Where Are The Leaders?

The thing that annoys me the most in this automaker crisis, is the question of leadership. Not the Obama style of leadership, where appearance is all that counts, but the real thing. I think the world of President Bush, but on this issue he’s been sitting back and waiting for someone else to find the answer. Same for President-elect Obama; sure he can say it’s not his problem right now, but considering that he will be at the helm in just a few weeks and therefore whatever is or is not done will bring him the consequences, you’d think he could motivate himself to get moving on a clearly important issue. Of course, the do-nothing Harry Reid and Nancy Pelosi have also been still and quiet in terms of productive suggestions – shrill accusations and rants may play for soundbites, but they don’t move the issue ahead by even an inch. Then of course, we can also look at the recent performances of the automakers’ executives, the UAW, and the many anointed ‘experts’ in the industry, which have amounted to ‘help me and let the rest fend for themselves’ – predictable but again not real leadership by any reasonable definition. The reason this problem, which most of us saw coming years ago, has not yet been resolved and may well be addressed in a distinctly foolish manner, is that no one – no one at all – has shown any leadership.

Some decades back, I used to chat with my employees about their long-term plans (still do, of course), and I was struck by how many thought that getting into management would make their lives easy. Just give the orders and make the others work, sweet. Of course the reality is much different. Some managers no doubt try to run their businesses in that way, but that is bad management. Any good manager can tell you, that effective management means you have to direct everyone’s efforts to get the best results, and that responsibility, credibility, and accountability start with you. To my mind, that truth only increases in importance as the rank rises. Look at the top title for most businesses: Chief Executive Officer. It means that the CEO should be the one to state clear priorities, address the top needs, and take full responsibility. That does not mean the CEO is the fall guy for whatever goes wrong, but it does mean that the CEO must take clearly communicated, well-defined actions which protect and improve the company’s long-term health. It’s the same, to a lesser degree, with all of the other chief officers. And in this crisis it’s painfully obvious that the chief officers have been trying to hide from the problems, not address them. It’s also obvious that there are far too many “chief” officers at each of the three companies, for the real chief officers to get a hold of the matter.

The last couple days have shown indications that Congress means to bail out the automakers. As a result, everyone is talking about what conditions should be put in place. For me, it’s obvious that the current set of top officers at each of these companies needs to be replaced, but there’s more. The three automakers need a streamlined, shareholder-controlled leadership design, so here’s what I think needs to be done, as part of any package:

GM – fire all top officers, have the SEC search for new top execs. Do not limit the pay on the new team, but tie it to performance, both short and long-term. Also, limit the number of top officers to ten. And limit ownership by any single person to no more than five percent, or fifteen percent by any family or consortium.

Ford – same as GM, but also change the two-tier system which allows the Ford family to control the company with a minority interest. Ford can turn down the aid if they insist on keeping their structure, but if the public is going to bail them out, it’s overdue for Ford to become a publicly-owned company in every real sense.

Chrysler – same as GM, but require all significant shareholders to sell their ownership down to the 15% cap specified in the GM case, and sell them at the current stock price, not the later price resulting from the aid package. No government aid for a privately-owned company, especially one with a tear-down reputation like Cerberus.

I have a sneaking suspicion that most of the top officers and shareholders will resent and resist this move. But it should be non-negotiable and required prior to receiving any aid. If they need it, these companies should feel the same pain they are or will be inflicting on everyone else around them.

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Uncle Sugar