The Leadership Quagmire

To lead is defined by words like showing the way, guiding, being the example. In cards it is the person who makes the first play and sets the strategy as least in the beginning for the rest of the game. Leadership also is synonmous with getting results at least in today's corporations, businesses and organizations. The conundrum leaders find them selves in is the choices they need to make to balance the needs of various stakeholders such as stockholders, their customers and employees and of course their own personal needs.



So here we are today with an historical financial crisis on our hands, with giant formerly successful corporations crumbling and begging for help from outside their walls. Everyone is asking "how did this happen?" and though there are a plethora of circumstances that may have contributed to the catastrophe... isn't it primarily the result of leadership decisions and choices? The leaders at the top of the large banking and brokerage and insurance institutions made choices to maximze profits for their stockholders - a key obective of most companies. As stockholder myself through my investments and retirement savings I was happy to see my ROI climbing with visions of retirement fun dancing in my head. Didn't we all get caught up in the sexiness of owning more things as our lines of credit increased? Weren't we all on-board the train to Shangri-la?



So now the consequences of those choices at the top executive level of the crumbling corporations or at my level watching my retirement savings dwindle and credit card debt hovering are hitting us smack in our "main-street' lives. And we are angry and rightfully so to some degree of the lines we were fed, our gullibility in buying them and in the trust that has been taken advantage of by greedy executives in those giant corporations. We want retribution of at least some satisfaction that someone at the top is paying for their greed and with Bernie Madhoff off to prison as an example we now want to see the leaders at AIG and others being held accountable for their poor, greedy decisions. As "main street" struggles to get by each day we are horrified that those executives would receive a penny of compensation for actions that we are now paying for with our hard earned tax dollars.



I struggle though with my own contradictions - I liked it when I was making money and now that I am not, who is to blame? So here we are ..AIG executives got greedy and in the meantime helped many of us build our retirement nest eggs. They want their contracted bonuses for all those decisions they made that made lots of them and us money. Only today none of us are still making money because of those decisions. I'm angry but just not sure at who. Leadership is supposed to reflect ethics, integrity, compassion, empathy, calculated risk taking, responsibility, confidence and emotional self management and those competencies and values should be constant in all decisions. Appears these executives let go of these and we were either blindly unaware or didn't care.



This commentary/article from the Harvard Business Publishing by John Baldoni is interesting and a good one for this blog. I'd love to hear your perspectives.
Best Regards,
Sandi



http://blogs.harvardbusiness.org/baldoni/2009/03/how_aigs_edward_liddy_lived_to_figh.html?cm_mmc=npv-_-LISTSERV-_-MAR_2009-_-LEADERSHIP1


Voices » John Baldoni » How AIG's Edward Liddy Lived to Fight Another Day
How AIG's Edward Liddy Lived to Fight Another Day
11:25 AM Thursday March 19, 2009


Well, it wasn't the OK Corral — but there were plenty of shots being taken as Edward Liddy, CEO of AIG (aka the most despised business in America) strode into the chamber room to face a Congressional inquiry panel. Picketers were holding signs, Congressmen were snarling for the cameras, and public opinion was decidedly against the speaker. But as John Ydstie of NPR described it, Liddy "almost immediately began to defuse" the hostilities with his straight talk.
I would be the last one to make any apologies for AIG, which at best was mismanaged and at worst criminally so. Anyone involved in such a management fiasco should not receive bonus compensation for driving the enterprise into virtual insolvency. But Liddy is not the chief culprit; he is the CEO brought in by former Treasury Secretary Hank Paulson to rescue the company. It bears noting that Liddy receives one dollar a year in compensation. After his testimony to Congress, however, his colleagues might want to buy him dinner.
Liddy's presentation is a textbook example of how to deliver an unpopular message in front of a decidedly unfriendly crowd, something that leaders need to know how to do whether they are speaking to stakeholders or to the public at large. Here's how Liddy did it:
Share the outrage. In his prepared remarks, Liddy said, "We are meeting at a high point of public anger. Americans want to know how the country got into the financial mess we are in... I share that anger." Demonstrate understanding of how people feel and align your remarks to that point of view.
Slay the dragon. "I have asked the employees of AIG Financial products to step up and do the right thing," he said, having asked those receiving more than $100,000 to return at least half of those payments. Liddy noted that some had already given back their entire bonus, which of course, is what Congress and the American people want. By addressing the issue candidly, Liddy was able to get people to listen, even if they do not agree with him.
Accept responsibility. Liddy's remarks described AIG as making "mistakes... on a scale that few could have ever imagined possible... [T]he company strayed from its core competences in the insurance business... [and] became an internal hedge fund, which then became substantially overexposed to market risk." Did you or your company make terrible mistakes? Call yourself out for it.
Address the solution. Liddy focused the remainder of his presentation, and elaborated in public testimony, on how AIG is working with the Federal Reserve and is now owned by the American people. When delivering a tough message, a leader must focus attention on what to do next.
Stand up for your people. Liddy made it clear that those responsible for getting AIG into its mess were "gone." Bonuses were not for performance. They were for retention of employees who were "winding down" AIG's $1.6 trillion damaged assets portfolio and were in effect managing themselves out of a job. Liddy's sentiments are in direct opposition to what Congress wants to hear, but as CEO he must champion those employees he feels are doing the right thing.
Remain calm. Edward Liddy was as forthright in his tone as he was with his analysis. He did not become ruffled at tough questions; his demeanor likely took the edge off the proceedings. It is very important for leaders to exert calmness; if a leader comes unglued it gives opponents ammunition to attack and supporters no reason to follow. Liddy kept his cool.
The greedy behavior at AIG ought to serve as a Times Square video billboard for how (with apologies to Lord Acton) greed corrupts and absolute greed corrupts absolutely. But I would not put a picture of Liddy on that billboard. He demonstrated what it takes to be accountable in public and in the process demonstrate that some financial executives still remember how to be straight with the American people.