Civic Leaders Come and Go: In Search of Accountability
Many forms of conduct permissible in a workaday world for those acting at arm’s length, are forbidden by those bound by fiduciary ties. A Trustee is held to something stricter than the morals of the marketplace. Not honesty alone, but the punctilio of an honor the most sensitive, is then the standard of behavior. As to this, there has developed a tradition that is unbending and inveterate.
—BENJAMIN CARDOZO
It is fascinating to observe how corporate, institutional, and political leaders decide when to stay and when to go.
Supreme Court Justice David Souter and Pope Benedict, though enjoying lifetime appointments, resigned from their posts: the first because he wished to return to a scholarly, monastic life in a Vermont cabin, the second because of illness and an inability to perform acceptably while in office.
At IBM, the CEO is out at sixty years of age, no questions asked, no protest to be lodged. Lou Gerstner and Sam Palmisano, arguably in their prime, stepped down in deference to that rule. It is designed to encourage internal aspirants to the top spot to stay and not leave IBM for other available senior executive positions. Whether and which internal contenders for CEO are successful is determined well in advance of the time needed to look for outside candidates. A fixed, relatively early retirement age is viewed at IBM as a key to senior executive retention.
When Hosni Mubarak was finally toppled as the president of Egypt after a twenty-nine-year dictatorship, albeit one that featured regularly staged rigged elections, a joke circulated throughout the country explaining that his departure was no loss.
It is said that on the day he first took office, Mubarak’s limousine driver was taking him through downtown Cairo when they reached an intersection requiring one to turn either left or right.
“Mr. President, which direction would you prefer that I turn?”
“Well, what would Nasser have done?”
“Oh, sir, he would have taken a sharp right.”
“And what direction would Sadat have taken?”
“He definitely would have had me turn left.”
“I see. Well, then, why don’t we just stay put.”
Staying put is the best that can be claimed for Egypt’s society, economy, and polity during all of the Mubarak years.
That prolonged stall also characterized the New York Philharmonic during Paul Guenther’s thirteen-year tenure as its board chair (1996–2009). He stayed on too long.
He failed to lead, and he failed to leave.
In the immediate wake of the excruciatingly embarrassing round-trip of the New York Philharmonic to and from Carnegie Hall, it was widely thought that Paul Guenther and Zarin Mehta would surely find a speedy and dignified way to resign, or failing that, the trustees would insist on both taking their leave. Neither happened. At galas, Paul would introduce himself this way: “I am Paul Guenther, and yes, I am still the chairman of the New York Philharmonic.”
Resigning from office is straightforward. Announce a date. Appoint a search committee of the board to look for your successor or refer the matter to a well-functioning nominating and governance committee, if there is one. In other words, leave a time-certain vacuum and allow your trustee colleagues the freedom to fill it.
Instead, Guenther took it upon himself to find his own successor. Could there be a less persuasive recruiter? At least a few individuals were offered the post. All declined. Months passed. Then years. Finally, in desperation and perhaps for the first and only time at Lincoln Center, a search firm was consulted to help find a board chair, one who did not come from the trustee ranks, numbering some sixty strong. So much for succession planning.
Matters were hardly better at the New York City Opera. Its weakened condition, particularly after Paul Kellogg’s resignation; the on-again, off-again, shaky agreement that Gerard Mortier would serve as Paul’s successor; and the designation of the ill-prepared George Steel all suggested strongly the desirability of Susan Baker resigning as the chair of the board. Her leadership was identified with unconsummated institutional wanderlust, with the severe erosion of the New York City Opera’s endowment, with confused and shrinking audiences, and with persistent operating deficits. One sign that her credibility and judgment were in doubt was the disappointing charitable contributions of most trustees. Another indicator was her unwillingness or inability to expand that group and to raise its performance in giving and garnering donations.
As with the last-gasp selection of Steel, only when it was too late to matter did Baker relinquish her post, to Charles Wall. It fell to Wall to close up shop, once and for all, and he did so with as much class, dignity, and generosity as could possibly be imagined.
