Chief executives (CEOs) occupying the corner office for life (or the rest of their working life) can be an advantage - but more often, a disadvantage. One has to go back to the adage “Power corrupts, absolute power corrupts absolutely.”
The advantage is that such a CEO virtually substitutes for the founder or family. There is long term commitment - and a personal presence through long term projects.
The disadvantage may be, that they get so powerful and incensed, that they may be doing exactly as they please- and also get by, provided they keep most of the stakeholders happy with the returns that the stakeholders expect.
The organisation that saw the advantage of a “limited but reasonable tenure in power” was the Jesuit order of priests, of the Catholic Church. All their institutions elect a Rector (CEO and No1) for a period of five years. At the end of this term, he has to step down and he becomes “one of the community.” Another is elected, for another five-year term.
Thus they all know that power is temporary. It has to be fairly and judiciously used, all the time remembering, “Do unto others as you would have them do unto you."
Such CEOs remain rational and emotionally balanced. They rarely have prejudices or strong likes and dislikes. They are also pushed into working hard to show the best they can do in the time that has been allotted to them – five years – no more, and no less!
The greatest reward for the Jesuit superior is the comment, “The five years of Rev X, was a golden period,” OR “Rev X laid the foundation for this growth when he was the Superior”.
In the corporate world, Unilever seems to have followed the Jesuit model. Every Unilever chairman is appointed for five years. Six months after appointment, he has to nominate two or three of his juniors as prospective successors to himself. He then also becomes a mentor to these two or three.
The world head-quarters (HQs) also tag their performance regularly, in their present job. They may even supplement the training with short stints of assignments in the world HQs or at any of their subsidiaries.
In addition, they may be sent out for outside training at programs of reputed universities. They will finally decide who will be the successor.
The retiring CEO is looked after in terms of his pension and post-retirement benefits – so he is not in any dire need, especially if he has finished his term when he is way below the retirement age of 60.
This is a comforting guarantee to people with outstanding abilities who reached the top, earlier than most executives would.
Thus, Lever CEOs like Prakash Tandon and Vasant Rajadhyaksha went on to secure government of India appointments - more as a service to the country in their senior years, rather than as a ‘career job.’
And what happens to the CEO who is permanent till death do us part?
Most times it evolves into a shade of monarchy – where the king is supreme – and he is never wrong!
He is also tempted to demand earnings, which are totally out of balance with the earnings of the other employees.
There was a rule in the past- that the highest salary in a corporation, will not be more than 16 times the lowest salary. This code has been thrown to the winds.
For CEOs with permanence, the highest salary could even be 1,600 times the average lowest salary!
There are those, who use the power of permanence to give themselves secretly, a large bonus to enable them to afford a lifestyle which they enjoyed while they were in active service – and which they had got used to for many decades.
If not for disclosures in the divorce proceedings of Jack Welch, we might never had known what and how much he gave himself, even without the knowledge of the shareholders.
This was a pity, because many admirers, who had put him on a pedestal as the ideal manager, now had to pull him down.
Of course, there are exceptions- those who were CEOs for a long time and did not take advantage of their position. We will need to study these at another time.
For now, there is sense in selecting deserving candidates for specified terms, with clearly laid down goals; and evolving a succession plan that will keep the corporation moving forward for many decades!
(Walter Vieira is a Fellow of the Institute of Management Consultants of India (FIMC). He was a corporate executive for 14 years and pioneered marketing consulting in India in 1975. As a consultant, he has worked across the globe in four continents. He was the first Asian elected Chairman of ICMCI, the world apex body of 45 countries. He is the author of 16 books; a business columnist; visiting professor on marketing in the US, Europe and Asia. His latest books are "5 Gs of family Business" with Dr Mita Dixit and "Marketing in a Digital/ Data World" with Brian Almeida. He now spends most of the time in NGO work.)
