Plus, if and when it’s ok for a CEO to lie
Part I
A discussion on an Atlantic Flight
It was a busy summer filling several finance and ops positions
along the East Coast and in Europe. On a trip home to Chicago from candidate interviews
in Zurich and Brussels I couldn’t help but notice the distinguished passenger beside
me (Kiton suit, low key Audemars Piguet watch, posture, etc.). Trying not to stare,
I finally recognized him as a heavy speaker at the World Economic Forum in Davos
last winter. A while after takeoff he looked over at my printed legal pad which
has Business is Warfare printed across the top in bold letters. He casually asked
me about it and I mentioned I do this occasional newsletter. He then said he was,
in fact, a longtime reader (e.g. back to 2002!). He said its usefulness was ”inconsistent”
but on occasion liked sending it along to his staff as well as his son who, he added
in a quiet, disappointed tone, “utterly lacks the required edge to change things.”
He stared past me out the window as he said it. His tired expression said he had
concluded the family greatness was going to end with himself. The son wasn’t interested
in carrying the torch and, in fact, would only drop it repeatedly if he tried. I
guess that makes most dads sad. He settled back into his seat and read the FT.
After about an hour of silence and a couple more drinks he looked
over and held up his left forefinger. “Tell me the one trait that you look hardest
for.”
“In what?” I asked looking up from my pad.
“In one of your ‘corporate warriors’. What’s the proof at the
core? When I invest in companies I look for a lot of things but focus on the real
cash flows. What do you look for?”
This had become so intuitive for me I had to think about how
to put it. He stepped in, “Ok, start with the lowest common denominator.”
“Well, that’s simple. Expertise.”
“That’s too simplistic.”
“But the client needs it,” I said. “How else does the employee
pay his way?”
“To do what?”
“Drive value to the business’ ownership,” I answered.
“You think all it takes is expertise? That’s nothing. Every executive
has that, otherwise they shouldn’t even have the job.”
“But it happens. It happens all the time.”
“Of course. And when no one does something about it companies
wither. What else?”
“Relevant experience.”
He rolled his eyes. “Obviously. What else?”
“Ok. Demonstrated loyalty.”
He smiled. “I somehow knew that would be on your list.”
“Why?”
“You really do have a sort of platoon mentality, don’t you.”
he said. “So loyalty would be important to you. But let me ask you this, loyalty
to whom? The idea? The team? The boss? Themselves? Society?”
Suddenly I needed something really stiff to drink. I was outgunned
and I knew it. He knew it too. He was my Professor Kingsfield all over again. I
didn’t know whether to fold and go back to work on my speech or to maneuver. I paused
then came back with: “All those but mostly to the stakeholders.”
Wherever he was driving this caused a bend in his road. “The
stakeholders?” he asked.
“If the employee takes a paycheck, of course. That’s who they
work for. Everything has to eventually point to maximizing the owners’ enrichment.”
“But what do the equity holders know?”
“Who cares? That’s not the point,” I answered flatly.
“What about honor?”
“Well, it’s always better to behave so you don’t have to apologize.”
“Apologize?” he asked.
“It’s part of any job, especially a senior one, to have t make
tough choices. Honor dictates you make them for the right reasons. I think it’s
part of loyalty.”
“Don’t you find that these days loyalty has become too portable?”
he asked.
“Perhaps. But as long as somebody is taking a paycheck they have
to earn it. And a good executive, corporate warrior or otherwise, will persevere
until the moment they move on. That too is part of honor, at least as I see it.”
“Interesting. But you still haven’t told me what’s in the center
of this ‘loyal, honorable expert warrior with useful experience.’ These are just
ornaments on the tree. What’s the trunk made of?”
“Simple. They have to be driven to win. Otherwise, there’s no
real movement, just vibration.”
He thought about this for several seconds then smiled and reached
into his coat. He pulled out a business card and reached over, setting it on my
pad. “I guess that just about says it.”