The moral of these stories is surely that the choice of when a CEO or a board chair comes and goes should not be left entirely to the incumbent. An orderly and regular review process is required. In government, we call that process free and fair elections. In free enterprise, we refer to it as sound corporate governance. In nonprofits, the terms of the chair and the CEO are the province of the board of directors. Sound succession planning is imperative if highly valued institutions are to remain healthy.
My own decisions about when to leave various positions were largely determined by what had been accomplished during my tenure. Had important milestones been reached, rendering it less productive, less necessary, and less satisfying for me to stay in place? Was the institution ready for another leader? Was I physically and psychically ready to move on?
IN DECIDING WHETHER and when to step down, a CEO faces a serious danger. Will his or her tenure in office be so long as to conflate the interests of the incumbent with the needs of the institution? Is the very personal identity of the officeholder so intertwined with his or her institutional role that voluntary separation becomes too threatening to contemplate? It is always a bad sign when the board member or the CEO appears to need to occupy the position more than the institution needs that individual to serve. Trustees and CEOs hold institutions in trust for service to others, not the other way around. Often, when lengths of stay are prolonged, a key attribute of good governance—healthy turnover—is ignored. There is then a major risk that talented potential successors inside the organization will leave in search of challenging service opportunities elsewhere.
At Lincoln Center we enjoyed a rigorous nominating and governance committee process that annually assessed trustee performance. Not infrequently, improvement was called for and, on rare occasions, a request for the resignation of a negligent or disappointing trustee was in order. We also benefited from an annual executive committee review of CEO performance. Both processes created regular opportunities to discuss succession and its timing.
In my case, the board twice requested that I extend my stay. First from seven years to nine, and then from nine to twelve. These discussions about transition also led to the selection of Katherine Farley as the chair designate, a post she held for a full year before she formally succeeded Frank Bennack. Part of our thinking was to ensure that Farley remained as chair when I left the CEO post. The next president would then have at least a couple of years to serve with an experienced board leader at the helm.
There is wisdom in knowing not only when to leave your post, but also when to really “let go.” In his definitive work on the subject of corporate CEO retirement, Jeffrey Sonnenfeld reaches this conclusion: “Corporate leaders who leave office positively and enthusiastically may meet both their personal needs for renewal and the needs of their firm and society.”1
For an excellent example of proceeding just this way, I think of the conduct of Harvey Golub, the CEO of American Express. When retiring, he decided not to be the chair of the board when his successor, Ken Chenault, became the CEO or even to remain on the board as a plain director. Interviewed in BusinessWeek, Golub, who became and remained during much of my tenure a trustee of Lincoln Center, acknowledged how much he had enjoyed his days in the driver’s seat. He was available for advice if and when Ken needed it. “If Ken wants my input, he knows where to find me.”2 For Golub, retiring meant truly departing from American Express, not casting a shadow on his replacement.
It is said that Episcopalians always leave the scene without saying good-bye, whereas Jews always say good-bye and never leave. Harvey said good-bye and left, clearly an ecumenical approach. And a model worthy of emulation.
YOU CAN LEARN a lot about any destination—a hotel, a gym, a hospital, a college, or an employer—by how each greets you and how each bids you good-bye.
Are you welcomed by name? Is the place prepared for your arrival? Are you thanked for completing your term of service? Are you asked genuinely about what might be improved, and is there intelligent feedback to your suggestions? Well-functioning organizations should always conduct exit interviews, particularly of their most valuable personnel.
And what about your length of stay? Have you ever felt that the vacation you planned was longer or shorter than the destination warranted? Or that the third year of law school was one too many? Or that you were discharged prematurely from a hospital stay?
These sorts of issues are different in degree, but not in kind, from those that involve you and your employer. Throughout our tenure, from entry to exit and at all points in between, how we treat one another matters. And when it comes to the CEO, the impact is far-ranging and often enduring.
