For nearly two decades, Carlos Ghosn has been at the helm of Renault-Nissan (Nissan acquired Mitsubishi in 2016) and considered an icon for the automotive industry by managing two Fortune 500 companies at the same time. A few weeks ago Ghosn was arrested for under-reporting his earnings in Japan and also allegedly using the company’s assets for personal use.
Lately, another star CEO who has been coming under fire is Sheryl Sandberg. Once the darling of Silicon Valley, it’s now hard for Sandberg to deny that she did little to steer Facebook away from unethical business practices.
While predicament Ghosn, Sandberg and their respective companies find themselves in is startling, it is not surprising or that uncommon. Many star CEOs think they can get a free hand in doing almost anything without any questions being asked about their decisions or their conduct.
Transparency failures
In the aftermath of Ghosn’s removal, Nissan’s CEO Hiroto Saikawa went on to say that too much power being concentrated on one individual allowed for the misconduct, and that the company failed to detect it because its structure wasn’t transparent enough.
And therein lies the problem—star leaders aren’t questioned about their decisions or held accountable like other leaders can be. According to Pallavi Jha, chairperson and managing director of Dale Carnegie Training India, this happens not because of the authority that a star CEO commands but because of their influence on people. “The stronger you are as a manager, the more people you will carry along. The moment you create followership, you will be allowed to do more things,” she says. While having charisma is a very good thing for a leader, according to Jha it can also be problematic. “Charisma can be used positively to inspire, to open avenues and to make things happen,” she says. But it can also go the other way—it can intimidate people who report to him/ her or it can make a leader complacent enough to ignore opinion around them. And this is when a star CEO with undue proportion of authority, power and influence falters.
Aditya Narayan Mishra, director and CEO of CIEL HR Services, believes that the board has a major role to play in keeping business leaders—stars or other wise—accountable. And for this, it’s crucial to have the right combination of non-executives and executives on the board. “The board needs to ensure that the governance norms are set right, there is accountability that is felt through each of the meetings,” he says. Mishra gives the example of Satyam Computer Services, where the company’s board, which was supposed to maintain checks and balances, didn’t do its job. “The then managing director had such a large Banyan tree kind of impact on the board that everybody thought he’s larger than life of personality, how can he be questioned,” he says.
A company’s role
When the going is good, companies like to believe that a star CEO has a major role to play in the success. It is easy to get taken in by the charisma, confidence and flamboyance of the individual, and extend a long rope to the star to then to do his or her magic. This happens from a place of trust, explains Jha. The leader becomes a star because he/she is good at their job and has proven their mettle. As a result, the organization and the board of directors believe that he/she will be able to pull off all kinds of strategic decisions and maintain decorum. “The oversight happens because there is some tacit trust in the individual. And, therefore, the individual has a bigger say,” she adds.
Another problem is that a star CEO, with a magnified image and overbearing influence, can overturn recommendations of committees set up to audit impact or expenses. Sometimes committees don’t get a chance to function or are just a sham, notes Mishra.
Hence, at a later stage when a CEO or the head of the organization gets into trouble, the organization cannot absolve its role in the situation. After all, if it hadn’t given so much power to the star CEO, the company could have avoided its negative predicament. “CEOs do sometimes think they are gods, that whatever is happening is because of them and even organizations tend to believe that. The company management is partly responsible for creating a halo over the person based on the success. And while the leader is responsible for his/her actions, but who made that person god? Poor internal systems and processes enable this,” says Vidyut Lata Dhir, professor of organizational behaviour and leadership at SPJIMR, a management institute in Mumbai.
Time to change
One way out could be for organizations to consider adopting distributed leadership. “Gone are the days of one person commanding and controlling it all. It’s not like only one person has all the skill sets and others know nothing. Every decision that’s taken in a company, should be taken by a team of leaders and not one star performer. Today organizations harp on team building, why not implement that at the top level too?” asks Jha.
It’s also crucial to have a solid board in place as a lot of issues can be resolved before matters go out of hand. Mishra observes that while the auditors are much more stringent, he doesn’t see that seriousness among the board of directors; at least not to that extent. And the way to resolve that, he suggests, is members of adequate stature be appointed, who know their job and take it seriously. “When a CEO has been in a company for a very long time and the board members have been there for not that long, then their ability to question also gets limited. Ultimately, they are also appointed by the CEO. So structurally the formation of board is an issue as is the tenure of the board members,” he says. In addition to this, the sitting fee for the board members should be increased so that they feel committed to follow an exemplary code of conducts.
Finally, while there are enough regulatory provisions, Dhir believes, the parameters to measure success are faulty and need to be reviewed.
CEOs who landed in trouble
Jack Dorsey, Twitter
His creation is one of the most used social media platforms for people to announce new developments. However, Dorsey was fired in 2008 because he was apparently spending too much time on his hobbies—fashion design and yoga. Three years later, Dorsey returned as executive chairman of the firm.
Rahul Yadav, Housing.com
He was called the maverick in India’s start-up landscape. The outspoken, impulsive CEO, however, lost support of the board when he was accused of leaking an email after a spat with one of the investors.
Travis Kalanick, Uber Technologies
His company revolutionized the way people commute. Helming a unicorn company, which was fast expanding globally, Kalanick was one of the more popular founder-CEOs from the Silicon Valley. However, a toxic work environment, unaddressed gender discrimination and sexual harassment complaints led to the board deciding to relieve Kalanick.