Sailing against headwinds

We've been told that we're contrarian. A good friend recently said: "As a contrarian, now is the time for you to sail against the headwinds." We couldn't agree more, assuming there's a strong outboard motor on board. Here are three sets of issues and corresponding views to consider:

1.) Change. President-elect Barack Obama epitomizes change by whom he is and what he has accomplished. We're personally in awe of the achievement but that doesn't mean we're sold on "change we can believe in" as a lasting message. Especially not when it looks as though he's going to staff key positions with a bunch of retreads from former administrations. Why no one has pointed out this reality speaks volumes about how much the status quo remains the status quo. Change trumps experience was the main literal takeaway from the election. The real question is whether political change will lead business, societal and generational change. And whether one individual representing a movement can marshal in new governmental systems and capabilities that actually work. Obviously it's going to take some time. We remain hopeful until proven otherwise. Things can only go up from here, right?

2.) TARP. For the acronym deficient, this stands for Troubled Assets Relief Program (TARP), which represents the largest infusion of government money into the banking system since...well, ever. Large banks lapped up the favorable terms like thirsty dogs, while smaller regional and community players are trying to figure out the pros and cons of program enrollment. Take the money and you're deemed desperate. Refuse the infusion and risk being branded as risky. Poor buggers. What a no win situation. Here's a common sense suggestion that seems lost in the debate: Turn the money down if you don't need it. Take it if you do. Then be prepared to explain your position in clear terms.

Look for the new administration and Congress to rework the bailout terms as they're already doing with AIG. So what if it takes some time. Get things right for a change (no pun intended.)

3.) Economy. The next CEO who uses the terminology, "not since the Great Depression," to describe current economic conditions will have to choose one of the following:
A.) Death by stoning in the public square
B.) Proving that he or she was alive and working during the Great Depression
C.) Called out publicly by the TGR
D.) Combination of the above

We would love to see some leadership on this issue, but unfortunately, true to form, CEOs and boards are hunkered down trying to figure out what comes next in their own little worlds. Free market believer says, "well, that's what they're supposed to do -- protect shareholder interests." The optimistic change agent says it's time to get beyond selfish interest and focus on answering need vs. fear-based protection of assets.

Back to "since the Great Depression" demagoguery for a closing minute. Consider the following fact that wasn't in place during the 1930s. Companies have a combined $1 trillion in cash on their balance sheets. Microsoft, for example, could run for three years without additional revenue. While that's not likely, it's a key statistic that has been grossly overlooked by the sound biters focused on saving companies that may not deserve to be saved.

Which side of these issues are you on? Leaders need to know or at least show a capacity for knowing. We could argue that if this were already the case then the recession would be shorter-lived. But that's not going to fly. For what should be obvious contrary reasons.

# # #

A.I.G.: Code red governance disgrace

See what happens when a board of directors doesn't do their job? According to today's New York Times, New York Attorney General Andrew Cuomo will now review pay packages and expenditures. That's normally a board working alongside management responsibility. See the story if you haven't already, http://www.nytimes.com/2008/10/17/business/17aig.html?ref=business

American International Group (A.I.G.) is now officially a code red governance disgrace. Granted it's an extreme example. But this whole idea that governance is something that happens when no one is watching or listening needs rapid debunking. A little education might help too.

A.I.G. didn't have to be this way. And we're not talking about the implosion of their business that led to government seizure. We're referring to their inability to take the appropriate actions themselves since bailout money was directed their way. It's incredulous that not one leader or manager within the company or board didn't speak up and say, "hey, wait a second. We shouldn't be doing these types of things based on the situation we find ourselves in."

This tragic chapter isn't over. Next week we will learn just how much the insurer's credit default swaps have, well, defaulted. Attention CEO and board: Get out in front of this mess whatever way you can. Appear with Cuomo in public. If you're afraid of mounting lawsuits or shareholders, then you don't deserve to be leading this company. Second thought, maybe A.I.G. isn't a company that deserves to be led?

# # #

Invisible Governance

Go ahead potential Flubbers in Chief. Whale away at "greedy CEOs" and Wall Street corruption. Congress, parade the villains in front of committees so the public can feel better. Or is it you, Congress, who needs to feel better? We can't tell anymore, nor do we care.

The outrage surrounding the financial crisis isn't about compensation. It's not even about incompetence or leadership failure although a good argument could be made on the latter.

The market crash heard around the world has many of the best and brightest looking pretty dumb these days. Cries of "failure in leadership" tend to ring hollow when something called an irrational market continues to destroy more value than a Category Five hurricane.

Don't let the revisionists mislead you. What preceded the eye of the current storm cuts to the issue's core. Invisible governance describes the raft of gutless boards and government regulators who allowed what amounts to stealing to ruin a free market system.