I examined the engraved card then looked over at him. “Thank
you. Now, tell me about your son.”
Part II
About an hour later we were in the thick of another discussion.
It had spun out of the notion of honor and the lengths to which senior managers
should go to win for their equity holders and how much emphasis should be placed
on social good. We had entered into the sticky subject of management lying.
“No, a CEO should never lie,” he said flatly. “That’s taking
it too far. Look at Enron,” the famous manager said.
I set my drink down and looked over. “Nice, but unfortunately
business has gotten to the point that natural selection favors the deceitful.”
“And you help.”
I frowned. “I resent that. You make it sound like I push for
deceit for deceit’s sake. That’s not true. That would be stupid and shortsighted.”
“Sure you do. I’ve probably suffered through every column you’ve
written for 5 years. Most of them center around some creative form of deception
in the ‘corporate battlefield’ as you unflaggingly put it.”
“And that’s wrong? How can that be wrong? Don’t equity
holders have a right to expect their CEOs and managers to do what’s necessary to
create sustainable increases in equity holder value? Note the emphasis on ‘sustainable’.”
“Of course. But I don’t believe that has to include institutionalized
lying,” he said, then paused to sip his scotch.
I leaned back into my seat. This wasn’t going well. I looked
over, “Ok, what about a ‘noble lie’? A lie told as a substitute for violence and
to prevent harm. Would you lie to a mugger to protect your son from a beating? Is
that lie ok?”
“Of course, because you’ve done a good thing and there are no
social consequences,” he answered confidently.
“Well, in a strict sense, yes there are. Just ask the potential
beater—you efficiently modified his ability to make an accurate decision by lying
to him. Therein lays the power of deceit. It alters perceived reality so different
decisions are made. Informed decisions, but with bad information. So don’t tell
me you haven’t damaged social trust because you have. But in those circumstances
it’s ok. Right?”
I glanced into his hooded eyes as he watched and listened. It
was one of those moments when you realize most people in a conversation just wait
for you to stop making noise so they can say something. But that wasn’t the case
here. I was confident in what I was saying but the intensity of his listening was
both welcome and yet unnerving. Plus, there seemed to be something else going on.
A kind of weird weight hung in the cabin air between us.
I continued, “Well, then. So it’s ok to lie as long as you’re
defending something from harm. You’ve used a lie to coerce and modify behavior,
so it’s no different than a club; they’re both coercive weapons. And weapons make
people do things they don’t want to do.”
There was another long, heavy pause between us.
He finally said, “You’re going to sit there and seriously tell
me it’s ok for a corporate officer to lie? You preach about the sustainability of
profits, but you can’t reliably sustain profits that are based on lies because lies
themselves are unsustainable.”
"No, I’m saying it depends. Lying isn’t just a tool for
managers that lack the skill to come up with a truthful alternative. Those lies
are unsupportable. But there are times when deception should be given technical
consideration just as you would any potentially useful tool.”
“Such as?”
“How about lying in war?” I asked.
“That’s different. That isn’t the world most people live in.
In war things are different.”
“How about corporate war?”
“Oh, here we go,” he said with a depreciating tone.
“That’s right. Here we go,” I said, getting a little hot, but
wary of jumping on my usual soapbox. “Does your competition lie about you, even
in small ways, to get your customers?”
“Of course.”
"And taking your customers hurts you?”
“Typically, of course.”
"Ok, let’s look at this,” I said sharpening focus. “Your
competition deploys deceit as a tool to hurt you. That’s a pretty good definition
of an enemy. And enemies, in my galaxy anyway, lose the right to be treated fairly.”
“So in this sacred galaxy of yours you get to treat ‘bad people’
badly?”
“I get to treat them as they treat me. I was raised on the Golden
Rule and experience has taught me it’s a pretty good one.”
“So once you have somehow divined someone is an enemy, then your
moral compass loosens up a bit. Your acceptable tool-set becomes a bit ‘broader’”.
