There remains a lot of confusion, including from sources where you wouldn’t ordinarily expect it, about what a CEO really is. There is a persistent inclination to see the CEO as, essentially, the company. He or she is viewed as an all-powerful figure who issues orders which are expected to be obeyed.
Consider this recent piece from The Economist by the author of the “Lexington” column, which concerns itself with prominent issues in the United States. This one is about the final months of the Bush Presidency, offering some thoughts about what they mean and how it all may have come about.
The politics aren’t the issue, here; this sentence is: “Mr Bush liked to think of himself as a CEO at the head of a government machine rather than as a politician in a town of politicians.”
The point the author makes is instantly recognizable to the reader. What is interesting is that the metaphor used to make it is a wholly inaccurate depiction of what the role of the CEO really is.
It is true that many of us – including many CEOs – do view (or wish to see) the top boss as possessed of the degree of complete, unchallenged authority and control over a mechanism that merely awaits commands that The Economist author suggests is the case. But just check with a CEO – or an organizational “machine” – or two to find out if that is a reasonable description of the dynamics that really obtain at work and how they are dealt with.
And, indeed, where it does – or is contrived to – happen, the results are rarely as decisive or salutary as the comparison suggests. What’s more, where they are, it is usually made both possible and putatively necessary by an emergency situation; when that ends, so do the circumstances that make such a regime feasible or even nominally justifiable.
Let’s take a look at the other side of the Lexington comparison. The president is indeed a politician obliged to work things out with other politicians. Some of those are ambitious and immensely capable members of his or her own “organization,” the executive branch. Significantly, others are members of another branch of government, the legislative, which presumably deliberates and produces the legislation which the president is charged with executing.
That is an interesting aspect of this discussion. On the one hand, you have a legislature directly representing the people and constituted specifically to determine and give direction to the actions of the government – much like a board of directors. On the other, you have an executive which gives expression to that direction.
But what really happens is a struggle between the executive and the directory functions that has persisted since the founding of the nation. It is no good, the argument goes, to wait passively for direction from a cumbersome and often indecisive legislative process. Instead leadership needs to be provided by the executive, which is characterized by much-needed focus, vision, and energy. In fact, this approach suggests that the legislature is best not the source of legislation, but merely the formal endorser of programs and policies created in the executive.
Sound familiar? Is there any more legitimacy in an imperial CEO than in an imperial president? Is the lack of balance – or, perhaps, distorted weighting – between these organizational functions any more beneficial, acceptable, or dangerous in one setting than in the other? Should a CEO view him- or herself – and be viewed by owners/directors – as master of the machine, or a politician among politicians?
Whether in business or politics, we are currently living through a particularly important period for considering such matters – and for expressing our views regarding them. Please do so wherever you are able to cast your vote – whether as a citizen or a shareholder.
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Today’s tips: One of the key controversies highlighted by the current financial mess is the familiar matter of executive compensation. Please see this essay on the resurgence of “say on pay” initiatives by Carl Icahn at The Icahn Report, as well as this one by Peter Galuszka of BNET.
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5 Comments
Jim – The ramblings of GWB as to his role I do not think serves your point very well. Your basic case for comparing the government to the firm is faulty. Faulty because the government basic “rules of the road” are different – the firm is based on a charter granted by the government and the government – USA’s at least – is formed in it’s Constitution. In our Constitution the basic operational activities are broken up between the executive and the legislative branches. The Congress is nothing like a Board of Directors in all to many ways to need to be defined.
There is no way to compare marketing to taxing authority – no way to compare compliance to the Supreme Court – no way to compare the authority to declare war to market share activities.
Hello again,
The firm is indeed granted a charter to operate, as well as a legal framework within which to do so – just as, it should be pointed out, are all governments themselves in the United Stated below the level of the state (the state being the charter-granting government), and there are tens of thousands of these governments, from large cities to school districts and the like.
So, governments and corporations share this. They also share certain governance features. But the main point of the post is to compare the rights of owners – whether of sovereignty in society or of shares in a corporation – with those of the agents they assign – politicians or managers – to administer their affairs. In this respect the comparison points to a competition for power between the two sides that is real, documented, and of fundamental importance in both domains.
The details of the differences between the Constitution and a corporation’s bylaws do not obviate the existence of this competition between owners (or their representatives, whether in Congress or on the board) and those assigned specified executive power. The core issues in this regard, and their influence over the course of events and fiduciary integrity of the structure – whether governmental or corporate – are essentially the same and of great importance, requiring careful consideration.
Thanks for your observation, and for providing me the opportunity to address it!
The issue of ownership seems strained when comparing capital investments to the blood and treasure demand of citizens. The next that you seem to offer short shift is that of the distribution of authority used at most government levels. It is also necessary to remind you that the example you used was a federal – GWB – and his failed attempt to compare his behavior and lack of performance with that of a CEO.
What is evident now in our current financial melt down is that is all to true that he followed the CEO of Enron. What is also true is that in the coming days the fall out from GWB is going to bring about a response that will make S-OX look like having a dunce hat place on corporate leadership – compensation – taxing – all measure of perks will be put under controls that leaders will need much assistance to cope with.
The one point I want to make clear – I get that you are attempting to bring more voices into the leadership discussion – I too want and see the need for the same. The problem is that in this post modern state of affairs – leadership needs to understand the demands of co-valuing others contributions and needs. The must take those issues to heart and move from there.
Perhaps the fact that the piece from The Economist referred to a highly charged political matter is contributing to some confusion here. Let me try again to clarify the matter.
This post is not about politics generally nor about any particular politician. Neither is it an effort generally to compare governmental and private – especially commercial – organizations. It certainly is not an effort to claim that they are the same.
The purpose is two-fold. First, to take exception with the suggestion made by the author of the piece from The Economist about what a CEO is really like.
Second, it was to suggest that the role of a CEO perhaps should more closely resemble that portrayed as appropriate for a president – to act in some respects as a politician among politicians – to recognize the presence of multiple sources of power and influence and act as a good-faith, albeit also a purposeful, broker in working with and among those forces.
As a part of this point, I attempted to break out the vital question of the responsibilities and roles of the executive and directive (or owner-interpretive) authorities, the natural competition that tends to spring up between them, and the consequences of the outcome of that competition on the integrity of the overall system of which they are essential interacting parts.
It is decidedly incorrect to pretend that this is not a major element of the debate about the nature of government in the United States, or that it is not a similarly, and increasingly, important question with respect to corporate governance, as well.
It is possible to make this point and to have this discussion without introducing political invective, and it is my hope that this site will be used for the former, and that the latter will be conducted on other sites that welcome it.
I do appreciate your participation in the discussion, and hope we will continue to hear from you.
The issue between us seems to be an understanding regarding a couple key points – what are the contours of the “directive (or owner-interpretive)authorities” – …”the consequences” and the “integrity” of the system without dealing with the politics nor the personalities that inhabit the system. If I attempt to strip away the politics from any institution/organization of people – government – firm – family – I end up thinking only of their artifacts. To a bare stage waiting for the drama to begin or of the stage where they just left.
I am very open to a nominalistic discussion to the extend that the drama removed by the stripping of the personalities has a language construct that is sharable. So I await.
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