Pick your culprit: Merrill Lynch, Lehman Brothers, WaMu, Wachovia, AIG, Fannie, Freddie, etc. Each firm had an invisible slate of directors, and in Lehman's case, a former theatrical producer rounding out its membership ranks. Look over a few compositions, and you'll pick up on an over-abundance of "retired" or inactive executives. Not to mention a litany of money management and finance types when more value-driven business builders could have inserted more real world reality. But that's hindsight now.

Every day brings new damning revelations of how invisible these boards were leading up to the collapse, including clear evidence that AIG's board stood by while irrational risk was being taken on a complex derivative called credit default swaps (Wall Street Journal, October 11-12.) You don't have to be a Wall Street whiz to understand that credit default swaps are code for unregulated insurance with no required reserve.

Consider the intangibles, which have just as much consequence but rarely generate much debate. Boards, working with management not against it, are responsible for setting and enforcing shared values. The collective bodies that fill these board seats are accountable for firm culture, which has now been shot up more than the Godfather's Sonny Corleone riding through the toll booth.

In AIG's case, lack of enforcement provided the impetus for managers to take on unprecedented leveraged risk without anyone calling out the obvious. The fact that this type of behavior was allowed going back to the tenure of former AIG Chairman Hank Greenberg is the real culprit, not all the damaging byproducts that have surfaced over the past few weeks (yes, that includes the lavish St. Regis retreat approved after receiving public bailout money.)

Ironically boards also are the ones who set the terms of CEO pay, which is determined by market dynamics, pay consultants and, if anyone was being honest about the process, gamesmanship by recruiters and their firms, which are generally hired by boards to find a CEO. After all, everyone has to get paid their fair share. Recruiters, lawyers, consultants, secretaries, etc. Boards also lead the process known as CEO retention, which seems quaint right now with everyone trying to stem the tide.

What seems to be missing the most is a basic fundamental. It's a board member's primary responsibility to ask tough questions such as, "hey, wait a minute. What happens if risk on these derivatives blows up and we don't have any reserves to cover the investment?" Difficult questions are foregone when profits are going through the roof and only rarely asked during normal times. That's the real crime here, and the situation won't be corrected until more are held accountable for lack of fiduciary responsibility.

The worst part is banks have not been traditionally held to the same governance standards as corporations. We've heard our fair share of experts say, "oh, they're just banks." But that's just rationalization, which leads to denial, which leads to projection. Hence the current mess.

The buck has to stop somewhere, right?

While we're not holding our breath, an overhaul of governance in the banking and financial system will be essential if anyone wants to see real change. It's becoming abundantly clear that the government will be the ones calling the shots, not the smooth water sailors currently occupying their seats. Let's pray that it's not FASB, another stealth culprit in this shadowy systemic mess. There's also bound to be a few shareholder lawsuits aimed against individual board members. Especially at AIG, which has generated the most outrage.

No solution to combat invisible governance will be perfect. The blame game is still in the first quarter. But anyone that tells you the solution can't be found in the problem's root causes either isn't being intellectually honest or is trying to cover their tracks. We simply can't afford anymore disappearing acts at the highest decision-making levels.

# # #

Is political leadership over as we know it?

Let's start at the top on the $700 billion financial bailout or whatever you want to call it:

President Bush. Done. End of story.

Treasury Secretary Henry "Hank" Paulson. A bit better but suffering from an incurable disease: Perceived ties to investors on the street formerly known as Wall, which has destroyed the public interest and pitted small business against big business in ways that haven't been seen since the Great Depression. Ok, sorry for that last phrase. We had to work the cliche in somehow. Paulson, an appointee not an elected official, isn't helping his cause by laying blame on foreclosures and then saying things like "we're doing this for the American taxpayer." That just doesn't wash.

Fed Chairman Ben Bernanke? While understandably difficult to follow Alan Greenspan, the original architect of sub-prime mania, Bernanke looks like he's on the verge of a nervous breakdown every time he visits Capitol Hill. Fully understandable -- just not what anyone wants to see from the guy in charge of cash flow.

Congress? Members of the House and Senate are notorious for appearing to stand up for the folks while the cameras are rolling -- only to cave in later out of fear. That's what feels like is happening now. In political terms, a vote for the bailout may put the 2002 Iraq war vote to shame. We're holding out hope that the counter balance to the conventional wisdom -- do this now or else -- will produce a better outcome.

Where are the nation's "best and brightest" CEOs? Oh, that's right. Hiding away counting up their cash while dialing their hedge fund and private equity buds to see where the next deal may lie. Others are polishing up their resumes with turnover season now in full swing.

