Downsizing the CEO

Business Week: The Boss On The Sidelines

"If anybody needed proof that the new balance of power in Corporate America has shifted, Maurice R. 'Hank' Greenberg provided it on Sunday, Mar. 13. While the imperious chairman and CEO of American International Group Inc. (AIG ) was holed up aboard his yacht on the Florida coast, his company's independent directors were packed into a conference room in their lawyer's Manhattan office.

The board members faced an urgent crisis: a growing accounting scandal that seemed to lead straight to the CEO. As directors debated whether to cut Greenberg loose, the 79-year-old titan lashed out at them by telephone. 'This board is being run by a bunch of lawyers who can't spell the word 'insurance,'' he shouted. 'If you get rid of me, you will destroy this company!'

It was the kind of intimidation that had helped Greenberg consolidate unprecedented power in his four decades at the helm of the insurer. But this time, the bullying didn't work. Within a day, Greenberg, once the most powerful man in the industry, was out as CEO. Two weeks later, as the scandal widened, he was forced to resign the chairmanship, too."

Laurie's Comment

I highly recommend a thoughtful read of the full article cited above for top executives (CEOs, CFOs, etc.). We have entered a new era where boards of directors, auditors, and lawyers have taken the reins in corporate America and show no signs of letting go. Facing legal and criminal liability for their failures, they are experiencing real and well-warranted fear of severe consequences and are no longer willing to remain on the sidelines.

Whether the new legalistic, formal relationships with CEOs that have replaced traditionally informal and cooperative ones are good or bad on balance remains to be seen. But this new business environment seems to be here to stay, so senior executives had better prepare themselves to deal with it for the long haul.