Quarterly Essay 10 Bad Company: The Cult of the CEO

By Gideon Haigh

In Bad Company, Gideon Haigh scrutinises the way we have turned CEOs into tin gods. Is moral outrage the appropriate response to the collapses of Enron or HIH or are we all implicated in a crazy system? Haigh argues that the attempt to create great entrepreneurs of the new caste of CEOs by giving them shares is doomed to failure and inherently absurd. In a tough-minded, vigorous demolition job on the culture that produced the cult of the CEO, Haigh writes a mini-history of business and shows how the classic traditions of capitalism are mocked by the managerialism of the present.

“The world where the CEO is deemed to be a ‘genius’ at least equal to a great actor or a great sportsman is a world in which ... Gideon Haigh refuses to believe.” —Peter Craven, Introduction

“The making of the modern CEO has been a story of more: more power, more discretion, more ownership, more money, more demands, more expectations and, above all, more illusions. More, as so often, has brought less ...” —Gideon Haigh, Bad Company

• Language: English
• Publisher: Black Inc. Books
• Release date: Jun 1, 2003
• ISBN: 9781921825095

Gideon Haigh

Gideon Haigh is an award-winning writer, described by The Guardian as 'the most gifted cricket essayist of his generation'.

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Quarterly Essay

Quarterly Essay is published four times a year by Black Inc., an imprint of Schwartz Publishing Pty Ltd

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CONTENTS

Introduction Peter Craven

BAD COMPANY

The Cult of the CEO

Gideon Haigh

CORRESPONDENCE

George Seddon, Barney Foran, A. Duncan Brown, Peter Christoff,

Tim Flannery, Peter Walsh, Amanda Lohrey

Contributors

Quarterly Essay aims to present significant contributions to political, intellectual and cultural debate. It is a magazine in extended pamphlet form and by publishing in each issue a single writer at a length of at least 20,000 words we hope to mediate between the limitations of the newspaper column, where there is the danger that evidence and argument can be swallowed up by the form, and the kind of full-length study of a subject where the only readership is a necessarily specialised one. Quarterly Essay aims for the attention of the committed general reader. Although it is a periodical which wants subscribers, each number of the journal is the length of a short book because we want our writers to have the opportunity to speak to the broadest possible audience without condescension or populist shortcuts. Quarterly Essay wants to get away from the tyranny that space limits impose in contemporary journalism and we give our essayists the space to express the evidence for their views and those who disagree with them the chance to reply at whatever length is necessary. Quarterly Essay will not be confined to politics but is centrally concerned with it. We are not interested in occupying any particular point on the political map and we hope to bring our readership the widest range of political and cultural opinion which is compatible with truth-telling, style and command of the essay form.

INTRODUCTION

Gideon Haigh’s Bad Company:The Cult of the CEO is the tenth of the Quarterly Essays and something of a departure for us because it does not, in any obvious sense, emerge from a broad consensus of left-liberal opinion. On the contrary, Haigh is not only a devout believer in capitalism, he is someone who is not interested in the contemporary witch-hunt about the mad, bad CEOs who have destroyed their companies, crippled their shareholders and generally acted like criminals.

Or rather he is interested in this only as the symptom, in extremis, of a deeper disease. He cites John Kenneth Galbraith to the effect that there will always be an element of embezzlement in business and that different economic climates and different economic cycles will highlight it in different ways, nor is its perception wholly distinct from fashions and counter-fashions.

But the grosser examples of corporate misbehaviour, which inflame the Right and Left, are not Gideon Haigh’s primary emphasis. What he is interested in is not the crooks per se but the wholly conventional captains of industry who we have elected to believe are the colossi of a market world of which they seem the emblems and the epitomes. What gets dubbed globalisation, Haigh remarks at one point, is simply the regnancy of the American way of managing economies of all kinds and what goes along with this is the apotheosis of the managers.

Not the managing directors, of course, that’s yesterday’s parlance – enshrining yesterday’s modesties, it suggests that the wondermen are merely the first among equals. No, the CEO in his contemporary incarnation is possessed of the traditional mana of kinship and he (generally it’s a he) is paid so royally that you have to wonder what blind faith is hedging him with such divinity.

