"Can this man save Chrysler?" That was the headline on the cover of the September 17, 2001 Business Week, emblazoned across a picture of Dieter Zetsche, Chrysler's CEO. To the left of that picture were the pictures of four other CEOs. Each picture headlined an article about the CEO or the CEO's company.
This is just one issue of one business magazine, but CEO's dominate the business press. An article about problems at Cisco Systems bears the headline, "Can Chambers Re-ignite Growth ..." Another article is about "The New Barry Diller." No, you're not reading a special business issue of People magazine, and it's not even Soap Opera Digest for Business. Instead, it's the state of current business journalism. It's the cult of the celebrity CEO.
If it's a cult, why then there must be members. They include journalists, board members and a number of the CEOs themselves.
If you're going to blame anyone for this, you might as well start with Lee Iacocca. Iacocca had one heck of a run at the Ford Motor Company. He caught the attention of the top brass in 1956 with a marketing slogan, "A '56 for 56" - a 1956 Ford for fifty bucks a month. That put him on the fast track.
Next came the Mustang. In 1964, Iacocca was the first auto executive to make the cover of Time and Newsweek in the same week. In 1973, he was the highest paid executive in America at what seems now like a paltry $875,000 a year.
Things were looking good. Iacocca was one of a three person executive office that included Henry Ford II. It looked like he would become the first non-Ford to be President of the company. Then he got fired.
He didn't even have time to cash his unemployment checks. Two weeks after he got fired, Lee Iacocca took over the almost bankrupt Chrysler Corporation. We saw him on television, lobbying Congress for a special deal for Chrysler. He became the visible spokesperson in all of the ads, guaranteeing the quality of Chrysler vehicles.
Lee Iacocca was the very first of the celebrity CEOs. He's still the only business leader whose memoirs have sold over one million copies. What started with Iacocca was a change in the way the business press covers business and the way that companies and the public seem to think about business and business leaders.
Some of this is understandable. It's certainly more interesting to build your stories around personalities than around Balance Sheet numbers or pictures of automotive plants But there's a problem. We've come to believe that CEOs can do magic. We've come to believe that the norm is for great leaders to sweep into a company and transform it virtually overnight, making the stock price soar.
Through the '90s, with the economic wind at our backs, investors, boards, and the public at large, began to anticipate uninterrupted exponential growth rates. We wanted growth in sales, growth in earnings, growth in profits; but most of all, growth in share price.
Somehow, along the way, the job of the CEO became viewed as keeping the share price up. It wasn't even building share price and investor value for the long term. The emphasis is strictly short term.
Business journalism and good economic times and the desire to find a hero contributed to the growth of the cult, but the Internet and cable news organizations threw gasoline on the fire. Suddenly, we had almost instantaneous reporting of results and rumors and "whisper prices" . More and more Americans bought stock. They paid attention to all that reporting.
It became more important to have a good half than a good year, more important to have a good quarter than a good half. After a while, it became important to have good buzz to keep that share price up, no matter what the real performance was. CEOs were the seen as the magicians that made this possible, and we began to treat them like celebrities.
Celebrities get their name above the title. So do CEOs today. The stories focus on the CEO more than on the company. We seem to believe, despite a ton of evidence to the contrary, that great CEOs make great companies, even though it's far more likely that great companies make great CEOs.
Celebrities get compensation based on promise and far beyond what others in a similar field get for their performance. According to a study by the executive compensation firm Pearl Meyer and Partners, average CEO compensation in 2000 totaled $10.9 million. It was up 16 percent over 1999, even though the stock market was down.
Celebrities get guarantees and perks that astound the rest of us. They have agents, and personal publicists and signing bonuses. They have severance packages that insulate them from their own failure.
Well, so what? So a few folks are over-hyped and overpaid, is that a bad thing for your company or for a company you invest in? The answer is yes.
Let me revert to my Marine experience for a moment. What I learned there was that a leader was supposed to accomplish the mission and care for the people. The simple fact is that if you've got someone at the top of a company who's primarily concerned with getting more money and making the cover of Business Week, that person isn't giving full attention to accomplishing the mission or caring for the people.
Effective CEOs have three missions to accomplish. The first is to build long term competitive advantage. The only two proven sources of long term competitive advantage are relationships and culture, the people stuff. That means that an effective CEO needs to pay attention to the things that build the company's culture. That's recruiting, training, supervision, and compensation. It's caring for the people, too.
Besides long term competitive advantage, the mission of the CEO is to build long term profitability. That's a matter of delivering value to the customers in your market. For the CEO, that might mean concentrating on market research, or on building a great customer experience, or on six sigma quality. Sometimes, short term profitability may suffer.
And every CEO faces some kind of unique business challenge. The third mission is to meet that challenge while improving long term competitive advantage and profitability.
I call the CEOs that do this "We First" CEOs. They stay focused on the mission and the people. That's their job. They know that they're likely to come in for celebrity treatment.
Some are very uncomfortable with it. Bill Gates is a good example. He seems distinctly ill at ease with his celebrity status, always wishing that the interview would be over so he can get back to helping Microsoft conquer this world and the next.
Other We-Firsters love the celebrity. Jack Welch was one of those. He clearly loved the attention and the celebrity that he achieved. It just never seemed to distract from accomplishing the mission, which was getting G E to increase its long term competitive advantage and profitability and deal with several unique business challenges.
Those are the We-Firsters. Other CEOs are Me-Firsters. They're the ones to watch out for. They're the CEOs who seem to court celebrity for themselves.
Some of them hold things together pretty well. Take Stanley Gault of Rubbermaid. While he was at the helm, the company did well. When he left, things came apart. He hit the short term goals just fine, but never did what the CEO is supposed to do about building competitive advantage and profitability over the long term. Along the way he lapped up the coverage that came his way, and cut muscle instead of fat to keep up the quarterly numbers.
At least Gault's performance generated short term success for Rubbermaid. Consider some other Me-Firsters that almost destroyed the companies they headed.
After making some marvelous predictions and disastrous decisions at Mattel, Jill Barad left the company a wreck, but with a $57 million severance package. Or consider Richard McGinn, who was always good for a grand prediction and always ready to take credit for success at Lucent. He got a severance package that took ten pages to describe, while a paragraph or two were given to 10,000 of the 40,000 layoffs that endangered Lucent has announced so far this year.
The hype is going to be there. Since the mid-eighties the business press has moved decisively from covering companies to covering people. Through the nineties the intensity and speed of reporting on business has shot upward. Those things won't change.
That means it's up to the CEO to use the celebrity or not, but to accomplish the mission and care for the people in an environment where CEO celebrity is a reality and hype is the norm. To figure out whether a CEO is a Me-Firster or a We-Firster, listen to their language.
Listen to the "I Count." Me-Firsters take credit and make grandiose predictions. There are lots of "I's" They show off themselves. The company comes second.
Compare that with someone like Jack Welch. I was fascinated to read many of the interviews with Welch, as he headed for retirement at the end of his long and successful run. Clearly, he had much to be proud of and much that he could take credit for. But, again and again, he would deflect the credit to the company as a whole or to individual executives.
The only time that I remember him staying in "I" mode for very long, was when he was asked a question about what his primary job as CEO was. And then he talked about developing people.
Welch doesn't lack ego. And he reveled in celebrity. But he understood that GE made him as much as he made GE. He understood his job. And he did it.
And if you don't see behavior like that? What if there are too many I's and not enough we's? Then it's time for you or your investment dollars to head the other way. Great companies and great investment vehicles are built by the We-Firsters, not the Me-Firsters.
This feature appeared on 1 October 2001