Lehman, AIG Chiefs Should `Man Up,' Stop `Kissing the Mirror'
Oct. 10 (Bloomberg) -- Executives passing the buck for failures that sank their companies or pushed them to the brink win no sympathy from business leaders and management experts.
``They need to man up and take responsibility,'' said Warren Bennis, founder of the Leadership Institute at the University of Southern California and author of books including ``Leaders'' and ``On Becoming a Leader.'' ``They kept winning, believing in their own omniscience and thinking they can get away with anything.''
Chief executive officers summoned to Capitol Hill this week by the U.S. House Committee on Oversight and Government Reform didn't point fingers at themselves, drawing criticism from fellow chiefs.
``There are three reasons why companies go out of business and individuals go out of business: No. 1 is arrogance, No. 2 is arrogance and No. 3 is arrogance,'' said Harvey Mackay, chairman and CEO of Minneapolis-based MackayMitchell Envelope Co. and author of ``Swim With the Sharks Without Being Eaten Alive'' and ``Beware the Naked Man Who Offers You His Shirt.'' ``They all have chapped lips from kissing the mirror too much.''
Testifying before the panel, Richard Fuld, who worked for Lehman Brothers Holdings Inc. for 39 years and was CEO when it fell apart, said he felt ``horrible about what happened'' and that management did ``everything we could to protect the firm.''
Fuld, whose compensation for his last eight years totaled $484.8 million, said Lehman had to seek bankruptcy protection Sept. 15 because of a ``financial tsunami'' that was ``bigger than any one firm or industry.'' Fuld and Lehman spokeswoman Monique Wise didn't return calls yesterday for comment.
That's the wrong attitude, said Jeffrey Gault, CEO of Los Angeles-based LandCap Partners, which bought $40 million of land and construction loans from Wachovia Corp. in August. ``You're either the boss or you're not the boss. The CEO is the owner of the deal.''
Blaming Accounting Rules
Maurice ``Hank'' Greenberg, who ran American International Group Inc. for 38 years until 2005, blamed successors for getting rid of controls he put in place that would have saved AIG, according to a written statement he gave the committee. The insurer agreed to an emergency rescue Sept. 16, giving the federal government a 79.9 percent stake. Ken Frydman, a spokesman for Greenberg, declined to comment for this article.
For their part, the two men who followed Greenberg at AIG faulted an accounting rule that they said forced the company to book unrealized losses. Martin Sullivan was CEO for three years until June. He earned $4.6 million in salary and bonus in 2007, and was given $47 million in severance and long-term compensation. Robert B. Willumstad was in charge until last month and received about $4 million this year.
Sullivan and Willumstad didn't return calls for comment.
System Failure
``Looking back on my time as CEO, I don't believe AIG could have done anything differently,'' Willumstad said in written testimony. AIG, which had profits of more than $10 billion in 2005 and 2006, lost billions in the mortgage-backed securities market. It was running short of cash when it agreed to the bailout and got an $85 billion loan from the Federal Reserve. The Fed loaned it $37.8 billion more this week.
At no point did the witnesses acknowledge errors in judgment, a management ``travesty,'' said Rick Wartzman, director of the Drucker Institute at Claremont Graduate University in Claremont, California. He is also a former Wall Street Journal reporter, editor and business columnist.
``Being a leader is about being responsible and not passing the blame. True leaders step up,'' Wartzman said. ``To say you're acting on the best information available is a failure of leadership that reflects a failure of the system.''
Representative Henry Waxman, a California Democrat who is chairman of the committee, has scheduled three more hearings as part of an investigation into the events leading up to Congress's approval of a $700 billion rescue package. Waxman said the hearings would start ``holding those responsible to public account and identifying the reforms we need.''
Maximizing Bonuses
In their testimony, the CEOs put up a ``a weak defense'' by saying that outside events were responsible for their companies' unraveling, said William Hopper, chairman of London-based WJ Hopper & Co., an investment bank.
The resistance to accepting blame is linked to a ``decline of the culture'' in business, a shift away from ``old-fashioned executives'' who rose by working in every division of a company and understood ``the craft of management,'' Hopper said.
Many executives now ``come out of Harvard and Yale and start halfway up,'' he said. ``All they're interested in is maximizing their bonuses.''
To contact the reporters on this story: Michael Janofsky in Los Angeles at mjanofsky@bloomberg.net -----------
Dumme Bänker machen immer die gleichen Fehler, schlaue Bänker immer neue. (frei nach Tucholsky )
Wer sein Konto überzogen hat braucht sich um seine Einlagen keine Sorgen machen. :) |
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