BETRAYED BY OUR LEADERS

Betrayed by our Leaders--first in a series

1 November 2010

My perspective on leadership
I believe that the well-being of the people of a country depends crucially on the quality of its leadership.  The tremendous sense of failure and frustration that people in the United States of America feel about their lives now and their prospects for the future is clear evidence that our leaders have failed us.  Now failure can result from mere incompetence, which would call into question the judgment of the electorate for consistently electing idiots.  I think there is something much worse happening--Americans have been betrayed by their leaders.

Here is how I am using the word “betray”: to violate a trust that someone has placed in you; to pretend that you are interested in someone else’s well-being when your only interest is self-enrichment.

This betrayal has happened at the hands of our leaders in multiple facets of our life: political leaders, business leaders, leaders in government, leaders in the media, religious leaders, educational leaders, and, most troubling, our thought leaders.  I can (and will, over time) muster evidence that my claim is true, but here I will make a polemical statement.  Let me start with business leaders, for I come from the world of business.

Part 1: Betrayed by our business leaders
If I hear one more graduate of Harvard Business School say, “the purpose of my business is to make money”, I am going to first scream and, second, kick that person where it hurts the most.  Sorry, but the purpose of business is to do something you want to do, make something you want to make, hopefully things that are useful to others.  It’s no different than why people write, sculpt, compose music, or create great works of art.  Now, you may have to make money to do what you want to do, and rewarding your financial supporters is at the heart of capitalism.  But to say that making money is the goal is to confuse goals with constraints.  It’s like saying, “In order to live, I need to make money, so the purpose of living is to make money.”  And the problem with modern leaders of big businesses is that they are hired guns who don’t really want to do anything other than make money.

Try out the following statements and see how they feel:

“I want to invent a cure for polio because I want to make money.”  (Did you know that Jonas Salk gave away all rights to the vaccine he invented because he wanted to benefit mankind more than he wanted to make money?)

“I want to be Chairman of the Joint Chiefs because I want to make money.”  (The job is tougher than that of most corporate CEOs, the pay is a hundredth, but the talent is every bit as good, if not better.)

 “I want to create Central Park in New York City and the Emerald Necklace in Boston because I want to make money.”   (Frederick law Olmsted was one of the greatest champions of the City Beautiful movement, which said that the more aesthetically pleasing you make a city, the more people will want to live in that city, and the happier they will be.  Making money was no part of his calculation.)

If, in other walks of life, people can do great things without money dangling from a stick in front of them, why is it that business leaders in the West are like Pavlov’s dogs, salivating at the prospect of making money, and unable to perform without being paid vast sums?

“OK,” you say, “but what is the connection between greed and betrayal?”

What happens in too many large corporations is that first, “performance” is defined as share price performance in the next three to six months.  Second, the concept of “pay for performance” is introduced, and the CEO is given lots of stock options, whose value will depend on stock price.  Voila!  The CEO’s rewards are driven by performance!

Here’s the connection to betrayal.  When you recruit people to top business positions with the promise of “pay for performance”, with “performance” being short-term share price increases, you are likely to get people who are driven by money and only by money, people who care little about creating jobs for Americans, creating great cities, creating great companies to work for, making sure their employees have decent benefits, least of all people who think about how their companies will do well 100 years from now.  Their focus is on making as much for themselves as they can, as soon as they can.  And if they have to sell everyone around them down the river, so be it.

Directors of these companies abet this behavior—or should I say demand it? They not only define performance too narrowly, they fail to provide true oversight, not ensuring that even the narrowly-defined performance they want is truly there.  Not surprisingly, CEOs slash costs to goose profits.  They strip benefits from employees.  They lay off thousands, empty out city centers, embark on mergers and acquisitions to expand fiefdoms, cook the books, hype the stock (in cahoots with analysts no less venal), and decamp with the loot before the façade collapses.

Only then do we discover--too late!--that the companies they ran have been hollowed out or corrupted, and are on the verge of failure unless bailed out by taxpayers.  Think Enron, WorldCom, AIG, Goldman Sachs, BankofAmerica, and General Motors, and then multiply that number a thousand-fold.  The image that captures this behavior with magical succinctness is this cartoon by Pulitzer Prize winner Tom Toles in the Washington Post:

Do companies owe something to society, in addition to what they owe to their investors?  Yes, yes, yes!  Money is only one of the ingredients of success.  Infrastructure, an educated population, a safe environment, patent protections, the rule of law, and, not least, government bailouts, are all benefits conferred by society, without which corporations would fail very fast.  Thus, when a company is allowed to come into existence, there is a sacred trust placed in it by society to give something back.  That trust has been betrayed.