Stephen H Baum Leadership

So, famous, powerful, jet-setting news magnate Conrad Black has been convicted of fraud.  Notwithstanding that his expected appeal may further reduce the sentence for his crime which can include incarceration, many CEOs shudder at what looms in his future – years of further litigation, a possible tell-all book by his wife, the loss of a friend of thirty years, exclusion from important places that were his sanctuary and a distrust by anyone of character with whom he seeks to do business.

And he has given the public yet one more case of self-centered leadership.  Another black eye not only for Conrad, but also for CEOs. Could anyone have seen it coming?

Based on my own interviews with more than two dozen CEOs, today’s leaders were shaped by experiences that began in their youth.  Especially their character, their integrity.  If they did something unethical and hated the feeling in the pit of their stomach or the consequences when their parents found out, they would move along the good path.  I believe that is true of most of the top hundreds of corporation CEOs. However, if their reaction was that they got away with it or that they could easily abide the consequences, they began to slide down the greasy pole.

At age 14, Black was expelled from a Toronto private school for stealing copies of coming exams and selling them to his fellow students. So it isn’t too much of a stretch to accusations of self dealing as the leader of a public company. It is only my opinion, but I bet that if boards and other entities who placed their trust in him had taken a more thorough look at what shaped him, they might have found other instances, where his otherwise attractive traits – like pushing buttons and testing the limits, thinking big, and generally battling for what he wanted – went awry because he wasn’t motivated by good purpose for the enterprise and all the constituents it touches. Sure, association with him meant rubbing shoulders with the rich and famous and making gains unachievable by other means.  But it came with a price. 

“In addition to appealing for his freedom, Mr. Black will now be fighting for what’s left of his legacy.  In the eyes of Patrick Fitzgerald, the United States attorney who prosecuted him, it is a cautionary tale.”

 If you have often wondered what personal  traits put a leader in this predicament, count the number of words in an article about his troubles before the telltale word appears: arrogance. As Paul B. Healy,Mr. Black’s own head of investor relations in a prosecution witness in the trial remarked: “This is not a happy day.  And I believe that all of this could have been avoided, if you just drop the arrogance.”

Don’t be fooled by his being convicted of lesser than initial charges. That is a pattern that goes back to convicting a famous Prohibition racketeer of tax evasion. But do take away the central message: it takes decades to build a reputation and seconds to lose it. Would you want to be even suspected of such behavior? And how lonely and difficult your life be if you lost the trust and were estranged from friends and family?

How widespread is behavior like Black’s? The news would have us believe it is epidemic among CEOs of top companies. All too frequently, we read of price-fixing, backdating of options, hiding losses, sham transactions, consumer fraud,  insider trading,  tax evasion, document destruction to thwart investigations and illegal wiretapping.  You could probably name at least one company in each category. 

More than a few big-time CEOs are in jail, and more will soon be joining them for these kinds of offenses. What were they thinking? Were they thinking at all? They’ve damaged trust in the system, destroyed their company’s reputation, and ruined their own lives, not to mention their families’.

I asked the head of one of the world’s largest accounting firms whether the rotten-apple CEOs were 10 percent or 1 percent in the top thousand companies. His response: “No way it’s ten percent. It’s a small minority now. It’s much better today than in 2001 when we had the Enron situation. The reforms were necessary. Accountability is clear today.” My professional experience is consistent with this view.

 You can’t hide your character. Eventually it becomes known to the people around you. The manner in which you handle yourself in situations that involve moral choices (whether or not you see them as such) will be discussed in hushed tones at the office water cooler and in the halls, and a view of your character will be well established throughout your company and industry long before you realize it. As important, this will set the standard for decisions made daily by hosts of dispersed managers you cannot possibly supervise.

The pressure to perform, to hit your numbers, is enormous these days. The time frame for you to deliver results keeps getting shorter. If you aspire to the top job it’s far too easy to justify stepping over the ethical line, especially if the situation you are facing is not clear black and white. Good character will, in the end, guide you safely past the rocks and shoals of illegal, unethical, or unfair practices that will tempt you throughout your career. And good character is the first among equals when it comes to the core traits you must possess for attaining sustained, effective leadership.