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Another CEO bites the dust...

Another CEO bites the dust. Hank Greenberg has been a CEO of the world’s largest insurer for more years than many readers of this piece have been alive. His business results have been impressive, if not unmatched. So, why is he being canned?

Check out the full article as it appeared in the July 2005 issue of Business Journal.

Does it Matter What CEO’s Believe?

By Fred Kiel, Ph.D. & Doug Lennick

Authors of Moral Intelligence: Enhancing Business Performance and Leadership Success, Wharton School Publishing, 2005

Another CEO bites the dust. Hank Greenberg has been a CEO of the world’s largest insurer for more years than many readers of this piece have been alive. His business results have been impressive, if not unmatched. So, why is he being canned? Well, the directors apparently are worried that he has become a liability and the Department of Justice seems to think he might be a crook – it is investigating whether or not to bring criminal charges against him for having inflated AIG’s financial figures. That’s called lying by most ordinary people.

How can we explain the behavior of people who have contributed so much but yet flame out like this? It’s as if one element of their “winning formula” was a clinker – or more precisely, a time bomb waiting to go off and erase the otherwise impressive history of winning.

Our research suggests to us that a leader’s behavior is the expression of a set of underlying beliefs and that all behavior is aligned with a corresponding belief. We believe that this part of an individual’s “moral compass” and it contains a relatively short list of beliefs about human nature, the world and how to best influence people—one’s “worldview.” These beliefs inform one’s decision making and drive behavior.

So, what was the clinker for Hank? Does he believe in his heart of hearts that it’s okay to cheat if you don’t get caught? Or a slightly more socially acceptable version – “Everyone has to bend the rules from time to time in this competitive global market. The good guys come in last?”

What are the core beliefs that drive moral behavior? Does it really matter what CEO’s believe? We believe it matters a great deal. And we think that there is a “right” view on this matter – even though it has yet to be proven with research. These are empirical questions that beg to be answered.

Some interesting research along these lines has begun. Kotter and Heskett in their 1992 book, Corporate Culture and Performance, discovered that revenue, stock prices and net income were found to be far greater for those companies who were led by leaders who created “adaptive cultures” and strove to live in alignment with a specific value system.

More recent research reported by Collins in his book, Good to Great, also lends support to this idea. He found that all good-to-great executives were similar in important ways. He calls them “Level 5 leaders” and notes that they are driven to produce results but in a morally intelligent way.

No one to date, however, has isolated the contents of what Collins calls a “black box” or identified all the elements in our “winning formula” metaphor. These basic questions remain to be answered: What are the beliefs of these amazing leaders – their core convictions and worldview? What do they believe about human nature? What do they believe about themselves? Why are they so driven to achieve sustained business results by following universal rules of human conduct instead of bending the rules?

Answering these questions might be the most important research that can be done. After all, no amount of new rules about compliance or newer versions of the Sarbanes-Oxley bill will accomplish what we need. Simply staying within legal boundaries is not enough. Instead, we need to develop self-monitoring moral individuals who then go on to create virtuous circles and become moral educators in their own right. For better or worse, CEO’s teach us all by their behavior.