Platt Perspective on Business and Technology

Board room and executive suite musical chairs and the impact of recycling old ideas and perspectives in the face of change

Posted in macroeconomics by Timothy Platt on October 14, 2011

If there is one ongoing, compelling theme that has run through this entire blog and in all of its nearly 800 postings, it is change. Businesses and organizations in general are always facing change and its challenges as markets and opportunities open up and evolve and as problems arise. But that simply reflects business as usual. We are also facing a more systematic and long term, revolutionary period of change with the emergence of a truly ubiquitous, everywhere and all the time marketplace and business context. That creates change, and of a more profound nature and at a faster pace than would be found in any business as usual. And both nationally and globally we have all been going through a period of profound economic crisis and challenge.

I chose to title this posting with the phrase “board room and executive suite musical chairs” as I decided not to identify this practice by an earthier and perhaps more accurate label – leadership incest. The basic idea here is however, very simple no matter what it is called. The same small community of business executives all sits on each other’s boards of directors while serving on the same executive teams for those same interconnected organizations – collectively forming a small and cozy club. And when one of them has to step down from one of these positions in one of these interlocked businesses, they simply move into another senior position with another organization in the group.

I have written about this from the perspective of executive compensation, and particularly where the members of these clubs determine each others compensation rates by sitting on the boards of “separate” businesses that are cited in determining fair and customary scales of compensation packages. Company A’s senior executive compensation rates are used to justify and set the senior executive pay rates for company B and B in turn is cited in setting the rates for A, and they do so through third party agencies that both pay for the services of. And I have used the term kleptocracy in that context.

I write about this again with several issues bringing it forcefully to mind for me. The first is our still damaged economy where such greed is no longer sustainable – but where this interconnectedness at the top still prevails. Second, I just read of the failed CEO of one company in such a club moving into the same position in another as an essentially immediate move. But I am not writing this posting to rehash the story of compensation as it plays out in this context. My goal here is to raise the issues of failed leadership per se, from an inability to bring in new ideas or fresh perspectives and the capacity to generate them.

If many of our largest companies are in trouble and failing to effectively, creatively respond to the challenges and opportunities out there, that is partly because of factors and forces external to them. But this is also a result of fundamental failure in leadership where too many of our largest businesses and corporations lack vision and lack the fresh perspective at the top needed to find new ways forward.

I have recently been writing about organizational structure and operational functionality in businesses and about how our rapidly emerging context of ubiquitous computing and communications call for change in how they are planned out and executed (see Business Strategy and Operations, postings 187, 189, 190, 193, 197 and 200 and Business Strategy and Operations – 2 for postings 203 and 204 for parts 1-8.) This is playing out in the context of all of the spasms and uncertainties that our recent prolonged, deep global recession and anemic recovery have fostered. And they both play out as a host of other change-forcing factors and issues confront us.

If our national and global economies are to remain strong, if our businesses and marketplaces are to remain viable, if our people and communities are to remain safe and secure we need leadership that can respond to these challenges, and simply recycling the same small coteries of tired old ideas and perspectives cannot do that.

When the senior executives of a major corporation complain they are only receiving 400 times the wages of the average worker in their business that is troubling (and that was not a made up number or example.) When this leader and their same-group peers are constitutionally unable to effectively lead in the face of change: securing their businesses’ future and creating a future for their employees – that is a formula for disaster.

Ultimately this, perhaps more silent cost of board room and executive suite musical chairs, is the larger cost. That is where this practice will serve to cut off our futures by limiting our businesses’ and marketplaces’ potential.

I offer this as a thought piece in my Macroeconomics and Business. I write this posting in mid-October, 2011 but this is a news story that has been developing for quite a while now, even if our current and ongoing economic crisis looks to be bringing it to a head.

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