22 February 2009
During my career in financial services I’ve adopted a unique way of assessing the quality and caliber of the managers I have worked for, and with, by drawing upon my time in the United States Marine Corps. At the end of the day I don’t look for quality management, but quality leadership; things get managed, people require leadership and if leadership is lacking, you’re going to manage to fail.
The entire crisis the economy is facing currently can be directly attributed to two interconnected points of failure: corporate governance and leadership. By far, however, the failures in governance rest upon this other, much more insidious, failure – ineffective, incompetent, and ignoble leadership. And the failures are not just in the private sector, but are also prevalent at the regulatory and congressional levels as well. Based upon what we have had demonstrated to us these last several months, all of these bodies are equally culpable in managing to fail in upholding their responsibilities. This failure in leadership is simply without comparison.
Since the 1970’s this country has made a gargantuan investment in graduate business education that has brought the United States to the pinnacle of world economic power and the precipice of an economic abyss. Call me cynical, but all this investment in business education seems to have advanced a culture that rewards cleverness and guile more than intelligence and character; salesmanship trumps leadership. We need only look at the craven, self-centered manner in which the SEC managed to fail in the Bernard Madoff affair as confirmation. The NY office was more concerned about “how they would look” in accepting leads given to them by the Boston office than the fraud itself.
The SEC then compounded this failure in pursuing Harry Markopolos’s repeated leads by managing to fail in demonstrating the required competence in reviewing Madoff’s securities operation, audit trail, and client financial statements. We found out only late last week that for more than thirteen years, Madoff had not placed one trade for a client account. It would seem the entire SEC managed to fail at every turn in its duty to protect investors. Quality leadership is not demonstrated simply by possessing a degree from an accredited institution, wearing a suit, or giving lip-service to motivational poster slogans.
Another clear example is John Thain, former CEO of Merrill Lynch. He’s learned leadership requires much more “substance over form” than the other way around. It means practicing what you preach and not putting your personal ego ahead of those you are leading. In the military officers who manage to fail at leadership can be charged with criminal offenses: dereliction and conduct unbecoming are two that come to mind in the case of John Thain. Ultimately though, the real dereliction charge can be leveled at the Board who managed to fail in its duty to oversee Merrill Lynch management.
Board level leadership is a centerpiece of our financial market system. It requires people who have demonstrated industry experience, demonstrated operational and subject matter expertise, and demonstrated independence from management. If Boards continue to slip and slide in these three basic leadership qualities then America’s companies will continue down the path of managing to fail.
The entire crisis the economy is facing currently can be directly attributed to two interconnected points of failure: corporate governance and leadership. By far, however, the failures in governance rest upon this other, much more insidious, failure – ineffective, incompetent, and ignoble leadership. And the failures are not just in the private sector, but are also prevalent at the regulatory and congressional levels as well. Based upon what we have had demonstrated to us these last several months, all of these bodies are equally culpable in managing to fail in upholding their responsibilities. This failure in leadership is simply without comparison.
Since the 1970’s this country has made a gargantuan investment in graduate business education that has brought the United States to the pinnacle of world economic power and the precipice of an economic abyss. Call me cynical, but all this investment in business education seems to have advanced a culture that rewards cleverness and guile more than intelligence and character; salesmanship trumps leadership. We need only look at the craven, self-centered manner in which the SEC managed to fail in the Bernard Madoff affair as confirmation. The NY office was more concerned about “how they would look” in accepting leads given to them by the Boston office than the fraud itself.
The SEC then compounded this failure in pursuing Harry Markopolos’s repeated leads by managing to fail in demonstrating the required competence in reviewing Madoff’s securities operation, audit trail, and client financial statements. We found out only late last week that for more than thirteen years, Madoff had not placed one trade for a client account. It would seem the entire SEC managed to fail at every turn in its duty to protect investors. Quality leadership is not demonstrated simply by possessing a degree from an accredited institution, wearing a suit, or giving lip-service to motivational poster slogans.
Another clear example is John Thain, former CEO of Merrill Lynch. He’s learned leadership requires much more “substance over form” than the other way around. It means practicing what you preach and not putting your personal ego ahead of those you are leading. In the military officers who manage to fail at leadership can be charged with criminal offenses: dereliction and conduct unbecoming are two that come to mind in the case of John Thain. Ultimately though, the real dereliction charge can be leveled at the Board who managed to fail in its duty to oversee Merrill Lynch management.
Board level leadership is a centerpiece of our financial market system. It requires people who have demonstrated industry experience, demonstrated operational and subject matter expertise, and demonstrated independence from management. If Boards continue to slip and slide in these three basic leadership qualities then America’s companies will continue down the path of managing to fail.
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