When Leonard Lauder, the then CEO of Estee Lauder, decided in his capacity as the chair of the 92nd Street Y’s search committee to offer me the post of executive director, little did I know how consequential this decision would be. At the time, I was just thirty-one years old. Henry Kohn, the president of the board of directors, called me with the good news. But he didn’t mention that my predecessor, once removed, would remain something of a fixture at the place. His name was Carl Urbont, and he and his predecessor, Jack Nadel, had together served more than sixty years as CEO of the Y. When Urbont resigned, Jack Boeko was appointed executive director, but he departed some eighteen months later.
Throughout the search for Boeko’s successor and during his brief term of service, Carl Urbont held the post of executive vice president, supposedly in charge of fund-raising. Actually, Urbont acknowledged that he was unfamiliar with raising funds and had engaged in very little of it during his long tenure. It struck me as awkward in the extreme to have my predecessor working every day only yards away from my office at a salary higher than my own, and with a full-time assistant at his disposal, assigned to a task he was admittedly incapable of completing successfully.
As it happened, I was too self-confident and too challenged by the state of drift and underutilization in which the Y found itself in the summer of 1977 to be very much bothered by his presence. He could have been an irritant. A constant second guesser of my every move. He could have been an in-house critic with the trustees, whom he knew very well, and with staff, many of whom he had hired or who had previously reported to him. That the board of directors did not recognize the potential for mischief in Urbont’s continued presence, holding a job for which he was clearly unqualified and with which he was very uncomfortable, well after retirement age, seemed amateurish.
Almost twenty years later, as I became the president of the International Rescue Committee, all was not well with the organization. My predecessor, Bob De Vecchi, and the leader he followed, Carel Sternberg, were the only CEOs the IRC had known in its storied fifty-plus-year history. Strapped for resources, having great difficulty finding enough cash to meet payroll, and organizationally challenged, the institution, I learned after the fact, needed rescue almost as much as the refugees it served. Rather than bid De Vecchi a fond farewell with warm thanks for his extraordinary service, which had been heroic in many ways, the IRC’s board of directors saw fit to elect him to be one of its own.
Playing that role was an invitation to Monday morning quarterbacking. Perhaps I should not have been surprised, because the IRC was institutionally immature, and nowhere more so than at the board level. Some key players, like John Whitehead, Winston Lord, and Dr. James Strickler, were outstanding leaders and recognized the need for change in board composition and expectation. And De Vecchi never once interfered with my chief executive role. Nonetheless, on the board there was a trustee married to a senior staff member who reported to me. On the board were also both a father and his son and a husband and his wife, serving simultaneously. As was the case at the Y, there was no common understanding about the financial obligations or the service requirements expected of trustees. It is hardly surprising that their charitable contributions and commitment of expertise and service were highly uneven. Taken together, they left a great deal to be desired.
Neither the Y nor the IRC could find a red carpet to roll out for their new CEO. Each was thoroughly unprepared to greet me and had given virtually no thought to an appropriate orientation or introduction to the institution, its key actors, and its formidable challenges.
Later, after I had announced my plans to step down as the CEO of the IRC, I interviewed with the search committee of Lincoln Center, chaired by the president and CEO of the Hearst Corporation, Frank Bennack. It was the IRC and the 92nd Street Y all over again. Strange governance practices seem to follow my career path. Serving on the search committee was my friend and former CEO Nat Leventhal. Leventhal, who had been president of Lincoln Center for some seventeen years, was an extremely close friend of his successor, Gordon Davis. They had practiced law together. They had both served in the administrations of Mayor Lindsay and Mayor Koch. Davis was also a trustee of Lincoln Center for part of the time that Leventhal served as president. Leventhal must have been pleased that Davis was selected to take his place, and he must have been saddened that Davis’s tenure as president lasted only nine months. Not only was Leventhal then given the opportunity to help select a second successor by serving on the search committee after Gordon’s resignation, but he had earlier been elected to Lincoln Center’s board as a full-fledged voting member.
