Bad Company: The Strange Cult of the CEO

Citation

(2004), "Bad Company: The Strange Cult of the CEO", International Journal of Productivity and Performance Management, Vol. 53 No. 5. https://doi.org/10.1108/ijppm.2004.07953eae.002

Bad Company: The Strange Cult of the CEO

Gideon HaighAurum PressISBN: 1854109693£6.99

Those of us in the UK have recently had to get used to the meteoric rise and enormous remuneration of CEOs. The USA was there first. Alfred Sloane was the first CEO to make it to the cover of Fortune magazine but that was not until 1963, when big business in the USA was 100 years old. The financial compensation surged 1,000 per cent in three decades, taking it to 500 times the pay of the average worker. Politicians did not baulk at this; indeed they lauded it. Bill Clinton dubbed WorldCom’s founder Bernie Ebbers “the symbol of twenty-first century America”, Stephen Byers, a hard-line UK Labour minister for Trade and Industry, advocated world-class pay for British business people in 1999: “We accept such an approach in relation to sports stars, so why don’t we adopt the same attitude for directors?”

However, more recently things have turned sour. Enron and WorldCom went bust, and 250 big US companies restated their accounts in a single year. More recently, there has been the Parmalat scandal in Italy. The reputation of the CEO is tarnished – but his pay package seems untouched!

Haigh’s book traces the rise of big company CEOs, and tries to assess how important they are to company performance. Haigh suggests that on his analysis, many of them are over-rated and over-paid: “Paying outsized sums to CEOs is not simply socially offensive, but intellectually difficult to justify”.

Most of the book deals with the rise of the CEO and is a readable and well-paced account, centred on America “because it is, as Dean Rusk put it, the fat boy in the canoe: when it moves, all must adjust”. Significant figures such as Rockefeller, Henry Ford and Alfred Sloan are placed in context and brought to life by a range of anecdotes.

As Haigh gets to more modern times – the second half of the twentieth century – he covers the conglomerate era of the 1960s, the rise of shareholder value in the 1970s, leveraged buyouts in the 1980s and the dot.com bubble and the “excesses” of more recent times.

As a catalogue of who did well, how much they were paid and what went wrong, this book is excellent. A picture is built up of what makes a bad CEO – though, perhaps not surprisingly given the coverage, what makes a good one is less clear. Haigh suggests that “conjectures about what makes a successful CEO have an irritating habit of collapsing in the face of the eternal exception”.

However, this is a little sloppy – others, such as Jim Collins, have made real attempts to identify those factors that determine success.

Haigh’s book started life as an essay, and, as such, it has no index or footnotes. Perhaps, then, it is churlish to be too critical and we should just regard it an interesting and diverting read, an eye-opener on the extravagant vanity and greed of many corporate executives.