to personal misconduct, all of which were denied.
Both men had two things in common. They had incredibly high profiles. And they had an increasingly dismal record of delivering for shareholders. Renault-nissan might roll out hundreds of thousands of cars a year, but it struggled to make a decent profit on them. WPP might have been the biggest advertising and marketing agency in the world but its shares had drifted aimlessly for five years and had done little for 20. Neither man was delivering where it really counted – on the bottom line or on the stock market.
It is impossible to ignore the connection. In truth, their turbocharged celebrity turned into an effective shield from the very mediocre performance of their companies. Even more worryingly, although this is hard to prove, there must be a suspicion that it may have allowed them to get away with behaviour that would otherwise be unacceptable in a quoted company. The result? Tough questions don’t get asked, and even less answered. And like any organisation where accountability has evaporated, performance very quickly goes downhill.
After all, if either Sorrell or Ghosn had been subjected to a little more examination, the issues at both companies might have been identified and fixed much earlier.
If celebrity is a red flag, who else out there should investors be worried about? Jamie Dimon at JP Morgan Chase is constantly offering his opinions on everything. But the share price has stagnated for the last year. Sheryl Sandberg at Facebook has become a feminist icon, and has certainly done a lot to push women’s role in management. But as chief operating officer of Facebook she has allowed the company to run out of control and it is now in serious trouble. In this country, Unilever’s Paul Polman has been outspoken on European and environmental issues. But there has been little progress on moving the business forward, culminating in the debacle of its failed move to the Netherlands this year.
A few celebrity CEOS can combine a social conscience, involvement in political and social issues and a prominent personal profile while also driving their business forward. But it is often a sign that the fundamentals are being neglected, and that an ego has started to get out of control. The downfall of Ghosn is yet another reminder of that – and there may well be a few more in the year ahead.
‘The result is, tough questions don’t get asked, and even less answered’