CEO Scandals: These Too Shall Pass

By Holstein, William J. | Chief Executive (U.S.), June 2005 | Go to article overview

CEO Scandals: These Too Shall Pass


Holstein, William J., Chief Executive (U.S.)


Q & A

Jack Welch argues that the American public is not turning against business. BY WILLIAM J. HOLSTEIN

Jack Welch, former chief executive of General Electric and coauthor with Suzy Welch of a new book, Winning, says the climate of negativity toward CEOs will subside and a new generation of business leaders will emerge. Here are excerpts from a conversation originally conducted for The New York Times:

In your career, have you ever seen an environment in which CEOs are being turned out of office this rapidly and in these numbers?

I don't recall in my career seeing that. We clearly had some alarming situations that have required some actions. I think this, too, will pass.

Has the pendulum swung too far?

We're going to need a re-look at some of these things. We had to have SarbanesOxley. The public needed to have confidence rebuilt, to know that the system was working. And they got it. I think it passed 97 to O in the Senate. But like any hastily done bill, there might be extremes in here. I think Sox 404 is a heck of a burden on small entrepreneurial companies about to go public. Maybe some modification is needed. I don't think it's a problem for big companies. These have well-established processes, internal auditors, audit committees and everything else.

These days, directors are personally and financially vulnerable if they make the wrong decision. Has that changed the dynamics of the boardroom?

I'm not in boardrooms, but I think it has to have. What we ask is, "What is the role of a director?" We're picking them for their judgment, their character, their ability to see around corners, to sense whether the strategy is right.

But they can't do that by looking at the books. They can only do that by walking the company. They have to get out and meet people at all levels, and get a feel for what it's like out there. Are they hearing the same things out there that they're hearing in the boardroom? Then they have to support the CEO. The company has to win. If they don't have confidence in the CEO, they've got to make the change.

When you go out on your book tour, how do you explain what a CEO does?

I don't explain it. What I talk about is, any time you are managing people, your job is not about you, it's about them. I was talking to students at Columbia and New York University, several hundred at each one. I tell these kids, "It starts out about you as you go as an individual into a company. But once you get a leadership job, it moves very quickly to being about them. You have to hire great people who can excite and make you look good - and make the company win. It quickly goes from "you" to "them." Your ability to excite them and go after challenges will determine how good you are. Because you can't clo it by yourself.

Do you think that in today's environment American CEOs are too focused internally, playing defense, to be competitive globally?

No, I don't think that's true. I don't think the great CEOs in America today are in any way focused on defense. Their boards wouldn't let them. They're in a global competitive battle. That requires them and their boards to work in concert to win. You may see some who are concerned because their boards are not giving them the backup they need. But, in general, I would not make that sweeping observation.

Who are the best active CEOs today?

There are so many out there, but I know three great ones-Jim McNerney (of 3M), Bob Nardelli (of Home Depot) and Jeff Immelt (of GE).

Since you trained them all at GE, don't you have a little conflict of interest in naming them? …

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