Thursday, March 17, 2005
Handwriting On The Wall
OK, so I'm late to the party, as usual. Earlier this week Bernie Ebbers, onetime CEO of WorldCom, was found guilty of fraud, conspiracy and securities violations. He testified in his own defense that he never really knew what was going on with his company's accounting, blaming the chief witness against him, Scott Sullivan, the former CFO of WorldCom. Trouble is, when he was riding high Mr. Ebbers bragged about what a "hands-on" CEO he was. Can't have it both ways, Bernie.
This verdict has to have the unconvicted Enron management, along with a whole bunch of folks whose names we haven't seen in the headlines, shaking in their shoes.
I think this verdict was a good thing for all of us. I'm not an anti-corporate type but when CEOs and top level management are being paid obscene amounts of compensation to run a company -- sometimes several hundred times the compensation of the company's lowest-paid workers -- it defies logic that they should be able to avoid accountability for fraud and other bad acts by claiming ignorance. They're very well paid to know what's going on and to fix things that are broken, so they'd better have a strong case for conspiracy by underlings in order to get off the hook when something like the WorldCom debacle occurs. Bernie didn't, and he rightly took the fall.
People don't get to be CEOs of large businesses without being pretty smart and pretty talented. They have to be willing to take risks and they have to be able to recognize opportunities that others don't see, and they also have to be tough enough to fire their best friend in the company (even if they never actually have to). Another ingredient in their success is luck. There are a lot of smart, tough, risk-accepting and perceptive executives out there, maybe some that compare favorably to, say, Jack Welch or Bill Gates, but if they aren't at the right place at the right time, they'll never have the opportunity to show what they can do. That said, I suspect that some of these barons of commerce get to a point where they start believing their own press releases, and feel that they can do no wrong. They are so taken with the notion of being the Big Boss that they forget that they have bosses, too -- the shareholders of their enterprise. That may be what happened to Mr. Ebbers. I think there's a lesson here for everyone who bears the title of CEO.
This verdict has to have the unconvicted Enron management, along with a whole bunch of folks whose names we haven't seen in the headlines, shaking in their shoes.
I think this verdict was a good thing for all of us. I'm not an anti-corporate type but when CEOs and top level management are being paid obscene amounts of compensation to run a company -- sometimes several hundred times the compensation of the company's lowest-paid workers -- it defies logic that they should be able to avoid accountability for fraud and other bad acts by claiming ignorance. They're very well paid to know what's going on and to fix things that are broken, so they'd better have a strong case for conspiracy by underlings in order to get off the hook when something like the WorldCom debacle occurs. Bernie didn't, and he rightly took the fall.
People don't get to be CEOs of large businesses without being pretty smart and pretty talented. They have to be willing to take risks and they have to be able to recognize opportunities that others don't see, and they also have to be tough enough to fire their best friend in the company (even if they never actually have to). Another ingredient in their success is luck. There are a lot of smart, tough, risk-accepting and perceptive executives out there, maybe some that compare favorably to, say, Jack Welch or Bill Gates, but if they aren't at the right place at the right time, they'll never have the opportunity to show what they can do. That said, I suspect that some of these barons of commerce get to a point where they start believing their own press releases, and feel that they can do no wrong. They are so taken with the notion of being the Big Boss that they forget that they have bosses, too -- the shareholders of their enterprise. That may be what happened to Mr. Ebbers. I think there's a lesson here for everyone who bears the title of CEO.
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