The exception always seems to be Warren Buffett who has invested $5 billion into Goldman Sachs. It shouldn't always take a brand name such as Buffett to step up. But thank God he does.

The two presidential candidates? Not even in the park. Both are holding back, making political calculations about what to say and do instead of standing up right now and declaring what they think should be done in definitive terms. If anyone thinks Barack Obama and John McCain are capable leaders in the mold of Teddy Roosevelt, then we have some free beachfront property that's not foreclosed. It's not entirely their fault -- more about this inane way we go about electing the leader of the free world.

Yes, leaders and students of leadership, we are now entering uncharted territory.

No one has shown capability to lead the country right now. Out of fairness to the current slate, maybe a better question is: Can the country even be led in its current state?

If nothing else, the bailout issue gives new meaning to the saying: All politics are local. Former titans (and friends) such as Tip O'Neil and Ronald Reagan may need to be raised from the dead at the current rate.

# # #

Fear is not an option

Perusing today's news is enough to make any reasonably minded business person gag.

Two New York Times pieces, in particular, about how media are tempering what they say http://www.nytimes.com/2008/09/22/business/media/22press.html?ref=business and how advertisers are trying to decide whether to ramp up advertising http://www.nytimes.com/2008/09/22/business/media/22adcol.html?ref=business in the wake of last week's, uh, negative turn of events.

No wonder the public has tuned out media and no longer trusts government. Both institutions continue to fail on providing clear cut solutions -- much less well thought out ways to even find a solution.

Message to business leaders: Don't rush to judgment. Remove obstacles where you can. Take the appropriate actions to protect and help key constituencies in your business. That means serving customer need, being clear and up front to employees and investors and aligning strategy and execution with the appropriate systems, capabilities and people.

This message may not be sexy enough for public consumption, but it's what matters. Difficult times require steady hands, not a bunch of flailing motions that simply reinforce existing anxiety.

# # #

Clarification

Evidently, some readers thought Tuesday's "Where was the Lehman board?" post was a copycat of a much better rendition that was originally posted Monday on the Wall Street Journal's Deals blog.

Go to http://blogs.wsj.com/deals/2008/09/15/where-was-lehmans-board if you would like to review a copy. You also can read the same exact copy that appeared online Monday in today's print edition. Odd repetition but part and parcel of this brave new world.

It was never our intention to steal someone else's idea. Or in this case, a professional journalist at a reputable publication who we like to read when there's time. Chalk up the oversight to not reviewing as many web blogs as possible. "The Garlington Report" is not our full-time job either. But that's beside the point.

To avoid future oversights, we will leave the Wall Street meltdown to the legions of reporters currently on the case. They're the pros. We're just an niche observer who likes to underscore points relevant to our audience.

# # #

Where was the Lehman board?

What do a theatrical producer, retired Rear Admiral and the long ago retired CEO of IBM have in common? It's not a trick question. But you might mistake the answer for the punch line of a bad joke.

The answer is they're all now former members of the Lehman Brothers board of directors.

The entire cast counts four retired hands, two private investor/advisory types and one self named independent investment consultant who serves as the Chairman of the Finance and Risk Committee. Ok, the latter is well known name and respected investor, Henry Kaufman. But still. Where was Mr. Kaufman on the risk that obviously did this firm in? Does anyone know?

Taken together, the list (http://www.lehman.com/who/bios/board_directors.htm) looks more like the casting call for the movie, Cocoon, than a robust slate of active directors looking out for shareholder interest. Fuld is a dead man walking so we'll give him a pass on governance.

As to the others, well, good luck with getting new directorships. You probably won't have any problem, seeing that the old boys network likes to recycle the same old bodies into the same old chairs. It's a mystery that remains unsolved for now. But the day of directorship reckoning is coming. Keep screwing up at this level, and the secret is bound to get out.

We remain completely mystified that nothing seems to have been learned or applied since the collapse of Enron.

# # #

Memo to Ken Lewis

"Overnight, the shotgun merger will transform Bank of America into the nation’s largest player in wealth management." -- New York Times, September 15, 2008

"Acquiring one of the premier wealth management, capital markets, and advisory companies is a great opportunity for our shareholders," Mr. Lewis said in a statement. "Together, our companies are more valuable because of the synergies in our businesses." -- Wall Street Journal, September 15, 2008

Asked by an analyst if he had a desire to pursue a deal with Bear Stearns, Mr. Lewis shot back: “I’ve had all the fun I can stand in investment banking.” -- Wire services, September 2007.

============================
To: Ken Lewis
From: Jeremy Garlington

While you're soaking up status as Wall Street's newest darling, we thought we would offer up a sobering reminder that seems lost every time a big deal comes calling.

