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Sepp Blatter resigns

What can the world of business learn from Blatter’s downfall?

By Julian Birkinshaw . 03 June 2015

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First, we crave leaders with integrity – who are able to do the right things for the organisations they serve, and who have the social awareness to see when their own position becomes untenable.  Blatter clearly failed on both counts, as did Dick Fuld at Lehman, Fred Goodwin at RBS, Jean-Marie Messier at Vivendi, and Dennis Kozlowski at Tyco.  There are also plenty of leaders who have acted with high integrity, exiting before they were pushed, or standing up for a point of principle, for example Michael Woodford at Olympus. Alas, they don’t get anything like as much attention as the corporate villains. 


Second, if we cannot rely on our leaders to show integrity, we need robust governance and control systems to keep them in check.   FIFA, of course, was in a unique position – it had no competition, it had control over a product that everyone wanted a piece of, and it based itself in Switzerland. It was essentially unaccountable, which of course is why Blatter was able to hold on for so long. In comparison, big corporations are held in check through a range of formal and informal mechanisms:  


  • Internal controls - non-executive directors, audit committee, risk management systems
  • External regulation – auditors, analysts, shareholder meetings, earnings calls
  • External competition – activist shareholders, corporate raiders
  • Public transparency – whistleblowers, glassdoor.com, bloggers, press articles

This is an impressive set of checks and balances, and yet it is not always enough.  Which opens up the third point – why on earth do some companies still get away with dodgy or fraudulent activities, despite all these controls?  I think the key variable is time. We all know that power corrupts, but it doesn’t corrupt instantly.  Over the years, leaders who lack integrity gradually take control of the various levers of power, they surround themselves with acolytes, and they reduce the strength of the mechanisms designed to hold them in check.  The problems at Lehman, RBS, Vivendi, Tyco, Olympus and Enron were brewing for years.  


So what can we do differently?  Strangely enough, we should probably draw inspiration from the world of politics. In the recent UK general election, David Cameron, Ed Miliband and the other party leaders had to submit themselves to direct, often plain rude, questions from the public, on live television. They were subject to ritual humiliation on satirical quiz shows. The newspapers trawled through their personal lives.  A lot of this was over the top, it was unedifying.  But it helped to keep the party leaders egos in check. Can you imagine Sepp Blatter, or some of the corporate leaders mentioned above, submitting themselves to this sort of public accountability?


Regardless of their flaws, western democracies have three key advantages in their governance models that the corporate world – and FIFA – should take heed of. One is that leaders are held to account on a very personal level, and in a highly visible way.  The second is that activism is encouraged – new parties are encouraged to challenge old parties, and have the voice to be heard. The third is the idea of term limits – no US president can spend more than ten years at the top.  It is almost axiomatic that the longer someone stays at the top, the more powerful and therefore the more dangerous they become.   


These are not crazy principles for the business world.  Partnerships, such as law and accounting firms, have elections and term limits. There are even some business organisations, WL Gore for example, that elect their leaders.  If we cannot guarantee that our leaders show personal integrity – especially over the long term- we need to find more robust ways of keeping their power in check.


Image title & credit: FIFA President Sepp Blatter (Photo: Sebastian Bozon/AFP/Getty Images)

Comments (7)

max1 2 years, 8 months and 10 days ago

people

Socrates 2 years, 8 months and 11 days ago

The article assumes that the allegations of a criminal nature against Sepp Blatter are in fact proven and therefore justifiable as a basis of the criticism of the man and the organization. There is far more to this battle to control an organization as large, diverse and as powerful as FIFA is. The man who ran the allegations against a Blatter run FIFA along with the BBC were selective in their criticisms of the man and his organization. Frank Lowy the Australian who was quite vocal in his support for the Jordanian prince as alternative to Blatter is tainted with allegations of corruption (FBI probe into hundreds of millions of dollars of unpaid taxes in the US by his corporation and his family company) whilst the Federal Police in Australia conduct and investigation into how he spent an alleged $500,000 on Jack Warner the former FIFA deputy president. One version has it that Frank Lowy paid Warner the $4,000,000 he demanded from Lowy, which Lowy only admits to having paid $500,000 of, whilst on another front Lowy admits to having spent $45,000,000 in his failed bid to win the Qatar games for 2022. There is no way we can make any assumption on how and why organizations fail on the basis of unverified allegations. It does no one a service at all. Blatter resigned. He was not found guilty of any offence in a properly constituted legal forum. The LBS analysis must therefore fail

Socrates 2 years, 8 months and 11 days ago

The article assumes that the allegations of a criminal nature against Sepp Blatter are in fact proven and therefore justifiable as a basis of the criticism of the man and the organization. There is far more to this battle to control an organization as large, diverse and as powerful as FIFA is. The man who ran the allegations against a Blatter run FIFA along with the BBC were selective in their criticisms of the man and his organization. Frank Lowy the Australian who was quite vocal in his support for the Jordanian prince as alternative to Blatter is tainted with allegations of corruption (FBI probe into hundreds of millions of dollars of unpaid taxes in the US by his corporation and his family company) whilst the Federal Police in Australia conduct and investigation into how he spent an alleged $500,000 on Jack Warner the former FIFA deputy president. One version has it that Frank Lowy paid Warner the $4,000,000 he demanded from Lowy, which Lowy only admits to having paid $500,000 of, whilst on another front Lowy admits to having spent $45,000,000 in his failed bid to win the Qatar games for 2022. There is no way we can make any assumption on how and why organizations fail on the basis of unverified allegations. It does no one a service at all. Blatter resigned. He was not found guilty of any offence in a properly constituted legal forum. The LBS analysis must therefore fail

Thearae 2 years, 8 months and 11 days ago

Sepp Blatter is a manipulative, Machiavellian autocratic leader, who had been promoted to his level of incompetence and who did not know when to retire (i.e. 20 years ago). He was ultimately responsible for the corruption going on at FIFA. If he did NOT know what was going on, he shouldn't have been in the job. If he did know what was going on and did nothing about it, he shouldn't have been in the job. End of discussion. BTW I agree completely with AndreavonRoth (apart from the typo). At least someone is speaking sense for a change.

Starter007 2 years, 8 months and 12 days ago

Although there is a suspetion of misconduct in the case of FIFA, but it is too early to make any accusation of any sort unless a through investigation is made. Furthermore, it seems that new political powers are interfering in the case, which means it could iturn into another political war, and destroy our clean competition in football (soccer).

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