The Fortune Beneath Integrity

Sray Agarwal | April, 2012

Leadership is often defined by amalgamation of a few much-touted clichés that are in reality nothing but paraphrased thoughts of great management thinkers. Among all the attributes a CEO needs to possess, one attribute that slips between the cup and lips is ‘integrity.’ As told in Mahabhrata, no leadership is complete without integrity. This can be corroborated with the very nomenclature of the word integrity which is derived from Latin word 'integer' that means (in arithmetic) complete. Integrity revolves around two skills sets: high ethics and high professionalism/competence.  Events like Enron, WorldCom, IMF are living (or shall I say dead) illustration of how lack of integrity can bring benchmark companies to ruins. In spite of having traces of integrity, different CEOs actions reap different results. Superimposing the attributes of integrity on the BCG matrix would allow a better understanding and wide categorisation of CEOs, and the rest would automatically fall into place.

The Star CEO (high on ethical integrity and high on professional integrity): This is the type of CEO who form legacy and is seen as leader not only by the employees but the corporate world at large. Steve Job’s deep rooted commitment to innovation that produced outstanding robust products, always excelled in consumer’s mind space. His integrity was impeccable too. He always valued shareholders’ interest, but never took any steps for short cuts or short term actions to maximise their value. Narayan Murthy, whose competence in a nutshell includes founding Infosys in 1981 with $250, and through the journey of waves of success, today commands over $6 billion in revenue. Another exemplar of the winning combination of performance and ethics is Ratan Tata of Tata Group. In 1991, when Ratan took over as the head of the group, its turnover was Rs.14,000crores – and today its more than 9 times with Rs.129,994 crores! Talking about integrity, no one can beat Johnson & Johnson’s Tylenol episode in 1982. After death of 7 people consuming tainted Tylenol, what Johnson & Johnson did was nothing short of an incredible effort of damage control. Warnings were distributed to the hospitals, production was stalled, advertisements were all over the place, and 31 million bottles were pulled back from the market. It turned out to be an outstanding piece of promotion that touched people’s heart because of its integrity and competence.
The Cash Cow CEO (low on ethical integrity and high on professional integrity): These CEOs are the riskiest CEOs. They are those who have ability to take companies to zenith but can’t be trusted. These CEOs often indulges in scams, scandals and affairs and either ruin the companies financially or dents the company’s image. The impacts of these damages can range from mere jerk to complete devastation. For instance, HP’s CEO Mark Hurd pulled off an incredible feat by forcing a workaround of disjointed HP to five consecutive years of revenue and capital gains with stocks soaring 130%! However, his personal conducts were a botch in the company’s reputation. He was alleged of sexual harassment to former television actress Jodie Fisher! The indictment of his unethical business conduct was certainly inimical. Another CEO, Kenneth Lay of Enron, who kicked in with a compensation of $42.4 million in 1999, was one of the most successful CEOs in the US, but his career has been clouded by the blotch of Enron scandal! In spite of having best policies and corporate structure, it was the lack of personal integrity of the individual (Kenneth Lay) that made Enron an infamous history. 
The Question Mark CEO (high on ethical integrity and low on professional integrity): A very rare breed of CEOs. They do take wrong decisions but never would damage the image of the company. These CEOs should be given more leadership role and less decision-making role. Question marks must be analysed in order to decide whether they are worth the investment and position. Robert Nardelli, the CEO of The Home Depot and later on in the same capacity at Chrysler, belongs to this category. CNBC has named him as the "Worst American CEOs of All Time". At Home Depot, his policies nosedived completely. In 2006, he was the only director to attend annual general meeting, and more astoundingly he would allow the shareholders to speak for just one minute each! He was finally ousted from the company on January 2007. He was later hired for a panacea in Chrysler’s dwindling fortune, which he could not deliver. And finally, on April 30, 2009 Chrysler filed bankruptcy and Nardelli was sacked again! 
The Dog CEO (low on both): Fire them ASAP. John Browne, the CEO of BP, failed in all spheres! Browne was touched on the raw as more and more disasters started to line up. A major blast in the BP refinery in Texas, and the infamous oil spill in Alaska’s Prudhoe Bay.  That’s Browne’s professional incompetence. Simultaneously, his personal promiscuity was exposed too by a UK daily, The Mail.
In the words of Peter Drucker, “integrity means adhering to a code of ethics and doing the right thing by sticking to that code.” It’s clear then, that CEOs are a mixed bag, even though majority of them are not up to the mark in terms of competence and integrity. A survey by the Corporate Executive Board, Virginia revealed that, “having high-integrity cultures are 67 percent less likely to observe significant instances of misconduct.” Integrity no doubt is the most sought-after attribute a CEO must posses, but then what's more important is the combinations of subsets that form that very skill-set. A wrong concoction can be really poisonous.