More than half of all mergers and acquisitions fail (percentage higher -- verify with consulting and strategy advisory firms who publish endlessly on this subject) due to what's commonly known as culture clash.

We highly recommend you throw out the scripts and platitudes about "synergies and scale." It's time to get real. Here's a primer:

*For all those valuable existing wealth managers under the U.S. Trust umbrella that you purchased from Charles Schwab, what does the absorption of Merrill Lynch's wealth management unit mean to them? What can they expect to gain or lose?

*Will the collective businesses under the Bank of America be compensated in identical fashion? Or will there be different scales for different folks? More specifically, will a loan officer in Crawford, Texas (not named Bush) be incentivized to do his job the same way a wealth manager gets paid in Cleveland?

*How do the assets and liabilities of Countrywide and Merrill Lynch intersect? Are there economies of scale or redundant debt vehicles that need to be written down? Better yet, is there a vehicle that you can ride between them before they go at each other's throats?

*Who is going to lead the combined operations of the combined entities? You? Someone new? Better yet, who is qualified to do so? A bunch of retail bankers who previously lost their shirts in investment banking, or new whiz kid managers and leaders from other industries?

Good luck with getting to the bottom of these questions, the key to being in the ballpark of successful integration. This challenge obviously will require all the collective ability you can muster. We will be watching closely for an outcome that demonstrates reality-based leadership.

Oh, and one last thing: Are you sure your board, or is your board sure, that this deal is in the best long-term interests of shareholders? Paying 70 percent above market value begs an answer.

# # #

Life after Linked In?

Here's a link to a conference we're taking part in this week: http://www.onrec.com/conferences/090908/schedule.html

Our session, scheduled as the conference's final panel discussion, is titled, "Recruiting and Social Media...Interactive dialogue with the experts." This probably should be re-named, "The Business of Social Media: What's Worked vs. What Hasn't and Why." But we digress.

The only real clear takeaway is the widespread use of Linked In, the networking tool that a majority of business people over 30 and under 50 now use.

If Linked In represents social media's first generation, then blogs and micro blogs, such as Twitter, represent the second generation. Of course, that assumes blogs don't blow up based on the backlash being created in the presidential race and micro blogs such as Twitter don't find the dot.com ditch.

It's still not clear yet who will shape a third or next generation. Here's hoping other panelists and audience members can offer up an answer.

# # #

In one door, out another

On the surface, the two don't appear to be connected. Lou Gerstner's decision to step down as chairman of The Carlyle Group comes as little surprise, while serial private equity executive Greg Brennerman's move to a smaller fund leaves even less suspense.

Do they know something we don't? It's likely that they do but don't tell them that. We can't take anymore hubris than what already exists.

With private equity deal flow down, premium on proven niche has increased. So has getting back to what business is about vs. what some PEGs have tried to dictate.

Business leadership is about finding ways to grow, and if that can't be done right way, getting into future position to do so. Private equity investors' role is to squeeze every dime or nickel out of a business -- often to the point where it's impossible to invest in what needs to be invested in to grow. They often want quick fixes, such as big name talent, when building an organization is the best solution.

We're not suggesting that every PEG has this philosophy or that some don't strike a balance. Certainly there are fund investors taking a longer view.

The larger net effect, however, has produced an adverse impact on the marketplace. It's transactions at all costs, or in this case, fewer costs and fewer deals. Relationships and building for tomorrow have been replaced by greed and squeezing margins for short-term ownership reward. Some may say that's the name of the business game. But we're not buying it and suspect others who have led businesses through ups and downs aren't buying it either.

Maybe Gerstner will treat us to his views on private equity sometime soon. "Who Says Elephants Can't Dance?" remains must reading for any aspiring leader.

# # #

Public apology, take seventeen

John Edwards' mea culpa should lock the door shut on a 24-7 culture phenomena otherwise known as the public apology spectacle, take seventeen.

We're a nation of many things, but empty apologists, we are not. In Edwards' case, his attempt to come clean came after years of lies, millions of dollars in hush money and potential violations of federal election law. Sorry, dude, but the time to apologize came and went awhile ago. What's really scary here is how this same individual came close to becoming vice president and that his wife, a lawyer in remission with cancer, felt compelled to defend her husband's latest indiscretions. Truly amazing. We have now arrived at full scale public delusion.

