The Unmasking of Fools

Revelations make me pause and ponder, sometimes in awe of what I had just witnessed or learnt, and sometimes because I recognize that my newfound knowledge will never allow me to see certain things the same way again.

Such is the case with the hapless banking CEOs who struggled to channel humility as they sat before Congress this week, chastised for the monumental stupidity and incompetence with which they have run their businesses, both pre and post bailout.

To the uninitiated corporate outsider (most of us), the title of Chief Executive Officer denotes a certain magical aura; of knowledge, erudition and acumen. It makes us pause before we question their judgment. We want to emulate them; we read books filled with jargon ripped straight from the boardroom, as if speaking in corporatese will lend us the same aura of invincibility the titans enjoy.

Yet a fool is a fool, no matter his linguistic choices. Common sense does not bend to the wishes of the titans and common sense does not allow the lending of money to people who cannot prove their income. Nor does common sense allow a CEO to purchase a broken financial entity over a weekend, with no due diligence into what caused that entity's ailments, only to discover that those ailments have now infected his once-healthy bank. I am referring to the brilliant CEO of Bank of America and his brilliantly impulsive purchase of Merrill Lynch.

Are CEOs brilliant? Are the obvious fools we saw excoriated on Capitol Hill this week an aberration? No. Business leadership is an inexact skill, inadequately tought in business schools and not always possessed by those who run industry. As in life elsewhere, leadership, common sense and vision cannot really be taught, they can only be ignited in those who already possess them to some degree.

In recent years, business schools have tried to teach leadership through so-called "soft skills," to augment the "hard skills" of case studies and statistical and financial analysis. Is it working? We'll know in a generation or two, I guess.

The dirty big secret of corporate boardrooms is that the occupants of many of these executive positions are not worthy to hold them. Not from an educational or experience perspective but simply because, had the process of their selection being truly open and meritorious, they would most likely not have been selected.

Most are promoted from middle management where they post good results. Most continue their good results through expansion (buying other companies), which raises their company's stock price and makes everyone happy. This works in good times but cannot be sustained once obstacles emerge.

There is little long-term vision in most boardrooms and even less creative and courageous leadership. The CEOs of the big three automakers have known for decades that their economic models do not work, yet they have continued as per usual, replacing leadership and action with blind hope and oblivion.

I got a glimpse of this when I served briefly as an executive of an organization, responsible for $24 million in annual revenue and several dozen employees. Though much smaller than your average Fortune 500 corporation, the dynamics of this organization were very similar and equally enlightening in terms of what they revealed.

My selection was an inside job. Obviously, I thought I possessed the skills to do the job, but the reason I was chosen was because I had a prior working relationship with the chairman of the board. I knew very little about the internal workings of the company and knew almost nobody in the company or the industry, yet I got the job, a fat salary and all the perks of being a chief executive.

What I lacked in detailed knowledge I made up with what I believed to be common sense business practices: simple things like tracking the budget on a regular basis, documenting and approving expenses, motivating the staff and introducing predictability into hiring and promotions. The results were immediate and gratifying. People responded to the changes with the relief of someone who'd reached the end of a tunnel after years of digging through dirt.

Simple stuff, yet so elusive to the big boys of Wall Street and Detroit. Why? We are now overcome with the realization that, as Daniel Gross puts in his recent Newsweek piece "The Slow Unmasking", the big boys were "a bunch of clueless oafs." Add their cluelessness to that of our just-departed first MBA president, and the picture of the state of leadership in this country starts to sink in...like an overpowering revelation whose clarity cannot be missed.