Going off the rails

THOSE of us who still read newspapers over breakfast have had a delicious choice of late: do we start with the story about Bradford’s crystal Methodist or the one about Toronto’s stuporman? Paul Flowers, the former chairman of Britain’s Co-operative Bank and a Methodist minister, allegedly bought cocaine and crystal meth for a “drug-fuelled” orgy. Rob Ford, Toronto’s mayor, has finally admitted, after months of denials, that he smoked crack cocaine—before adding the comforting proviso that he only did it in “one of my drunken stupors”.

What does any of this have to do with Schumpeter’s home territory of chief executives? Mr Flowers was no banker: he rose through the co-operative movement’s political structures. Mr Ford is an elected politician. But they nevertheless illustrate a problem too often ignored in business, where people are much happier talking about dollars than dolour: how can you tell when a boss is showing signs that he may go off the rails? And what should be done about it?

The corner office is almost a factory for personal problems. Chief executives are under greater pressure to perform at the best of times; how much greater in periods of economic turbulence. Yet at the same time power corrupts. In experiments social scientists have shown, by giving random subjects power over others, that even in small doses it produces overconfidence, insensitivity and an urge to associate with other people with power.

Chief executives’ oddities can lead to complete corporate breakdown: it is impossible to read about the implosions at WorldCom or Hollinger or the Royal Bank of Scotland (RBS) without being astonished by the bosses’ behaviour. But even in less dysfunctional firms the whims of the man at the top can cause damaging depression or sycophancy below. Chief executives are the nearest things democracies have to sun kings.

An obvious sign of a boss breaking bad is grandiosity. He attributes the company’s success wholly to himself, indulges in endless self-promotion or demands ever more extravagant rewards. Jean-Marie Messier, who transformed Vivendi from a staid water utility into a media conglomerate that ran up huge losses, borrowed his nickname—“J6M”, which stands for “Jean-Marie Messier Moi-Même-Maître-du-Monde”—for the title of his autobiography. One study shows that chief executives who appear on the covers of business magazines are more likely to make foolish acquisitions. A second sign is over-control. The boss surrounds himself with yes-men and crushes dissent. He tries to control every detail of corporate life rather than building a strong executive team. A third sign is distorted decision-making. The chief conflates personal and corporate assets, is obsessed with buying other companies, or focuses on bizarre details. Mr Messier spent $17.5m of Vivendi’s money on a New York apartment for his personal use. Fred Goodwin, boss of RBS, micromanaged the building of a £350m ($630m) head office, called “Fredtown” by his underlings, and found time to redesign the bank’s Christmas cards.

A chief executive becomes likelier to succumb to these vanities the longer he stays in the job. He gets used to people fawning over him. He measures himself against other inhabitants of Planet Davos, not those Barack Obama calls “regular folk”. Percy Barnevik, the boss of Asea Brown Boveri, an engineering conglomerate, was widely hailed as “Europe’s answer to Jack Welch”. But the comparison went to his head: he pursued ever more reckless acquisitions and got himself awarded a tax-free pension of $87m. A boss may think himself so brilliant he refuses to plan for his eventual departure or undermines possible successors. Armand Hammer, of Occidental Petroleum, asked his board to agree to a long-term bonus plan, with a ten-year payout, when in his 90s.

What can companies do to stop the boss behaving oddly—ideally, before he starts? In a recent study MWM Consulting, a firm of headhunters, argues that boards need to make “behavioural risk” a standard part of their agenda. This might well include taking soundings from senior management. Chairmen also need to start talking to chief executives about the personal side of the job when they are first appointed, and keep talking afterwards.

Remember the Little Bighorn

However, the best answer lies with chief executives themselves, who must recognise that the biggest threat to their success may lie within. They need to cultivate the art of seeing themselves as others see them. Kevin Sharer, the former boss of Amgen, a biotech company, used to get his direct reports to list his strengths and weaknesses annually for the board. He also kept a painting of General Custer in his office as a warning against hubris.

The business world is starting to take these problems seriously. One of the most popular courses at Harvard Business School is Clayton Christensen’s course on how businesspeople should guard against an obsession with short-term success. About 40% of the heads of FTSE 100 companies employ “personal coaches”. Chief executives last half as long in the job, on average, as they did a decade ago. That may be bad for their nerves, but it makes them less likely to be become marinated in power.

That said, it is foolish to treat a cold as a cancer. Bosses have a right to privacy. In recent years Boeing and Hewlett-Packard have erred in disposing of chief executives after consensual affairs. The border between eccentricity and brilliance can be blurred. Bosses are peculiar anyway: more ambitious and more self-confident than the rest of us. Some of the most creative people in business have been very peculiar indeed: Henry Ford loved conspiracy theories of the blackest hue; Thomas Watson of IBM commissioned company songs in his own honour. The most important business decisions are still, as they have always been, nuanced ones about character and its complexities.

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