Gideon Haigh takes the coldest possible view of all this. He simply does not believe that you can take an upper-level managerial axe-wielder (trained on exactly the same Harvard MBA doctrine as all the other axe-wielders) and turn him into a genius of business by fabricating a status for him as some kind of stakeholder (a term that irresistibly reminds Haigh of the world of Dracula).

Haigh believes that the system of paying the CEOs the earth represents the folly of believing that you can turn humdrum generals into Napoleons by the simple procedure of remunerating them as only a thaumaturge could sanely be rewarded. It is an attempt to create great entrepreneurs out of hireling managers by the flawed method of giving them equity and stock options.

It sounds like a good enough idea in theory – that the newly hired CEO will act more in the interests of his adoptive company if he has a stake in its fortunes – until you realise he can effortlessly divest himself of these interests to his own financial benefit when it happens to suit him.

There is also an inherent absurdity for Haigh in the idea of instantaneously rewarding the brilliant CEO when true wisdom in business is not likely to be measurable for years, sometimes many years, after the event.

We have become used to the spectacle of the new-style CEO who sacks some bewildering fraction of the staff (often people doing crucial jobs in companies with little fat) for the sake of the figures, as if this was an end in itself. We have also seen the kind of CEO – was Donald Rumsfeld, the Secretary for the War on Everything, in this category? – who window-dresses simply for the purpose of selling the shop.

Much of what passes as business doctrine these days is to Haigh just a fire lit by heretics. Hence his disdain for figures like Chainsaw Al Dunlap, who did not change the world of business to anyone’s betterment apart from their own, they simply interpreted it as a graph for their egos and solaced themselves with dogs who could not talk back.

One of the distinctive things about Gideon Haigh’s Bad Company is that it is written against the post-Iacocca CEOs from the conservative position of someone who has a deep belief in the history of sane business practice and sees it mocked by the mutations it has suffered, which are still slavishly valorised by the very people who scream about the crimes of the crooked CEOs without realising that much the greater problem is structural.

That’s one reason why this Quarterly Essay, written in the wake of the HIH outrage and a general Australian wave of horror at CEOs gone crazy, is first of all a kind of history of business and is, secondly, so preoccupied with the American paradigm and the way it has impacted on international practice.

Haigh believes that you cannot offer a critique of contemporary business unless you are conscious of how much it comes out of the past and how radically it departs from it. He does not think you can understand the excesses of the Australian CEOs – even though his focus on them becomes closer as Bad Company moves towards its conclusions – unless you understand how parasitic they have been on an American model which is itself flawed but which has at times been efficacious in its own terms. (Haigh thinks that the celebrity-style American CEOs tend to be bad news but that at least they have increased profitability which is more than can be said for their marsupial brethren.)

Of course Haigh also has a fascination at once historical and satirical with both the enormities and the banalities of his subject. He can savour the creepiness of Henry Ford just as he can admire the far-seeing restraint of Alfred Sloan, the great head of General Motors, whose impersonality by contemporary standards of braggadocio and mercilessness is like T. S. Eliot compared to who … Marilyn Manson?

That’s not a Haigh comparison but metaphor and allusion abound in Bad Company which is an excavation of business history that manages to ally it with history proper and through history with literature. This is a meditation on the CEOs of a time of low morals that exhibits an attendant awareness of Dickens and Trollope not as adornments but as exemplifications of reality and which is spiced with the odd bit of de Tocqueville or Machiavelli because political hard talk has a perennial pertinence to the money game.

It is written in a style which combines the erudition of one of the nation’s most accomplished business writers with the natural plumage and range of mind of a writer who is by inclination dandyish in vocabulary and locution and always willing to go down crooked byways that can sharpen our sense of sometimes dark matters.

Haigh is at every point a compelling writer even when he is dragging the reader through thickets of new information or – which will also happen, contrarily, with his business readers especially – when he is defying what is generally accepted as the wisdom of the world.

The world where the CEO is deemed to be a genius at least equal to a great actor or a great sportsman is a world in which that savant of the cricket oval Gideon Haigh refuses to believe. He never quite says that these CEOs are moral pygmies or cultural morons, but he has a very powerful sense of how banal they are and how crushingly mundane are the values they represent and the values that have brought about their election.