Some private sector leaders probably look at John Edwards and say to themselves, "oh, he's in the public eye, that's why he got caught." While that may be technically true, it's misguided rationalization that needs no projection. YouTube will gladly show what you think no one else is watching -- no matter whether you're a CEO of a publicly traded company or leader of a small town school system. If that doesn't make the case, then maybe a passage from the New Testament will: Nothing is hidden that will not be revealed, and nothing is secret that will not be known and come out into the open. (Luke 8:17)

Leaders, if you do something that requires saying you're sorry, please do so privately and then exit the stage gracefully without further word. "This is a private matter" has a much better ring these days than "I'm sorry, but let me tell you what really happened."

# # #

Failing Up

There's a bad rash spreading right now in leadership circles. It's called "Failing Up." Beware. Unfortunately, or fortunately depending on your view, there's nothing to keep the rash from spreading.

Our top aggravator is Erin Callan, the maligned former CFO of Lehman, who last week joined Credit Suisse where she'll be in charge of hedge fund operations. Now there's a transition to write home about. "Look Ma, one bank fired me but another just hired me. Ain't life grand?"

Next is the entire enterprise called Citigroup or Citibank or whatever it operates as now (Citi-Sovereign?) You know you're living right when you report a $2.3 billion loss and somehow that leads to a market bump because performance came in above expectations. Yes, these are tough times on Wall Street. We get it. But why does the bar keep dropping lower and lower? Oh, that's right. No real bottom to the market has formed yet.

Out in the, ahem, Real World (somewhere between Wall Street and Main Street), Failing Up features a raft of characters trying to paddle their way through the current mess. These include but aren't limited to:

• Rick Wagoner, CEO, GM. Is it just us, or this guy so toast that no one will state the obvious?
• Lanty Smith, Chairman, Wachovia. While some may say this selection is unfair, here's what needs to be answered but rarely ever is. Who was guiding the board when all the bad decision-making was taking place that led to the current huge losses? Who was supposed to hold management accountable to their actions? Why did it take so long to see the obvious, which is now playing out like another bad movie that we've already seen? Find some answers and you, too, can fill in the "Failing Up" puzzle.
• Patricia Russo, Alcatel-Lucent. Now here's an example of how to fail up and stay there for awhile. This tenure is downright amazing by modern CEO performance standards. Full disclosure: Russo is the only survivor from a previous installment of TGR's "Watch to Oust" list. Congratulations!
• Any and all so called leader that is either currently or formerly associated with Fannie Mae, Freddie Mac, Sallie Mae and Smelly Hay. Ok, sorry, that last entity was fake for comic relief. To understand scope of the mortgage mess and the government's implicit role in propping up lenders requires suspension of free market beliefs. Currently proposed congressional legislation is beyond fleecing; it's more like robbing the last guy standing, Us!
  

Anyone who would like to challenge this last point or any of other content is welcome to do so in the comments section. We always welcome counterpoints.

In the meantime, watch for signs of a bottom in the leadership market. That's right. The key word is "watch." Much like what's going on in the financial markets, we're not saying one has formed yet or has even shown signs (unlike another CEO who thinks one is "close." Whatever.)

When a bottom does form, look for boards to start accelerating their change and succession plans.

# # #

Three Cheers for Steenland!

It's a rare moment when a corporate CEO shows public conviction of his or her beliefs. So we're delighted to recognize Northwest CEO Doug Steenland and his testimony on oil prices held this week on Capitol Hill. To quote directly from today's Wall Street Journal, A-4 for you old school print readers:

...Steenland endorsed banning pension funds and other institutional investors from future exchanges, and he urged lawmakers to close loopholes that allow traders to dodge regulation by trading on foreign exchanges or over the counter.

"Addressing excessive speculation is the most immediate remedy Congress could deliver," Mr. Steenland said.

Amen, brother. That move and a little more spine directed at our OPEC friends would go a long way in helping Joe and Shirley Six-Pack. Too bad it takes the courage of a business leader to bring this issue to light among our so called elected representatives. We won't even go there on the two remaining candidates for president.

In fairness, however, Steenland is somewhat of a lame duck having sold the Northwest farm to Delta. He and the airline business also are being hit particularly hard on this issue, while other commodity producers such Monsanto reap profits from higher grain prices.

But it's still significant to note these rare public leadership moments from CEOs. Particularly on an issue as complex as energy.

Thank you, Mr. Steenland, for going where no one else seemed able to go.

# # #

The Big Brown Rule

According to an anonymous source, Wachovia Corp. will select privately held search firm Spencer Stuart to lead an external CEO search. The bank cited the firm's strong credentials in banking and current track record helping other stalwarts such as Delta and Yahoo.*

"The Garlington Report" also has learned that this move will not only produce a slate of eminently qualified candidates, but it will also do absolutely nothing to improve the bank's lack of leadership and broken culture. Not to mention complete inability to transfer new or even old ideas into new practices.

