Bill George says things other chief executives won’t.
That shareholders come third.
That CEOs are obsessed with quarterly earnings.
That corporate boards are rubber stamps.
That CEOs are grossly overpaid.
George stands out from the usual critics of corporate governance not only because of what he says but also because of who he is — the consummate insider. A platinum member of the corporate elite, George sits on the boards of Goldman Sachs, Novartis, and Target. He’s the innovator-in-chief who helped transform Medtronic into the world’s largest medical-device manufacturer. And he is fed up with the greed and selfishness that have dominated so many executive suites and boardrooms for so long.
George, who left Minneapolis-based Medtronic in 2002, has been speaking out for years about the need for a certain kind of leadership. He’s convinced that it could have prevented the outbreak of scandals that have made “CEO” about as respectable a job description as “loan shark.” What’s missing, George says, is Authentic Leadership — that is, business leaders who demonstrate integrity, values, and conviction. Leaders who put customers and employees before Wall Street, speak out to right a wrong, and admit their mistakes. In other words, leaders with courage. “Authenticity and courage go hand in hand,” he says. “You need one to have the other.”
“Authenticity and courage go hand in hand. . . . You need one to have the other.”
Since penning his popular 2003 book, Authentic Leadership, which he wrote without the help of a ghostwriter (another un-CEO-like move), George, 61, has emerged as a vital voice for courage. A lone crusader among the ranks of top-tier CEOs and board members, George is issuing an impassioned call to action. In the media, in MBA classrooms, and on the lecture circuit, he warns about the everyday temptations that vex leaders and spur shortsighted decisions that do long-term harm. And he offers a blueprint for rethinking and reorganizing corporate governance, with directors taking a powerful role. By criticizing his peers in such blunt terms, George knew he risked being ostracized by them and jeopardizing his standing on corporate boards. But he says the backlash never came. Actually, the execs he hears from concur, and they’re glad he had the nerve to condemn the sorry state of business leadership.
“I had to speak out,” George says, “because the wrong leadership was being celebrated: CEOs who pumped up the numbers to keep Wall Street happy, made millions themselves, and then walked out on their companies.”
Aside from the headline-grabbing exceptions of late, George doesn’t believe that CEOs are generally crooked. The most pervasive problem isn’t corruption but weakness and self-interest. CEOs and boards cave in to “short-termitis,” the overwhelming pressure to deliver quarterly earnings at almost any cost. “For any CEO, the voice of the analysts is extremely loud,” he says. “It’s in your ear all the time, saying, ‘This is what you have to do to boost the stock.’ Leaders start responding to that instead of listening to their own voice.”
While corporate titans are frequently shortsighted, George believes that too often many of the boards that govern companies are deferential and passive. Directors don’t demand courageous leadership from their CEOs, and the CEOs don’t demand courageous leadership from their directors.
George champions outspoken boards. He argues that they should adopt their own set of governing principles, that at least two-thirds of the directors should hail from outside the company, and that boards should produce annual evaluations — in writing — of the CEO’s performance. “The whole point is to provide unfettered oversight, to challenge the CEO, not to sit silently,” he says.
As a CEO, George wanted independent thinking from Medtronic’s board members, not acquiescence. He recalls an instance in which his directors voted 11 to 1 in favor of a proposed acquisition. George, who understands that courage often requires that you stand up against forces that are far larger than yourself, was intrigued by the lone holdout. “I called [the dissenter] over the weekend and listened,” George says. “As a result of our conversation, I decided not to do the deal.”
People are born with an innate sense of valor, George believes. It’s deep inside us all. Finding courage is a matter of bringing it out, of overcoming your fear. Not until you’re tested does that fortitude emerge, however. George was tested plenty in his career, as an executive at Litton and Honeywell prior to Medtronic. He endured personal tragedy — the death of his mother and his fiancee when he was in his twenties. He doesn’t consider himself courageous, however. If he was, he says, maybe he would have journeyed to Selma, Alabama, in 1965.
At the height of the civil-rights crusade, George, who had just graduated from Georgia Tech, spoke out against discrimination at the school’s all-white fraternities. “It was a strident speech, but on the other hand, I didn’t march in Selma with Martin Luther King and maybe get myself thrown in jail,” he says. “I wish I had.”
Regret, George adds, is also a condition of courage. For while courage is often pursued, it is rarely attained.