" ...CEO Hubris" - Jeffrey Sonnenfeld

Bank of America and CEO Hubris
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By Jeffrey A. Sonnenfeld,
Washington Post, 09/20/2011

In light of Bank of America’s recent woes [brought on by Ken Lewis's leadership], this piece is part of an On Leadership roundtable exploring the root causes of the corporate ‘urge to merge’.

Earlier this month, Bank of America CEO Brian Moynihan pledged that the financial behemoth would get smaller even as it continues to choke on the troubled mega-mergers it gobbled up during the financial crisis. Several days later, Tyco’s announcement that it was dissolving its sprawling empire of acquired businesses was met with market enthusiasm. That news came on the heels of corporate break-ups at Sara Lee, Fortune Brands and Kraft; earlier in the year, talk of conglomerate I.T.T. splitting up for good sent the stock soaring 17 percent.

The old Yogi Berra admonition “it’s déjà vu all over again” well fits this recent stream of news about poorly conceived business pile-ups and M&A deals gone bad. It’s hardly the first time we’ve seen the fascination with conglomerates fade, or the “big is always better” philosophy of management proven wrong. But somehow, we’re still re-learning it.

Obviously, prudent growth in complex global markets is necessary. Economies of scale are vital, especially with the need to reach across global markets. But as always, there can be too much of a good thing. As another chapter of the big-is-better era appears to be drawing to a close, it’s important to ask: Just what drives the CEOs who staple these random enterprises together?

Such “serial acquirer” CEOs see their jobs primarily as expanding corporate holdings, rather than managing their companies to produce better products and services. They often see regulators as adversaries and accounting rules as inconvenient barriers to fulfilling their plans. They binge on acquisitions in the name of size, even if they’re not necessarily savvy. Ken Lewis’s purchases while leading Bank of America come to mind.

Serial acquirers seem to run their businesses as if their very complexity will make it hard to hold them immediately accountable. No single financial analyst can track the sort of dizzying array of business lines they venture into, and rapid growth without a focused corporate mission makes it harder to judge the performance of these chief executives by conventional yardsticks. Rather than exhibiting skill in producing new products, offering better services or inspiring employees, these executives are usually judged by investors and analysts by the swelling size of their empires.

What drives such thinking may not be able to be helped. In a decade-old survey of 130 prominent CEOs conducted by the Yale School of Management and the Gallup Organization, respondents were asked whether or not they agreed with the idea that “great leaders are born and not made.” Only 26 percent of respondents said yes.

What’s telling is that when their responses were matched up with their real-life strategies, those who did believe in greatness at birth turned out to be the serial acquirers. They tended to invest less in their existing businesses through expanding factories, developing new products and the like, and were far more likely to prefer growth through acquisitions. On the other hand, those who believed that great leadership is developed through experience were less likely to come from the big-is-better school of thought. In other words, serial acquisition isn’t just a business strategy. It can be a sign of CEO hubris.
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Jeffrey A. Sonnenfeld is the senior associate dean for executive programs and a professor at the Yale School of Management.

Egghead and Blockheads - by Maureen Dowd

Egghead and Blockheads
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By MAUREEN DOWD
Op-Ed Columnist, NY Times
September 17, 2011
THERE are two American archetypes that were sometimes played against each other in old Westerns.

The egghead Eastern lawyer who lacks the skills or stomach for a gunfight is contrasted with the tough Western rancher and ace shot who has no patience for book learnin’.

The duality of America’s creation story was vividly illustrated in “The Man Who Shot Liberty Valance,” the 1962 John Ford Western.

Jimmy Stewart is the young attorney who comes West to Shinbone and ends up as a U.S. senator after gaining fame for killing the sadistic outlaw Liberty Valance, played by Lee Marvin. John Wayne is the rancher, a fast-draw Cyrano who hides behind a building and actually shoots Marvin because he knows Stewart is hopeless in a duel. He does it even though they’re in love with the same waitress, who chooses the lawyer because he teaches her to read.

A lifetime later, on the verge of becoming a vice presidential candidate, Stewart confesses the truth to a Shinbone newspaperman, who refuses to print it. “When the legend becomes fact,” the editor says, “print the legend.”

At the cusp of the 2012 race, we have a classic cultural collision between a skinny Eastern egghead lawyer who’s inept in Washington gunfights and a pistol-totin’, lethal-injectin’, square-shouldered cowboy who has no patience for book learnin’.

Rick Perry, from the West Texas town of Paint Creek, is no John Wayne, even though he has a ton of executions notched on his belt. But he wears a pair of cowboy boots with the legend “Liberty” stitched on one. (As in freedom, not Valance.) He plays up the effete-versus-mesquite stereotypes in his second-grade textbook of a manifesto, “Fed Up!”

Trashing Massachusetts, he writes: “They passed state-run health care, they have sanctioned gay marriage, and they elected Ted Kennedy, John Kerry, and Barney Frank repeatedly — even after actually knowing about them and what they believe! Texans, on the other hand, elect folks like me. You know the type, the kind of guy who goes jogging in the morning, packing a Ruger .380 with laser sights and loaded with hollow-point bullets, and shoots a coyote that is threatening his daughter’s dog.”

At a recent campaign event in South Carolina, Perry grinned, “I’m actually for gun control — use both hands.”

Traveling to Lynchburg, Va., to speak to students at Liberty University (as in Falwell, not Valance), Perry made light of his bad grades at Texas A&M.

Studying to be a veterinarian, he stumbled on chemistry and made a D one semester and an F in another. “Four semesters of organic chemistry made a pilot out of me,” said Perry, who went on to join the Air Force.

“His other D’s,” Richard Oppel wrote in The Times, “included courses in the principles of economics, Shakespeare, ‘Feeds & Feeding,’ veterinary anatomy and what appears to be a course called ‘Meats.’ ”

He even got a C in gym.

Perry conceded that he “struggled” with college, and told the 13,000 young people in Lynchburg that in high school, he had graduated “in the top 10 of my graduating class — of 13.”

It’s enough to make you long for W.’s Gentleman’s C’s. At least he was a mediocre student at Yale. Even Newt Gingrich’s pseudo-intellectualism is a relief at this point.

Our education system is going to hell. Average SAT scores are falling, and America is slipping down the list of nations for college completion. And Rick Perry stands up with a smirk to talk to students about how you can get C’s, D’s and F’s and still run for president.

The Texas governor did help his former chief of staff who went to lobby for a pharmaceutical company that donated to Perry, so he at least knows the arithmetic of back scratching.

Perry told the students, “God uses broken people to reach a broken world.” What does that even mean?

The Republicans are now the “How great is it to be stupid?” party. In perpetrating the idea that there’s no intellectual requirement for the office of the presidency, the right wing of the party offers a Farrelly Brothers “Dumb and Dumber” primary in which evolution is avant-garde.

Having grown up with a crush on William F. Buckley Jr. for his sesquipedalian facility, it’s hard for me to watch the right wing of the G.O.P. revel in anti-intellectualism and anti-science cant.

Sarah Palin, who got outraged at a “gotcha” question about what newspapers and magazines she read, is the mother of stupid conservatism. Another “Don’t Know Much About History” Tea Party heroine, Michele Bachmann, seems rather proud of not knowing anything, simply repeating nutty, inflammatory medical claims that somebody in the crowd tells her.

So we’re choosing between the overintellectualized professor and blockheads boasting about their vacuity?

The occupational hazard of democracy is know-nothing voters. It shouldn’t be know-nothing candidates.