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| 2003
News and Press Releases |
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HEADLINE:
The CEO Blues
By: Jeffrey Sonnenfeld
The Wall Street Journal. December 9, 2003
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EXCERPT: WITH THE HOLIDAY season upon us, perhaps now's a good time to look back on the year and recount which CEOs have been naughty or nice, and how the climate for top executives has changed in our post-Enron world. First, CEO tenure is less certain than ever before. Research by Booz Allen Hamilton suggests that 39% of CEO turnover last year was involuntary, up from 25% the prior year. In the '90s boom years, CEOs were often eager to accept the glory. Now, society is eager to assign them blame. Second, the new faces of leadership are actually old ones. We began the year with a new SEC chief, 72-year-old William Donaldson, as the white knight restoring trust in that embattled agency. In the last few days, Freddie Mac turned to former head of the American Stock Exchange Richard Syron as its new chairman and CEO, Boeing turned to retired HP CEO Lew Platt and retired McDonnell Douglas CEO Harry Stonecipher for its leadership, while Delta turned to retired GM CEO Jack Smith and retired Burlington Northern CEO Gerald Grinstein. These moves were part of a renewed trend favoring what I call "generals," those retirees who return following leadership crises. Third and most noteworthy, however, is the new reason for their many ousters. Sure plenty of firms -- including Raytheon, Kmart, Spiegel, and Schering-Plough -- lost their CEOs due to faltering market performance. There are also the rogue CEOs, like as HealthSouth's ousted leader Richard Scrushy, currently facing an 85-count indictment for allegedly masterminding a $2.7 billion fraud. Others include mutual-fund CEOs such as Richard Strong, Gary Pilgram, and Harold Baxter -- all forced out of the leadership of their eponymous enterprises while facing securities fraud investigations. But the exit of Freddie Mac's Gregory Parseghian -- replaced by Mr. Syron after just five months on the job -- is different. It is part of a new pattern of CEO exits that include the recent departures of Boeing's Phil Condit, Delta's Leo Mullin, NYSE's Richard Grasso, AMR Corp.'s Don Carty, and Sprint's Bill Esrey. Clearly, these former CEOs -- some of whom I'm privileged to call my friend -- were performing comparably to their industry peers and surely were not scoundrels who had defrauded their boards or swindled their investors. Thus if they were well-respected business leaders with high performance standards who broke no laws, why did they leave office? The answer is one word -- credibility. Each of these leaders sadly lost the legitimacy to lead because they lost their moral authority.
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