When the global economy is presenting daily gloom and doom, issues like the structure of boardroom power seem less urgent. But business as usual will be resumed one day. The questions raised by Stuart Rose’s desire to be both executive chairman and CEO at the British retail giant Marks & Spencer (M&S) would persist even without the recent poor results that have weakened his defenses against angry investors.
The ins and outs of this rumpus are symptomatic of deeper developments in top management. Once, Rose-style one-man bands were the norm. Today, his move flouts majority opinion among Britons who care about corporate governance. It’s mostly a phoney war, of course. Many CEOs blessed (or cursed) with chairmen still dominate management internally.
In the great crunch, the cult of the CEO survives, even though the allied cult of shareholder value has been well and truly rubbished by the bear market. Banks as well as shareholders are licking the wounds created by the latest lunacies; money overlords who once financed governments may now depend, like Barclays bank, on the huge wealth of “sovereign funds.” The future of many deals is stuck today in the hands of “private equity.” The public company is being partly eclipsed by good old private ownership.
Compared with the CEO cult, privacy is more compatible with the New Management as practiced by the digital entrepreneurs. Their freestyle methods and success provide a template for an era in which the CEO is just one of the boys, or girls. These heretics don’t rush into recessionary cost-cutting, even in gathering gloom.
The ideal 21st century company generates ideas as readily as breath, bottom-up rather than top-down. The ideas will be devised, designed, disseminated, perfected and developed in never-ending, rapid cycles dominated by customer needs. Recognition, promotion and rewards will be dominated by achievement as seniority is kicked out of the window.
Alas, this transformation hasn’t occurred widely, though many non-digital CEOs have suffered from falling behind the pace of change; their own job tenures have shortened as open criticism of their performance (see Rose) has risen. Moreover, the search for short-term gains, so long despised by professional managers, is the driving force of private equity — the new capitalism.
Under the name of “venture capital,” the original privateers made key contributions to the New Management. As relative midgets, the venturers sought out guys with good ideas, fed them with moderate borrowings and supported technological strengths with imported managerial talent. Without the combination of idea-rich technology and able managers, miracles like Apple, Digital and Intel couldn’t have happened.
Apple outlived growing pains to spawn massive wealth: on Fortune’s latest reckoning, Steve Jobs and his cohorts lead the world in “power and innovation.” The top 25 powerhouses, however, include a non-digital trio: GE, Procter & Gamble and Boeing, whose leaders (Jeff Immelt, A.G. Lafley and James McNerney) aren’t personally noted as innovators.
Their companies were lauded as management champions half a century ago. GE’s stability and strength contrast with the disappearance in Britain of its arguable equivalent, GEC. Yet UK engineering can still produce as many as 109 candidates for the annual MX Awards given by the Institution of Mechanical Engineers. The overall MX winner is Wrightbus, the Northern Irish enterprise whose diesel buses give it the European lead. The founder, William Wright, is still on the board at 83.
That may sound old-fashioned; but the partnership mode of the hedge funds and the highly personalized leadership of Silicon Valley reflect qualities long attributed to the “family-owned and family-managed” business. In the days when M&S had uniquely grand managerial and business kudos, that is how its boardroom was seen. And, if the glories are to return to Rose’s public company, the lasting private virtues, as everywhere, have a crucial part to play.
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