Here's why:

• Insular board won't address what needs to be addressed. Instead they will try to anoint a Messiah that doesn't exist, thanks to a willing Search firm eager to collect a fee.
• Down market environments that haven't bottomed yet aren't the time to make change. Particularly ones where bad acquisitions have impaired ability to see straight, much less drive.
• No one is going to spin-off AG Edwards and let them operate independently like they should have been all along. As to all that sub-prime junk, well, live and learn.
• Nothing ever changes inside banks where change is a foreign concept. Always has been, always will be.

Whether Wachovia selects a search firm or which firm it is has nothing to do with the core issue. Same old shoes lining up in the same old closets. Just move the chairs around, guys. Save yourselves some time.

Look at this way: If you don't have effective leadership heading into a fire, chances are you're going to burn for a long time -- or at least until the flames get doused. Even after the fire burns out it generally takes a long time to see anything new.

# # #

*Note: The lead graph can neither be confirmed nor denied. Simply blogging conjecture. Its content doesn't matter anyway so consider it a play on the horse race that so many others seem consumed by.

We're tagging it "The Big Brown rule" for lack of a better connection. This refers to the Triple Crown contender who didn't want to run last Saturday in the Belmont Stakes after winning the Preakness and Kentucky Derby. Wachovia wishes they were that lucky.

HD: Where's the real fix?

'Dark night of change.' 'End is near when memories outlive dreams.' 'Best of times, worst of times.'

Shall we continue or has the cliche meter clicked loudly enough already? For more passive business news readers, all of the previous phrases have now been offered by Home Depot's executive brass so far this summer.

Sorry, but cute little quotables have a way of obfuscating a larger issue.

Someone needs to step up and answer two main questions: When the housing market bottoms, which it will, where will the company be? What are the number one, number two and number three things that you're doing to make sure equity value returns to the bottom line?

Time to turn the page, folks. Present a real vision. Quit blaming the market. Leadership is about the future, not the past. Getting back to "the Home Depot culture" is impossible.

Or to use a jingle from an old preamble: Yesterday is gone forever; tomorrow is yet to be. But where are you going to be? Fully mature, trying to find original DNA or re-positioned to win the do-it-yourself market at all costs?

Message to the board: If you can't answer these questions publicly or find leaders who can, then it's time to evaluate whether you're headed in the right direction. Plain and simple.

Or keeping with the subject's affinity to quip, "Toto, we're not in Kansas anymore."

# # #

Where's the weather chief?

Editorial

Crises have a way of revealing character, and the current firestorm over sexual harrassment at The Weather Channel is no exception.

We are now in Day Two of the story, which you can gather from other other reporting sources, such as http://www.ajc.com/metro/content/metro/stories/2008/05/07/channel_0508.html?cxntlid=homepage_tab_newstab. And still we have not heard from the company's top leader, Debra Wilson. Instead a range of muted responses have been offered through lower ranking employees.

Darts for a lack of visible leadership at the top. The Weather Channel is arguably Atlanta's, ahem, hottest cable brand (ok, sorry for the weather reference.) As they pursue a sale, it's clear that the so called corporate police have shuttered any attempts to calm their constituencies, including the thousands of female employees who must be wondering where the company's female CEO stands on what is now a heated public issue. Speaking of heat, we are often treated to their founder's views on global warming only to be left wondering where the company stands. We sincerely hope a pattern isn't forming here.

Does anyone else see the irony here? Where is the CEO? Granted this type of situaton is far too common with fear of reprisal on everyone's mind. It's a scene that repeatedly gets played out by large companies trying to shill themselves out to potential suitors. Little do they realize how much is lost every time a credible voice fails to step and lead on issues that people care about.

# # #

Should We Blog?

Pardon the interruption from the usual topics. But we've been repeatedly asked to speak to an issue that seemed worth addressing via this channel.

"Should We Blog?" speaks to the challenge of incorporating social new media into the standard flow. Here's a starter course:

• Set aside new vs. old media for a few seconds and ask a three-part question: What's the core issue or topic from an audience point of view? What's our message? And what do we want an intended audience to do as a result of receiving that message?
• As attractive as blogs may seem, keep in mind that web logs are highly specific and generally offer a deeper, richer experience than traditional media. Just spouting off the usual run of the mill "stuff" will not cut it.
• The blogosphere is not for the faint at heart. Nor is it ideally suited for big monolithic organizations who haven't figured out what their audience wants down to the nth degree.
• If something that has been said is untrue and you feel compelled to quelch the rumor, remember this axiom that any professional pyschologist will confirm: The more you repeat something that's incorrect, the more others will believe it's correct.
• You can't market the same old way to Generation Y, or those young, valuable buyers that everyone covets. Anything that smacks of contrived marketing will get its due. Just ask Oberlin College, which has seen its share of student backlash after coining a new slogan, "We are Oberlin. Fearless."