“Exactly,” I said, hoping we were done.
He sat there for almost a minute before he spoke. “Your playbook
has always intrigued me. On the surface it appears rational, then when you look
closer it gets a bit twisted. Then it begins to make sense again. Unfortunately
I’m not sure that’s where it ends.”
I couldn’t tell if he was giving me a compliment. Probably not.
I stared out the window at the cloudless ocean of blue and waited. I wanted to be
out there somewhere flying my plane.
He went on, “As you view it, in times of competitor induced corporate
war wouldn’t a good CEO, a good corporate general, endeavor to make the competition,
the enemy, seem even worse than they actually are in order to justify treating them
even worse? By your rules, even though that is escalated deceit, that would be characteristic
of a better CEO than one that wouldn’t do it. Right?”
It took a few seconds to get my arms around this. “Yes, because
short wars are better than long ones. That’s a Sun Tzuism that’s pretty hard to
argue with. Once you’ve been pulled into the ring, hit harder and end it quickly.
That’s a CEO’s job as a leader and caretaker of his employees.”
“But Tal, what about if a competitor hasn’t shown themselves
to be an enemy—they are playing by the rules. However, your CEO’s experience dictates
that it’s just a ruse and they will become an enemy eventually. Your playbook seems
to suggest it’s ok to treat them like they MAY behave?”
“You’re talking about preemptive behavior?” I asked.
He nodded.
I smiled, “No, I think that’s called prudent paranoia. In any
case an entity has to behave in a way that is unambiguously hostile to be labeled
an enemy. That said, it’s only intelligent to ‘hope for the best while planning
for the worst’. Your equity holders expect that of you. And any good manager expects
that from their crew. That’s just good management. It’s what they get paid to do.”
“Ok, Tal, here’s my take. The fact is most corporate deceit goes
on internally within the [org] chart. The challenge is that lying is so expedient.
And everybody wants more of what they want. The real issues are the trailing effects.
You can never tell one lie because more are needed to shore up the one you told.”
“I know. My father once told me lies, like money, compound. Just
not in a good way,” I said.
“I have found that managers that always tell the truth move up
quicker and get more done simply because the truth is free standing; the truth doesn’t
require maintenance. Truthful managers simply have more time to think about improving
themselves and the business. Unfortunately the rewards to a lie are typically immediate
and obvious.”
I thought about this a moment. “Of course. That’s why people
do it in the first place. People only lie for the reward. If there were no reward
of some sort we wouldn’t do it. Simple economics. Too bad the rewards for honesty
are, by comparison, so diffuse. And diffuse rewards are often invisible to very
bottom-line oriented management.”
“No surprise,” he said. “A solid bottom line is, after all, measured
in dollars, not the philosophical warmth of having integrity. Sure, it counts, but
it’s hard to quantify. Numbers are easy.”
“Exactly. And that’s a problem. It is, however, the way it is,”
I said.
“Tal, the key for your so-called corporate warrior, the CEO slash
general, is to incent honesty and thoroughness. He or she has to create a culture
of creative, thorough thinking, where alternatives to deceit are rewarded. You can
almost always find a truthful alternative. I learned a long time ago any rung on
the org chart almost always emulates the rows above them. The youngsters copying
the parents—so the parents have to be getting it right. Lazy workers lie, or at
least they lie more and they have to be weeded out. And if an externally directed
deception has to happen, really has to happen, and by that I mean there’s no truthful
alternative, then do it well. I liked your bit on FUD [Fear, Uncertainty and Doubt],
by the way. That was useful.”
I thought about this a moment. “Wait a minute. Just a few minutes
ago you were saying a manager should never lie.”
He smiled. “I know. Sorry about that.”
“You mean you…lied?”
“Yes. But a ‘noble lie’,” he said relaxing into his chair. “I
was protecting myself from a boring flight.”
I reclined my seat and stared up at the ceiling. This wasn’t over.
