Thursday, 5 September 2013

A Board Game

Few people really understand the complex nature that companies develop and use their boards to run the organization.

A board is typically made up of a dozen-odd individuals....who sometimes have a vast amount of experience in the company's business.....and sometimes are just oddball characters who were looking for a part-time job with executive benefits.  As a board get a hefty paycheck....a big office with a view....a secretary or executive assistant...a travel budget....use of some stadium seats....and usually just show up for a dozen hours a month to review the operations and listen to the analyst describe success or failure.

Boards determine the direction of a company.  If they are happy with the CEO....they reward him.  If they are unhappy....they fire him.  A board can screw up a company for years and years, by hiring some dimwit to run the company into the ground.  A board can be brilliant by hiring a virtual unknown guy, and getting tons of positive feedback from within the company over creative innovations and brilliant decisions.

Boards make or break a company.

Zurich Financial is Swiss insurance company of a major concern. Up until the last couple of years....they moved along at a pleasant pace....making a tidy profit....and being noted for four-star analysts and employees.

A couple of years ago, Zurich Financial started to notice they were slipping.  They were being approached continually by other companies, and having Zurich employees jump ship.  The company was having issues in making a noticeable profit.  The board likely sat there....meeting after meeting.....knowing that they were in a bad direction.

Eventually, they made a decision to let their CEO go, and hired a new guy.  This new guy....was a fairly tough individual, who was aggressive and demanding.  As far as the board was concerned....they needed a bold "captain" at the helm of the ship....going in a better direction.

Course, this meant bringing a bold new executive leadership game into Zurich Financial.   This new guy would ask stupid questions....challenge people on decisions....demand accountability.  In short, he wants real results, and wants to be noted for a profit change.  Just being average wasn't enough of a company agenda....they needed to be more.

Somewhere in this mix was the Chief Financial Officer (CFO).  He was a long-term guy for Zurich.  Based on Wall Street Journal reports.....he was competent and very capable.  On the other hand, he probably wasn't used to aggressive management styles, or meetings where frustrated would be dished out across the table.

Months passed in this new environment.  Around two weeks ago.....over a weekend.....the CFO committed suicide.  He left a letter....detailing the downturn, and the frustrations of dealing with the CEO (using his name in the letter).  It was the kind of letter that lays out blame and amounts to "last words" of a guy with no hope left in life.

Last Tuesday, the letter was read by the CEO at an emergency meeting of the board.  The CEO himself read it.  It was not a pleasant experience for him....being noted in the letter in a fairly negative fashion.  The meeting ended simply with a comment that the company needed to stand together as things progressed, and another meeting would be held in twenty-four hours.

By the end of the next day....the CEO had resigned.  No comment on his part....he simply walked out the front door.

The board?  There's little they say....except they are putting things back into some order.  They are hunting for the next CEO and CFO....probably to both be mild and non-aggressive types....going back to the standard order of things as the folks at the Swiss company had been used to.

Blame?  The board is the cog that makes companies like this work or fail.  Their logic to bring the aggressive guy in?  It made sense.  Their involvement in monitoring heated discussions and arguments?  Well....they probably should have been more proactive, but you usually don't worry about events like a board member.  To be honest, you simply sit as an adviser and try to stay out of the way of the company as much as possible.

Over the next year, there will likely be an examination by 500 different companies across the globe at what happened in this case.  Some will ask questions and wonder if they are screwing up.  Some will note that aggressive CEOs are a necessity.  Some will note that you can't be a profitable player in the world market, with a laid-back attitude.

This CEO who resigned?  I don't think you will see much of him anymore.  He will examine his attitude, his success stories, and achievements.  This episode stands out.  There's nothing he can do undo it.  In the world of lessons can't do much with this.  The business world is not a playground, a tidy and organized park, or a sinking ship.

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