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CEOs - Don’t sugarcoat it!
By Lauren | January 19, 2008
The Wall Street Journal’s recent governance report featured an article warning Chief Executive Officers of the danger of putting too positive a spin on the news they give to their Boards of Directors. The article warned that a CEO who always paints a rosy picture of the company to the Board may not be lying, exactly, but can be perceived by the Board as less than candid. Ultimately, the excessively optimistic CEO can be fired by the Board, not for out-an-out deceit, but for a pattern of misleading behavior that erodes Board confidence over time. Be candid about bad news or risk losing credibility, the article warned.
The problem with this, of course, is that optimism is one of those great American virtues we expect in our leaders. A CEO who fails to radiate optimism even in the toughest times can be perceived by a Board as ineffectual or weak. The WSJ’s warning also runs contrary to the advice most of us get going up the corporate ladder, namely, never present your boss(es) with a problem without also rolling out a proposed solution. A CEO who hasn’t yet come up with an elegant way to mop up a mess may decide that it’s too soon to bring in the Board. The intent is not to mislead or even withhold essential information, but just to delay disclosure until a way ahead has been found. The CEO may also be concerned that Board members will react badly to bad news, especially if past successes have created unrealistic expectations.
Ultimately, CEOs are probably wise to take heed to the WSJ’s advice, and recognize that excessive optimism can create the impression of dishonesty and erode Board confidence. The trick is to share the bad news without inviting an explosion. Next time, we’ll talk about ways that CEOs (or anyone else) can present a problem with minimal fear of an overreaction.
Topics: Business Ethics |