Murdoch's Testimony Provides New Playbook for CEOs in Trouble
Rupert Murdoch has ended an unusual spasm of CEOs taking responsibility for their companies. Expect to hear his cry of "It's a really big company and it was someone else's fault" repeated whenever an executive is in trouble.
The last few years have seen a major upswing in the number of CEOs who've had to fall on their own swords after corporate cockups they didn't directly participate in. (Admittedly, it takes very few to dramatically change the numbers when you start near zero.)
The Gulf oil spill cost BP's Tony Hayward his job even though there was no proof he was any better informed about oil rig safety than anyone else at the company. NPR CEO Vivian Schiller likewise had to surrender her key to the executive washroom when an underling was caught on (severely edited) tape saying mean things about overly sensitive conservative politicians.
Assorted bank bosses quit because of actions by trading departments. In many cases these were actions that members of the department itself didn't understand. At AIG, these were the people who got bonuses after crashing the company.
Enough of that
Murdoch has put a stop to this nonsense and will only leave News Corp. (NWS) when it is pried out of his colder and deader hands (anyone who disagrees can duke it out with Wendi Murdoch). The famously involved CEO has proudly told Harry Truman where he can put that buck he stopped. When asked why he shouldn't resign, the Aussie Digger responded,
The people I trusted, I am not saying how or at what level, let me down.He even managed to say that despite not knowing what was happening before all this, "I am the best man to clear it up." Well played, old boy, well played.
Every PR firm in the world was taking notes on Murdoch's testimony (and wondering how to hire a pie-thrower without getting caught). You may expect to hear endless variations on his themes whenever a CEO is called out.
Murdoch to board: Go on, I dare you
Some people are claiming that Rupe's lack of knowledge will undermine his credibility as CEO. (Yes, I too nearly spit out my latte with laughter when I read that.) With whom? His employees all know (if they ever doubted) that if there's a screw up somewhere, You-Know-Who won't be the one taking the fall. As far as Murdoch's credibility in the business world goes that has always depended on two things he still has in abundance: Money and influence.
Jay Lorsch, a Harvard Business School professor, suggested that the board will no longer think highly of him.
If he didn't know what was going on, he's doing a lousy job as CEO and the board should replace him. The board should be asking, 'Where were you?' The buck stops with him.A board of directors replace the CEO who hired them? Prof. Lorsch, have you been tracking CEO compensation recently? Diogenes will find an honest man long before you can find an independent board of directors.
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