Byline: Karen Lowry Miller
As 2004 came to a close, one could be forgiven for wondering if the lessons of Enron, WorldCom and Tyco had ever registered where it counts. Corporate scandals kept popping up with amazing regularity as Marsh & McLennan, Shell, Boeing, Hollinger and Fannie Mae all became the new shorthand for greed, ignorance and deception. In the United States, CEO pay went on climbing at even faster rates, while business-lobby groups fought Securities and Exchange Commission Chairman William Donaldson tooth and nail as he tried to give shareholders a greater say in selecting a company's board of directors. In Europe, executives were girding for battle against moves in Brussels to reform corporate governance, while CEO salaries remained largely a secret.
But a big change is penetrating the corner office. In the days of the supercelebrity CEO and the mega-deal, Wall Street was blinded and share prices jumped when a big name was scored or an acquisition clinched. Basking in the glamour of these rock stars, boards often assumed that the personality justified the means. Now a new kind of leader is emerging. Old-fashioned traits like integrity and character are trumping a knack for cutting corners. Bill George, retired CEO of Medtronic, calls it "authentic leadership," or a quiet kind of charisma that puts a sense of values and purpose ahead of back-slapping and magazine covers. The new breed of CEO, says Charles Elson, corporate-governance expert at the University of Delaware, "is a CEO whom you don't know about."
So just who are our humble heroes? Many have been right under our noses all the time. Reuben Mark, sometimes known as the anonymous CEO, has delivered excellent growth and returns at Colgate-Palmolive for two decades. He also enhanced his reputation for honesty when he resigned from the Citigroup board to protest its opaque succession process. Anne Mulcahy, who took over at Xerox in 2001, works hard not to be a celebrity, and her priorities are very un-'90s. She once sent a voice mail to employees saying that she'll fly anywhere to meet a customer, but won't spend too much time with analysts. Other CEOs point to A. G. Lafley of Procter & Gamble as a great model for down-to-earth leadership, and to Daniel Vasella, the doctor who runs Novartis with an eye on the needs of patients.
Many in the financial-services industry hail the calm competence of Wells Fargo CEO Dick Kovacevich. Few of the best examples are household names, even if they make household products. (Quick, who is the CEO of Johnson & Johnson?) Jeffrey Sonnenfeld, head of the Chief Executive Leadership Institute at Yale, says a new generation is unfolding. First there was the postwar "soldier-diplomat" CEO, followed by what became known as the silent generation, technocrats like Robert Stempel at GM, who was ousted by his board, and Lawrence Rawl, who botched the handling of the Exxon Valdez disaster. GE's Jack Welch and Lou Gerstner of IBM stand out in what Sonnenfeld calls a fundamentally unsuccessful generation. The 1990s bred celebrity CEOs, and now we have the backlash, the "service generation."
The risk of defining a new breed is that boards will simply trade one character type for another. "It maintains the mythology that a company does well or poorly because of the CEO only," warns Rakesh Khurana of Harvard Business School. After distilling a number of management studies, Khurana concluded that the CEO has only a "small, contingent or tenuous impact" on financial results. …