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)