For many years executive remuneration has been one of the ‘hot topics’ in corporate governance. Each year there is a furore around executive remuneration with the remuneration of CEOs often being a particular area of contention. This year we have seen the spotlight focussed on the remuneration of CEOs at high profile companies such as BP and WPP resulting in much shareholder comment and media attention.
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By Robert F. Hurley
Greg Smith’s March 14, 2012 op-ed piece in the New York Times, “Why I am Leaving Goldman Sachs” is a familiar story for those who follow the betrayal and repair of trust. Smith tells a story of his frustration and disillusionment at Goldman changing from a culture that valued service to clients to one that rewarded those who made the most money for the firm even if it betrayed client interests. To be clear, from a trust violation standpoint, Smith suggests that Goldman lacks integrity because it holds itself out to clients as being their servants when in reality the firm is focused on manipulating clients to buy or sell securities that benefit Goldman’s interests more than the clients’. If this is true, Goldman is saying one thing but doing another, which is duplicitous and lacks integrity.
What is interesting about Smith’s resignation letter is that it tells the all-too-common, inside story of how firms lose their way and violate trust. The message here, and one that is consistent with the BP, News Corporation, Toyota, and Lehman violations, is that these betrayals of stakeholder trust have root causes that are embedded in the organizational system. At BP there was rhetoric about safety after the 2005 Texas oil refinery explosion, but real currency of the realm continued to be profit; so they chose to save 7 million dollars to drill a Deep Water Horizon well that they knew was not the safest option. At News Corp, they said that rogue employees were responsible for the first hacking scandals (that it was not inherent in the system), but it was later revealed that hacking was a strategy used in the News Corp system to gain advantage among news outlets. Toyota had a strong quality culture, but a flawed and Tokyo centric recall system that failed to notify US drivers about cars that had been recalled in other countries. Lehman systematically overrode its own risk management practices because growth and profit is what really mattered.
Betrayals of trust by tyrants and government agencies show similar patterns. Time and time again incongruence in the organizational system cause major trust violations, which lead to demonstrations of trustworthiness by some aspect of the system, only for some other aspect of the organization to undermine it. A failure to align all elements of the organization’s architecture toward achieving its stated mission and values is what causes these betrayals of stakeholder trust.
High trust firms like Zappos, Google, Proctor and Gamble, and QuikTrip don’t fall into these traps. They do the hard work of clarifying mission and values, and they align leadership, culture, reward systems, and all of their core processes (product development, supply chain, etc.) toward serving stakeholders’ interests. These stakeholders — customers, suppliers, communities, and employees — know that these firms can be counted on reliably. The data is clear that these high trust firms derive many competitive advantages in lower employee turnover, more customer loyalty, more organizational resilience, and even higher stock price from this service. Doing the right thing and doing it consistently is a virtuous and effective way of doing business.
The good news for Goldman Sachs is that trust failures can be repaired and reputations restored. Mattel recovered brilliantly from its lead paint problem in toys made in China; Bill Clinton went from the disgrace of the Monica Lewinsky scandal to being a leader in global causes and presented as the world’s CEO in the media . But the path is not easy. Real trust repair requires
Satire for the Nu.nl news website, about an undersea oil spill of BP that took months to fix.
Sevensheaven images and prints are for sale at sevensheaven.nl
As we are busy blaming “BP” for messing up the Gulf of mexico I would suggest a solution for oil barriers along the beautiful beaches there and in fact all along our coastlines. First I will direct you to search floating “debris in the gulf of Mexico”.
There are enough objects floating there that if gathered and strung along the beaches could cover all the coastlines of our country I believe. It is floating so we would not have to buy new floating barriers, all we need is nets, which could be made from shredding more of the junk out in the ocean. “BP” didn’t put it there, it came from the cities along the waterways that feed into the gulf.
Though much of it is oil byproducts washed out from storm drains, a lot came from the “Beautiful” beaches and those “Valuable tourists” that are so afraid of getting a tar ball on their tootsies visited and left behind. They should come back and volunteer to help clean it if they really care!
I also propose instead of dredging sand that will destroy animal habitat we build berms of the garbage that came from those beaches in the first place. It may be ugly, to say the least, but it would do more for the fish and birds in the region that get trapped in it than any other thing I can think of, just cover it with a small portion of sand from the tourist beaches.
The wild life doesn’t want it and it’s only fare that the people that made it take it back and recycle it or something. They need to pay for every bit of the pollution just like “BP”, all of us who let that junk float out to sea should pay for it to be cleaned up!
If an honest look at what is in the ocean was taken “BP” would look like small potatoes or in this case oil byproduct pollution.
Elvin Lim is Assistant Professor of Government at Wesleyan University and author of The Anti-intellectual Presidency, which draws on interviews with more than 40 presidential speechwriters to investigate this relentless qualitative decline, over the course of 200 years, in our presidents’ ability to communicate with the public. He also blogs at www.elvinlim.com. In the article below he looks at Obama’s leadership. See Lim’s previous OUPblogs here.
Presidents struggle to take charge when crises befall the nation. In the immediate aftermath of disaster, whether it be the terrorist attacks of September 11, Katrina, or a massive oil spill, Presidents Bush and Obama alike have been accused of being slow to take charge. Despite the conventional narrative that crises unite the country and cause us to rally round the flag, the truth is that the American presidency is not an institution to which we quickly rally around because we have unrealistic expectations of what presidents can and should do.
While it has become a presidential cliché to declare, Harry Truman believed, that the “buck stops here,” it never does. Nowhere is this more obvious than in the oil spill disaster in the Gulf. The reason why the cliché doesn’t work is that even if the president may have the will to take charge, he cannot be responsible for someone else’s mistake, and even he is, he and the federal government lacks the technological resources to clean up BP’s spill. Incidentally, the first branch, Congress, ought to have some responsibility too.
Like the press and the American people, the White House clearly has not worked out the ethical boundaries of culpability versus responsibility, which it why it has floundered in articulating, exercising, and then defending the proper role of government in handling the present crisis. All this is compounded by the fact that the American media demands and expects a semblance of control even as nature and a complex reality stacks up against one.
While everyone is asking for it, no one knows what leadership means in this situation. If asked, talking heads would each have a different answer. The fact remains that the White House does not have plenary control over corporations and regulatory agencies, nor should it. The President can entreat other oil companies to chip in, but he does not have the authority to command them to do so. The President can pressure BP to be transparent about its operations, but he cannot seize BP’s assets or command a corporation to deploy its assets whichever way the White House directs.
And so the President has made repeated trips to the Gulf to show that whether or not he is in charge, he is at least in the loop and emotionally invested. Empathy, apparently, is a virtue in presidents if not in judges. We desire “activist” presidents, but events do not always permit them. If we insist on turning leadership into messiahship, we should hardly be surprised at the president’s showmanship.
Given the contested and myriad models of leadership being purveyed on the Left and Right, it behooves the President, at the very least, to decide exactly and then defend what his leadership amounts to. If Obama believes that the buck really stops at the White House, then, as the Left desires, the regulatory power of the federal government must be considerably increased. If he does not want bigger government, then he needs to educate the American people and the Right that the buck really doesn’t stop with government, but at civil society or somewhere else. Right now Obama hasn’t made up his mind, but in this vacillation he is trying to have his cake and eat i