For individuals or small businesses, an answer to "Should We Blog?" is clear: No, unless what you're bringing offers specific, helpful insight to those already connected to what you provide.

Isn't that the whole point of effective communication in the first place?

# # #

Which came first: Performance or Credibility?

Editorial

That headline isn't a trick question. Or at least it shouldn't be for the original three GE Amigos, all of whom presently find themselves in challenging stages.

Messrs. McNerney, Nardelli and Immelt might want to plan a summer reunion to share war stories. Sans their former boss turned CNBC talking head, Neutron Jack, who is known for a quick word or two. While each CEO made his mark via performance (or lack of), the current challenge is all about credibility. Forming it, keeping it and yes, even losing it -- only to hope it returns later.

Jeffrey Immelt proved this in one fell swoop earlier this month, blindsiding his hallowed constituencies with with an earnings report that led to GE's worst daily stock price loss in more than 20 years. But the core of the issue wasn't lack of performance. It was disbelief that the company could blow something that badly without forewarning. Put in simpler terms, it's never the infraction and always the cover-up or lack of disclosure that gets people worked up.

Second on the original GE succession list is James "Jim" McNerney, who is now having to step things up at Boeing after delay of their long awaited 787 Dreamliner, the closest thing to innovation the airline industry has seen since, well...TVs behind seats. While Boeing remains profitable, the stock's slide combined with a key product delay has pushed credibility to the fore.

Last but never least is the poster boy of everything that could go governance wrong, Robert "Bob" Nardelli, who now steers Chrysler after leading Home Depot into relative ruin. The recent Fortune magazine slick with Nardelli, Press and LaSorda dressed in black was enough to make any serious business reader gag. But thankfully they're now on record with a turnaround. We'll see what the credibility meter has to say about those vows down the line sometime.

Interesting to note: Unlike Immelt, McNerney and Nardelli are now on their second tour of duty after being passed over for the top GE job. Their mobility supports the widely published CEO turnover average of five to seven years, which now seems to be slowing down a bit.

Here's a key takeaway for all aspiring hot shots. Performance and luck might be what gets you the top job. But to keep it, it's about remaining credible. Lose that and you're generally toast. Unless you're already a brand name leader or have a great recruiter willing to line up the next gig.

Lesser mortal leaders who haven't become major CEOs yet tend to dismiss the importance of credibility only to realize its value after the (*&^ hits the fan. That's too late -- much like everything less that travels down the chicken and egg path of performance vs. credibility.

# # #

Delta-Northwest -- Time to go east

Here's our latest published view:
http://www.btobmagazine.com/Articles/2008/April/garlington.html

This marks the end of following Delta -- or at least until one of their top executives leaves the building. Bound to happen sooner or later.

Thanks for reading,

JG

Bear Stearns, JP Morgan, credit crunch, etc.

Confession: This topic was too rich to resist. Thanks to Business to Business magazine for allowing a wider audience to share in the content. What a great example of how easy it is to get caught up in the news cycle only to discover later that things aren't always what they appear to be. We'll stop there and allow you to form your own conclusions on the attached link:

http://www.btobmagazine.com/Articles/2008/March/garlington1.html

Ethics in the Blogosphere

Okay, so we're studying up in advance of next week's panel discussion, which is being joint sponsored by the Atlanta Press Club and Georgia State University's Center for Ethics and Corporate Responsibility. Please join us if your in-town schedule allows. Should be a lively event. Here's a link with more details on registeration:

http://www.atlantapressclub.org/events/event.php?id=113

In the News

http://www.bloomberg.com/apps/news?pid=20601109&sid=aMJLU7lbllbI&refer=home

Mr. Non-Fix it?

Editorial

Home Depot CEO Frank Blake will likely retain his role while the company continues to reach for a growth trajectory. Whether he should or not, however, remains open to debate.

The nation's largest home improvement retailer needs Blake’s trusted, reliable style and ability to “stick his fingers in the dikes,” according to an individual close to the situation.

What’s less certain is whether Blake is the guy to lead the company back to growth, something that investors have been clamoring for since the original founders left the building.

The answer is clearly “no” looking at things on paper. Blake is a Nardelli (as in former CEO Bob) disciple, has no contract and is a lawyer by training. So far his tenure has gotten above average marks -- even despite the previous facts, which rarely define big company leadership. At a simpler level, ask a long-time Home Depot shareholder about what their stock is worth today vs. 10 years ago. Watch out. You'll get an earful.

