Observations About the 2022 Mid-Term Elections
As a person who majored in political science and has been engaged actively in public
A lot has been written about Ken Lewis, the Bank of America CEO, since he announced his decision to retire the week of September 28. Many of the commentaries on him were highly critical, including one included in the Sunday, October 3, New York Times business section by Joe Nocera entitled “Incompetent? No, Just Not a Leader.” Nocera contrasted Lewis, whom I succeeded as Chairman of the National Urban League Board of Trustees in 2002, and who was an exceptionally capable chairman, with his precedessor at the Bank of America, Hugh McColl, whom he described as “born to be a leader.” I disagree fundamentally with the “born leader” theory.
Every leader does some things very well, and other things less well. Whether he or she succeeds depends on two factors:
The answers to these questions change over time. A leader can be a great match when hired or promoted into a job, but the job requirements can change radically over time. There can also be a situation in which the leader can be well matched to the bulk of the job’s requirements, but poorly matched to a particular kind of crisis or challenge.
Lewis was well qualified to be the Bank of America’s Chairman and CEO when he assumed his role in 2001. Nocera acknowledged that he was a very capable commercial bank leader, even as the bank grew, became more global, and had more complex strategic and operational challenges. Lewis’ challenge was to grow outside the banking market, because the Bank of America had hit a legally-mandated ceiling on the Bank’s ability to grow its market share in bank deposits (federal law limits any single commercial bank to no more than 10% of the total bank deposits in America.) Lewis was attempting to acquire an investment banking firm because it appeared to be an adjacent market space through which the Bank could grow by acquisition.
Beyond the question of whether he could lead a combined bank and investment banking operation, Lewis simultaneously confronted two crises with the Merrill Lynch acquisition: he was urged by the federal government financial regulators to do the acquisition quickly to stabilize the financial system, and he was directed to be careful with what he disclosed publicly about the company he acquired. During 2008 and 2009, he also became a regular participant in Congressional hearings relative to home mortgage loan write-offs, a daunting task and one for which business leadership does not prepare an executive. Everything he did was in a highly charged 24/x7 media environment in which there was massive public panic and anxiety, and in which the actions of the financial services industry became central issues in a hotly contested Presidential election campaign. Whatever he did well and was capable of doing before that time did not prepare him to deal with any of these crises, all of which had virtually no margin for error in the decision processes.
Had Lewis spent a lot more time in Washington over many years, he might have found a better way to deal with these crises, but, had he done so, he would have been less able to run the businesses reporting to him. Even without that Washington experience, he might still have made some wrong decisions, but might have been better prepared for them.
We now know that his decisions did not turn out the way he, the Bank’s shareholders, or the government would have wanted. I have no special insight as to who was at fault, other than to say that the very considerable capabilities Lewis brought to his job in 2001 did not prepare him to deal with the very different challenges he faced in 2008. In fact, although we will never know this, it is unclear that the great Hugh McColl could have addressed these challenges either.
As I think back on my tenure as Chairman and CEO, some challenges were foreseeable and constant, but others were beyond the board’s or the management’s ability to foresee. Google and other search engines radically altered the balance of power in favor of customers. 9/11, anthrax, and the financial weakening of the U.S. Postal Service were unforeseeable. I felt able to handle all these unanticipated challenges as they arose.
What challenged me was the post-Enron environment in which leadership demands shifted radically from growth, operational excellence, strategic thinking, and corporate social responsibility to a heavy focus on mind-numbing, compliance-driven, externally imposed mandates. While I could meet the job’s changing requirements intellectually, it stopped being rewarding and became very stressful.
I actually would have been far more comfortable dealing with the federal government, the media, the political environment, the economic crisis and the panicked public environment from 2007-2009 than most of my peers as CEO. At the same time, I would have a very hard time dealing with the irrational and highly destructive hostility directed today mindlessly and indiscriminately at public company CEOs from the media, public officials, and governance advocacy groups.
It does not surprise me that the average tenure of CEOs has declined drastically in the last decade, because job requirements change more rapidly, and boards of directors have to assess CEOs more frequently against those changed requirements. It also does not surprise me that some CEOs choose to leave their jobs early. At this time, I am not tempted to subject myself to the wildly inconsistent and, sometimes, unreasonable demands public company CEOs currently face.
We need to have realistic expectations of what CEOs can and cannot do, and stop looking for the mythical “born leader.” I would make the same comment about lawmakers as well; our expectations for them are far out of whack with human limitations and frailties.
CEOs who resign or are fired are far better off than many Americans who are suffering deeply today, so I do not ask that we give them sympathy for leaving their jobs. However, everyone is better off if public companies attract and retain highly talented people as CEOs. Today’s crazy environment significantly reduces the pool of great people that would want to be CEOs, and tens of millions of Americans are the worse off as a result.