Board Lessons From the Latest CEO Foundering
Some cautionary notes for directors.
The definitive studies of Sam Bankman-Fried (FTX’s collapse), Elon Musk (Twitter’s apparent implosion), Jack Welch (GE’s legendary CEO’s regrets), Bob Iger (Disney’s troubled succession), Mark Zuckerberg (Facebook/Meta’s internal and external struggles) and Howard Schultz (Starbucks’ second reappointment of Schultz as CEO) will come. But, in the meantime, even a superficial read of the news prompts a few quick reminders of best practices.
Sam Bankman-Fried. Vision is great, but absent skilled management it remains a pipe dream. In other words, love the destination but check the vehicle — early and often. Operations and compliance matter. Bending reality should not mean disregarding it, intentionally or not. Reality generally wins. (For other painful modern examples, see Theranos and Enron.)
Elon Musk. Musk’s acquisition of Twitter may work out, but even if it does, it needn’t be this hard. Time doesn’t begin with a new CEO. A CEO who acts as if it does risks deep and costly alienation of the workforce, especially the particularly able members, many of whom know (or will easily discover) their other options. If you’re looking for top performers, troll the “parking lots” (actual or virtual) of firms in transition. That advice holds even without mass firings. Furthermore, you know you’re in trouble when you set out to rehire numerous people who just left. Loyalty and fealty are not synonyms. Loyalty requires mutual trust. Trust begins with a first move and then a reciprocal move. It unravels in the same way.
Jack Welch. The near-mythic CEO himself reportedly said that he regretted the outcome of “his” biggest decision, namely selection of a successor, a decision based on a vetting process that Welch had redesigned. Well, the board, and not the CEO, should clearly and definitively do the choosing of a CEO in addition to the choosing of how to ramp up to it (i.e., evaluation of candidates, especially internal ones). Sometimes, process foretells outcome all too powerfully: A flawed selection process invites a flawed selection outcome.
Bob Iger. Hopefully, Disney will note and remember the importance of any modern CEO possessing a stakeholder perspective on the world, and a proven ability and willingness to listen to key stakeholders in particular (including shareholders). Even better, the CEO should not just listen to shareholders, but also acknowledge and respond to them. Still better? Anticipate. Effective communication for a CEO comes down not only to what was said but also to what was heard.
Mark Zuckerberg. Maybe “move fast and break things” should return to service exclusively as the lived mantra for 10-year-old boys. There’s little to argue with Facebook’s past success, but “more, faster” isn’t necessarily better — for anyone. Each of us chooses, by belief and by action, what constitutes a positive or worthwhile contribution. Still, a more nuanced motto to lead by might be “Seize every moment and quickly clean up each of your messes.”
Howard Schultz. As the old tale goes, “A highly successful businessperson turned 40 as a veteran of multiple divorces. After entering therapy for several years, he married again and this marriage proved durable. The explanation offered? “I thought I had a selection problem. I actually had a selector problem.” Restated, how will the next CEO selection process differ, particularly the board’s role?
Regrettably, we all trip up, even face-plant. Whenever we (or others) do so, we should pause and consider what we might learn from the experience. In the instances above, think Otto von Bismarck, who famously said, “Fools learn from experience. I prefer to learn from the experience of others.” Without ignoring the learning opportunity presented by our own experience, the experience of others provides rich material for any board member to mine.
Gregory P. Shea, Ph.D., is adjunct professor of management and senior fellow at the Wharton Center for Leadership and Change Management and adjunct senior fellow of the Leonard Davis Institute of Health Economics at the Wharton School of the University of Pennsylvania.