Let’s be clear. Unlike the analyst of the day on CNBC, we’re not calling for Blake’s scalp. That’s silly. Our main interest is determining when a board should ask the interim guy to turn the keys over to a more growth-oriented leader.

What won’t continue to wash indefinitely is the following line. Blake is a breath of fresh air following his predecessor. Duh! -- as any teenager would snap. Fresh air aside, sentiment needs to be future-oriented with a feeling of trust and confidence. It’s more about what a forward-looking strategy feels and looks like, and whether three years down the road, the current CEO will be driving strategy through effective execution.

One thing is for sure. Turnaround CEOs rarely make growth-oriented leaders. The landscape is littered with casualties. Recently ousted Citigroup CEO Charles Prince is one, but there are countless others.

So the question now becomes: When will the board act and who will they get? Stay tuned.

Conventional wisdom says nothing will be done until the markets bottom and growth can be more readily forecast. But that’s not how these situations generally play out. If the board decides it needs to make a change, recessions have little to no impact on their decision. Until then, they have to keep asking the relevant questions.

# # #

Coast to Coast

To blog or not to blog? is the question. Actually, that's not the question at all. The real question is: Who reads, or better yet, what do they do with what they read? For at least one day this year, we have an answer. See the attached, which presents a much better capsule of a presidential candidate-CEO pairing posted last week. Found Read is a Silicon Valley web log followed by IT and developer types occupying the normal Silicon Valley places. Thanks to them, we've added more capacity for readership without lifting a finger ourselves. Isn't that the whole point?

http://foundread.com/2008/01/11/mccain-welch-have-guts-clinton-is-a-gerstner-who-is-obama/

Can We Have This Dance?

It's the season of political dance. The Republicans look a bit lost with their normal waltz, while the Democrats are doing the three-step. The only absolute is the current narrative will change -- over and over and over again.

In the spirit of don't bite the fund raising hand that feeds you, we would like to issue a candidate-CEO pairing. Consider it two parts "Dancing with the Stars" and one part instructional for mere mortals.

Let's start with the Elephants, or Republicans. Mitt Romney (first picture below) talks endlessly about "his experience in the private sector" and "changing Washington." We would suggest pairing him with General Electric CEO Jeffrey Immelt, who despite popularity and innovation talk, has led during an era when the company's equity has remained virtually flat. Key takeaway: Beware of the platitudes.


New Hampshire winner and Comeback Adult John McCain is similar to Immelt's predecessor, Jack Welch, who ushered in much of business' preoccupation with leadership. Welch and McCain have published a litany of tomes, and their views seem to strengthen and resonate with time. The McCain-Welch pairing stands for experience, which has been unfairly overshadowed by change in the current cycle. If anyone thinks change is anything beyond good campaign rhetoric, then they need to take a couple aspirin and call their history doctor in the morning.

CEOs to pair with the Huckaboo and Mayor Giuliani don't leap to mind. These two are highly communicative, entertaining, funny and as energetic as the best used car salesmen. But that probably sells them too short.

Then there's actor/Senator turned candidate, Fred Thompson, who looks like he would rather be telling dirty jokes out back than running for high office. Chairman and now former CEO Jimmy Cayne at Bear Stearns may strike the greatest resemblance. This pairing desperately needs a week's supply of Red Bull and more hands-on execution.

Turning to the field of Donkeys, or Democrats...

We don't have a current CEO match for O'Bama (closest may have been Stanley O'Neal coming of age as Merrill Lynch's leader back when he first got the job.) Not having a CEO pairing is to O'Bama's advantage -- at least for right now while's new. Think media savvy, charismatic and thin on experience, which we saw our fair share of back during the rock star CEO era.

Clinton resembled former HP CEO Carly Fiorina right up until last night's come from behind win in New Hampshire. Pivoting off a comeback, candidate Clinton has newfound energy to run even the greatest turnaround. Perhaps Andrea Jung at Avon deserves this dance, or better yet, Lou Gerstner, the last notable guy who actually turned a large corporation around?

John Edwards strikes us the quintessential hedge fund trader turned Huck Finn who made all his profits during the last market turn and has simply been re-investing since then. In real life, he was heavily vested with Fortress so this depiction isn't entirely off the mark. The raised up by bootstraps turned multi-millionaire story is inspiring -- especially with John Mellencamp ballads playing in the background. But it all seems a bit hollow when measured against his belongings and thin political track record.

As to Bill Richardson, who arguably has the deepest resume of the entire field, we don't have an adequate CEO pairing for him, either. But he is the king of thoughtful personal views and one-liners (LOL: "I've been in hostage negotiations that were more civil.") That's a rare combination in CEO circles. Maybe John Chambers at Cisco before his second cup of coffee?

# # #