Plenary Panel No. 3 – CEO: Power and Accountability
Prof Pino Audia, Tuck School of Business at Dartmouth
Prof. Ernst Maug, University of Mannheim Business School
Mr. Peter Solmssen, General Counsel, Siemens
Mr. Gilles Pélisson, Former Chairman of ACCOR Group and Independent Director of Accenture, TFI, BIC and NH Hotels
Mr. Mats Isaksson, Head of Corporate Affairs Department, OECD
In the last 20 years, there has been a proliferation of codes and guidelines on Corporate Governance. This panel discussed whether this development went in the wrong direction, if there are too many codes that could harm business, and what the explicit role of the CEO is.
As a first speaker, Prof. Audia discussed CEO accountability from a wider perspective. Accountability of CEOs means being permanently scrutinized by various actors such as the board, investors or consumers; CEOs are continuously held accountable. This perspective not only underpins the role of media in this process, but also highlights possible tensions of being accountable to multiple parties with diverging interests. He also mentioned the difference of CEOs being held accountable for outcomes vs. being held accountable for processes. Finally, Prof. Audia noted that more excessive accountability pressure, partly ignited through an information explosion, can also result in counter effects and malfunctions.
According to Mr. Pélisson’s view, CEOs should primarily be accountable to the customer and focus on the product. He stressed the legitimacy of CEOs to steer the company and raised the issue of time restrictions in the process of decision making. As consensus finding in large groups can be too time consuming, the CEO needs sufficient resources to make decisions which cannot be delegated to subdivisions. As a recipe for good leadership, he mentioned being an example, fostering transparency, leveraging your employees and customers, both of whom can provide valuable information, and not limiting yourself but setting your own individual targets.
Mr. Solmssen, declaring himself not as an expert, but rather as a fact witness, shared his experience on accountability while being on the management board of Siemens for 5 years. Specifically, he reported about adverse effects using the “four-eye principle” which can result a shifting around of responsibility because two people have to approve major decisions. With an American background conspicuous about concepts like co-determination, he also mentioned his surprise of being accountable to the Workers Council – a notion that again stressed how multifaceted the concept of accountability is. Finally, in view of the huge amount of time spent on implementing risk management measures, he underlined the importance of the question which accountability mechanism actually are efficiently and effectively working.
Mr.Isaksson, while working on the revision of Corporate Governance guidelines in the OECD, has been following the Corporate Governance development over the last years. He pointed out that while focussing on shareholders and the management board, the role of the CEO as the missing link in the discussion has been underrepresented. Rather amusingly, he challenged the demonizing view of CEOs either stealing from the company or shirking on the job leading to invalid assumptions. Instead, a good CEO as the key person in the company, can compensate for a bad board, but not the other way around.
There was a discussion about whether the ability to be an effective CEO differs when working for a listed vs. non-listed company. It provoked the claim that when you have a shareholder family instead of widely dispersed shareholders, long term orientation gets a higher standing. This might be due to a stronger commitment and feeling of belonging to the company, whereas CEOs of listed companies generally tend to focus more on short-term financial numbers. Later it was added the the idea of widely dispersed shareholders fostering a low degree of control is, statistically, a myth as people are reluctant to go to the market which can be explicitly seen in a dramatic decrease of recent IPOs.
The idea was put forward to think of Corporate Governance rules not in terms of cost-benefit tradeoffs but as being complementary. The more precise the rules, the better you can navigate where you want to go, but without rules one runs the danger of getting lost.
The panel ended with a question about the most important qualities of a CEO. Despite a sound health condition, it was recommended to look at the record where these qualities been tested, such as in a crisis.