Chapter Six: Leadership--Navigating Context, Fulfilling Many Roles

Lee Iacocca was the first CEO in recent times to be internationally recognized for his leadership, grace, and guts. He was able to pull Chrysler from the brink of death, taking his charisma to Washington and successfully selling Congress on a government-backed bailout. He improved quality at a time when American cars were the butt of many jokes. In the end, Iacocca was synonymous with the Chrysler brand. His fight for the company's survival brought him unprecedented media attention, and his style won over many Americans. His book Iacocca: An Autobiography became a best-seller. A new kind of American icon—the celebrity CEO—was born.

The Celebrity CEO

In his book Searching for a Corporate Savior, Harvard Business School professor Rakesh Khurana talks about the emergence of the charismatic CEO:

The new corporate leadership that began emerging in the 1980s was in many ways a throwback to the swashbuckling Robber Barons of the late nineteenth century. This group, however, tended to be more public-relations savvy and psychologically attuned to the zeitgeist, thus avoiding being vilified as the Robber Barons had been…. These new members of the business elite were no longer defined as professional managers but instead as leaders, whose ability to lead consisted in their personal characteristics or, more simply, their charisma.^[1]

The stock market boom of the late 1990s—and particularly the dot-com phenomenon—further perpetuated the celebrity CEO culture. The new high-profile leaders tended to be from technology-related companies: Bill Gates of Microsoft, Steve Jobs of Apple and Pixar, Lou Gerstner of IBM, Michael Dell of Dell Computer, Carly Fiorina of Hewlett-Packard, Jeff Bezos of Amazon, and Larry Ellison of Oracle, among others. With the democratization of the stock market and skyrocketing share prices, the public fawned over these charismatic new masters of the universe.

According to economist Robert Shiller, management in the 1990s was about boosting share price above all else, due in large part to the emerging power of the institutional investor. CEOs were given strong incentives to keep that focus, including stock options. Shiller comments,

This new selection and incentive method for top management is a grand social experiment that turned managers into market manipulators, shifting their focus towards acting out phony new-paradigm fantasies, boosting the market price at the expense of real fundamental value, and even occasionally fudging earnings.^[2]

One could say, then, that CEOs of public companies in those years were paid handsomely to spin the market for the benefit of shareholders. But to be fair, perhaps we were happy to be spun as long as we were watching our retirement funds grow. Perhaps we weren't being completely honest, then, when we claimed to be shocked by the scandals in corporate America—CEOs talking up company stock to employees while discreetly dumping it themselves, disgraced executives taking the Fifth, massaged numbers, massive bankruptcies. Rather than ask probing questions and possibly discover that the emperor had no clothes, we wanted to believe in the "new-paradigm fantasies."

Of course, there are charismatic CEOs who have been truly successful in leading their organizations. The turnaround stories of Gerstner at IBM and Jobs at Apple are indeed inspiring tales of effective leadership. But countless other charismatic CEOs have proven to be ineffective—and at their worst, self-interested and unethical. As stakeholders in Accountable Organizations, we must demand more from our leadership than a winning smile and an ability to manage a press conference.

^[1]Rakesh Khurana, Searching for a Corporate Savior: The Irrational Quest for Charismatic CEOs (Princeton, NJ: Princeton University Press, 2002), 69.

^[2]Robert J. Shiller, "Celebrity CEOs Share the Blame for Street Scandals," Wall Street Journal, June 27, 2002, citing ideas from Khurana's Searching for a Corporate Savior: The Irrational Quest for Charismatic CEOs (Princeton, NJ: Princeton University Press, 2002).