Carly Fiorina, the former chairman and CEO of Hewlett-Packard, is spot-on in advising CEOs on how to restore trust in their role.
We WSJ writers must stick together. But there’s more than collegiate fellow-feeling in my support for Ms Fiorina’s opinion-piece in the Journal. She’s right.
At first I thought I ought to declare an interest. During the turbulent Compaq HP merger, I was seconded by Weber Shandwick to troubleshoot at Compaq for the CEO and Executive Chairman of EMEA, as their speechwriter, financial communication and PR adviser. I stayed on after the merger. Maybe that makes me sympathetic to her view.
Then I remembered that my having made her case as a professional did not mean that I necessarily thought then or think now she’s a brilliant commentator.
So no. It comes down to the simple fact that I think she’s on the money here.
She sets out some practical things big business can do to improve its practice and image:
- Strengthen accountability: boards should put all aspects of CEO pay up for shareholder vote on an annual basis. (UBS here)
- Make clawback provisions, which require a CEO to return compensation to shareholders if promised results aren’t delivered following their departure. (UBS here and here)
- Base CEO pay on a balanced scorecard that reflects customer satisfaction and investment in employees, in addition to achievement of financial goals.
- Every board seat should be voted on annually and board membership should be regularly refreshed to ensure that tough questions continue to be asked. (Barclays)
- When CEOs go to Washington and ask for taxpayer money, they should also be prepared to submit their resignations and those of their boards. (Dexia in Belgium here)
- To earn a bailout, a CEO and board should be held accountable for the decisions they’ve made – or perhaps the actions they’ve failed to take. (Ford and General Motors here)
- To strengthen transparency, companies should provide far more than quarterly earnings projections and annual profit targets.
- Important strategic issues and operational considerations should be reported consistently.
- Risks and assumptions should be spelled out rather than buried in the fine print. Employees bet on a company when they show up at work.
- Shareholders bet when they put their money to work. Customers bet when they buy a product. And now we’re asking taxpayers to bet. It’s reasonable that we all know what the company is betting on. (mortgage lenders here and here).
I sense that there is a consensus coming on, or at least clear thinking that will forge one. Moreover, Carly’s (excuse the familiarty, but I sort of worked for her once) advocacy of the importance of business’s independence from the state should serve as a rallying call:
There is no doubt that government will now play a greater role in key industries. While this expanded role is perhaps vital for a time, our Founding Fathers knew that government’s power should be limited. If we are to emerge stronger from our current crises, businesses must restore their credibility and regain the American people’s trust by embracing accountability and transparency.