Sources of sunshine

There’s so much disturbing news concerning the ethics of America’s bigger, newer, publicly traded corporations that I was actually surprised to run into smiling CEO the other day. The scene was hotel dining room, and in the time before our respective breakfast guests arrived he gave me new way to regard this current morass.
“I feel about 10 tonnes lighter,” he said. “And at first I wondered if there was something wrong with me.” He began tabulating the differences the string of scandals – Andersen, Enron, Global Crossing, WorldCom, et al – were going to make in his daily life.
“Look at how things were this time last year,” he said. “Wall Street was consistently attacking our figures. They weren’t exciting enough – weren’t big enough – didn’t show growth curve of 20 percent… “
He went on to describe harrowing few years of attempting to fuel profitability beyond all reason. “In business like ours, you just don’t get the high margins, and there’s always big cyclical swing in prices, so you have to be careful.” He laughed. “Do you remember what it was like on Wall Street couple of years ago? The word ‘careful’ was taboo. If you said something cautionary it was interpreted to mean you were DOA. And that was all it took for them to downgrade you to sell.”
The analysts and brokers held the whip hand over business for so long, he said, that many younger executives had no idea that fiscal prudence and sound bottom line might actually be healthy for company. Now that the tyranny of the bubble market is broken, it’s possible to draw up plans for company that does business in the real world, not just on the stock exchanges.
“So that’s one way the world has got better,” he said. “Another is that I’m finally getting accounting advice that doesn’t sound like it was written by someone who was going to offshore banking school at night.” The Andersen problem was (and still is) rife in every aspect of the accounting field, because of the same unrelenting pressures to please Wall Street. The trouble is CEO might never know if his company was skirting the line unless he himself did an independent audit. “A lot of financial officers began to assume – correctly, unfortunately – that their job was to ‘get it done’. Whatever ‘it’ was, regardless of ethical considerations or ramifications down the road. They even felt they were justified in misleading the CEO – in order to give him what espionage movies call ‘plausible deniability’.”
The resulting corruption of information could riddle company before chief executive could find out about it, he said, adding, “The fish doesn’t always rot from the head, you know. Sometimes it’s the other way around.”
Now that the data streams were running much clearer in this company, he was getting better feel for the marketplace – and the information was coming in faster. His executives and managers seemed to be invigorated by the sweeping out of the stables. They also were volunteering interpretations and opinions that seemed to favour improvements that were small and easy to implement at lower cost, quite difference from the era of grandiose strategies and spending to match. The CEO wondered if perhaps they hadn’t started to second-guess their instincts and shape their opinions to reflect go-along, get-ahead mood. “That’s an easy way to get out of your depth. I want my people around me to reflect strong, personally developed, honest opinions,” he said. “That way I can make decisions on the basis of the primary colours, not on the shading.”
A third source of sunshine in an otherwise overcast economic climate was the demotion of the Great God Tech. “Yes, I know it’s an old story now, and I don’t mean to flog dead horse,” he said. “I was just as entranced as anybody by the potential for productivity gains and the new marketing and distribution channels the internet offered. But it still shocks me to think of how many CEOs and boards of directors allowed themselves to be persuaded to bet the company on gigantic, unproven scenario that required the complete denial of every business model of the last 50 years.”
Now, he said, the nerds were back where they belonged – down in the engine room stoking the furnace of innovation – not up in the wheelhouse barking out orders. “The normal hierarchy has been restored, and frankly it will be too soon before I ever hear the phrase ‘paradigm shift’ again.” He paused to wave at this breakfast guest, who had just entered the dining room.
“I think when America wakes up,” he summed up, “it will realise it’s in the best position for sustainable growth and sensible management that it’s been in for decades.” He grinned. “And the best part is, CEOs who are viewed as steady steward types will be back in demand – for all the right reasons.” M

Mark McCormack is the founder of International Management Group.

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