And for Gideon Haigh we are all responsible because it is the world view we have created as an alternative dogma beyond which we cannot see because its value rests and rests utterly on the void. These jumped-up job-cutters with their mean minds and their narrow skills, their human quality of admitting no humane culture except that of cliché. Forget the Adlers and the Williamses and all the particular configurations of greed and folly, the collective delusion that has created a race of exorbitant titans out of managers is one we have all subscribed to.

Cancellation is the only solution and Haigh’s view of the subject is Ockhamite indeed. Who knows most about a company? The implication of this Quarterly Essay is quite plainly: the people who have devoted their lives to it, not the pig who comes in disguised as a silk purse because the position and the pay gleam like gold. Haigh is committed to the conservative tradition of business to such an extent that he will be mistaken for a radical ratbag. He even believes that some of the most qualified people to sit on boards could be drawn from the ranks (shock, horror) of retired middle management. Might they be stick-in-the-mud, disinclined to take risks, Haigh asks. Good on them.

Agnosticism of this order may sound like carol singing in no man’s land and provoke fire from both sides. In any event this is a tough demythologising essay, scathing and elegant, which will be read with pleasure and discomfort by the widest range of readers.

It is an essay by a man who takes a delight in the history of business, its scurrilities and its high achievements, who has never mistaken the sound of money for the music of the spheres.

Peter Craven

BAD COMPANY

The Cult of the CEO

Gideon Haigh

Ray Williams, it is said, prided himself on his manly bearing, favouring smart, dark suits tailored to his tautened physique, and always greeting visitors with a firm, sincere, double-handed handshake. He preferred, too, to keep the wider world at a distance, buying the house of his Mosman neighbour for $5 million to preserve his privacy, and commissioning a private chapel for his walled Lake Macquarie retreat rather than expose his family to the prying eyes of a public congregation. That poise did not desert him last year when he became Australia’s best-known and most-maligned chief executive officer, at the royal commission investigating the collapse of the HIH insurance group which he had headed for thirty years. He seemed cool, detached, crisply laundered, oblivious to the media’s enfilade of enquiries, his thin, unparting lips shaped in a mirthless smile. His severe countenance belied the excess involved in HIH’s $5.3 billion failure in March 2001.

Justice Neville Owen’s report, released on 16 April 2003, begins with a Shakespearean flourish: Beware the Ides of March. History’s most famous unheeded warning, says Owen, resonated eerily throughout the commission, HIH’s shambling journey towards oblivion having begun long before. The reader braces instinctively for a story of cabal and conspiracy, of hubris and nemesis – and the judge comes to bury the CEO not to praise him, citing blind faith in a leadership that was ill-equipped for the task, in which the hand and influence of Williams were paramount. HIH, it emerges, spent tomorrow’s money today in order to satisfy its cravings for premium income, plunging headlong into the acquisitions of CIC in June 1995 and FAI in September 1998 as it also threw good money after bad in the United States and United Kingdom. And on these condemnations did the attention of journalists naturally alight, translating into damning headlines: Blind faith, naked greed, HIH boss blamed for collapse, HIH chief faces jail and, of course, in anticipation of the salutary smack of firm government, Costello pledges justice for all.

Yet what detains the eye in Owen’s report is what might be considered a corporate variation on Hannah Arendt’s banality of evil: the mundanity of mismanagement. HIH, says the judge, was not a case where wholesale fraud or embezzlement abounded, and by and large the people who were involved were not inherently bad or in some way set upon being part of a corporate disaster.After three decades in charge,Williams was unrivalled in authority and influence. But his control depended on there being insufficient ability and independence of mind in … the organisation to see what had to be done and what had to be stopped or avoided; failure was as much an outcome of a culture of apparent indifference or deliberate disregard on the part of those responsible for the well-being of the company. Justice Owen reveals an organisation that was often flying blind. Its electronic financial system provided incorrigibly incomplete and inaccurate information. Its general ledger had unreconciled accounts dating back to 1995. The reporting regime was lax, the audit committee misconstituted, the budgeting process misconceived, the preparation of financial information was being manipulated by lower-level