Chief executive officers cannot delegate those functions that are most vital to creating public trust, Computer Associates president chief executive Sandy Kumar told executives at a meeting of the Swiss-American Chamber of Commerce last week.
Kumar told the audience that they had to answer the “intense scrutiny and cynicism” of the public by “creating a record of predictable, reliable and timely communications with constituents.” Business leaders should have a clear strategy for delegation that empowers those below, he said, but also clearly retains those issues that are the most vital to creating public trust.
“If those of us who carry the burden of leadership get it right—entrust to others what we can and hold to ourselves only the most critical issues—then the future will not be about turmoil; it will be about trust,” Kumar said. “I believe every one of our stakeholders want to trust us. And winning and keeping that trust will be the line that separates success from failure. For the moment, the unscrupulous actions of the few have made cynics of the many. What we decide to do in response is a decision we cannot afford to delegate to anyone. Too much hangs in the balance.
“It falls to us to reestablish the bond by creating a record of predictable, reliable behavior and performance, supported by a commitment to effective, forthright and timely communications with all constituents,” he continued. “In a phrase: we have promises to make and promises to keep. It is certainly the most important thing on my agenda.”
Kumar pointed to changes made over the past two years at CA, which totally revamped its business model and the way it interacts with and serves customers. The changes came about after the company—which had seen spectacular growth during the 90s, largely as a result of acquisitions—saw relationships with its employees, customers, and shareholders deteriorate and came under fire for lax governance practices.
“I realized we had to make some fundamental decisions about our business in order to meet customers’ demands and to position ourselves to grow over the long term,” Kumar said. “To do that, we needed to make fundamental changes to the way we conduct business.”
In particular, he said, it was important for the company to improve its reputation.
“There is almost no asset as important as your reputation. A good reputation makes everything easier, but you cannot assume it will remain intact even when you are right and the facts are on your side.” He suggested several rules for ensuring a good reputation, including:
· You have to learn to deal professionally and promptly with all of your constituents.
· You cannot assume that without considerable participation on your part the media will be able to get your story straight.
· You have to have people who can provide you with expert advice on all your communications activities, but as a CEO, communications decisions and the consequences that go with them come to rest in your office.
· And while you are defending yourself from doubters, you have to maintain your objectivity and be willing to question and change a previously held position -- even if your critics will claim a victory.
The company was forced to pay particular attention to its reputation after two ugly proxy battles, Kumar said. As a result of those battles, he said, the company has decided to create “state-of-the-art” governance policies.
Kumar said he recruited a top-tier board with seven new independent directors; elected the company’s first independent lead director; set term limits for independent directors; adopted strict rules prohibiting the re-pricing of stock options and, took the lead the tech sector by announcing CA would expense stock options. In addition, CA’s financial disclosures are now even timelier than is required by U.S. law.
“In conjunction with setting a standard of good corporate governance, we’ve also made a strong commitment to transparency and have made significant changes with respect to financial disclosure,” Kumar said.
“Ultimately, anyone who heads up a business must personally weigh the risks and benefits of continuing with the status quo against the risk and benefits of changing a company’s culture. Many participate in this risk analysis, but … it is the CEO who is accountable for the outcome of these decisions.
“When I look back on the changes, progress and turbulence of my company’s last few years, I remember some very lonely moments. But my only regret is that we didn’t begin the changes five years earlier.”