Such a state of affairs is an invitation to difficulty and discomfort.
To put a new CEO in the position of being judged by a predecessor who held the post for almost two decades was problematic. Leventhal now served alongside trustees whom he knew quite well and staff with whom he had worked closely, if not actually hired. The temptation to ask him how I was performing and vice versa must have been irresistible. It is a credit to Leventhal that I cannot recall a single problem. He addressed all of his questions and observations to me only, personally and confidentially. I felt completely free to ask for his advice. Not everyone would have been as circumspect and thoughtful.
There was no organized preparation for my arrival. No formal briefings. No systematic way to meet key trustees, donors, and constituents. No budget for the following year. Few fund-raising plans were in place. I felt very much on my own.
Surprised by these experiences, I drew lessons from them. When I took my leave of the Y, the IRC, and Lincoln Center, I refused to become a trustee, to serve in any way (unless explicitly asked to do so by my professional successor), or even to be a member of an emeriti group. Nor would I play any formal role in the selection process for my successor.
Having served for eight, six, and twelve years, respectively, at the Y, the IRC, and Lincoln Center, there had been ample opportunity to influence the culture, the staffing, and trustee expectations at each organization. That was enough, indeed more than enough. There is a time to pass the torch. The responsibility for the future of an institution resides in the staff and the board being left behind.
In politics, from my viewpoint, nothing brought more honor to George W. Bush than his conduct after leaving office. Unlike his handpicked vice president, Dick Cheney, who was an incessant source of consistent and shrill criticism of President Barack Obama, Mr. Bush simply refused to publicly comment on the performance of his successor. The same can hardly be said of Jimmy Carter, with his running commentary on many of the policies of his successors, which accounts for his relative unpopularity with all of them.
A departing CEO should do everything possible to ensure a solid first year of institutional performance after his or her departure. Mobilize staff to present thorough and thoughtful transition briefings. Offer the successor an opportunity to meet and greet key figures in an efficient, congenial way. Kick no cans down the road. And then leave the premises. Lock, stock, and barrel. But be available to provide advice whenever it is requested.
It has been rumored that some outside candidates to succeed the handpicked successor of Bill Gates, Steve Ballmer, as the CEO of Microsoft, were put off by the presence of both men on the board of directors and decided not to compete for the job.
Can you blame them? Those privileged to be in charge in government, in corporations, or in nonprofit institutions should first and foremost ask what is best for citizens, shareholders, customers, patrons, and clients. Rare are the occasions when retired CEOs hanging around the institutional water cooler can be helpful to such key stakeholders. Resist the temptation to continue to feel needed. Do not stay beyond what the organization realistically requires.
When in doubt, leave.
Consider the words attributed to Oliver Cromwell, speaking to the Rump Parliament in 1653: “You have sat too long here for any good you have been doing. Depart, I say, and let us have done with you. In the name of God, go!”
WHY DO OTHERWISE intelligent and sophisticated board chairs and those closest to them fail to speak frankly with each other and with their CEOs about individual and collective performance?
Why is it so difficult to point to areas in need of leadership improvement and to insist on the development of a plan to remedy a state of affairs requiring high-level attention? For that matter, why do so many trustees of an institution fail to call themselves and their CEO to account for serious performance shortfalls?
Gary Parr once commented at a meeting that the New York Philharmonic had experienced fourteen successive years of operating deficits. Fourteen. It carried out two conductor searches, one resulting in the retention of Kurt Masur, the other, Loren Maazel. Both were widely regarded as botched in process and disappointing in outcome. The board also took the orchestra on the round-trip to and from Carnegie Hall that squandered credibility and goodwill. This is not a record of performance to boast about.
Would all of this not be reason enough to expect the resignations of Paul Guenther and Zarin Mehta?
In the face of a declining audience and a deteriorating balance sheet, the Metropolitan Opera remains a troubled institution. Evidence abounds that Peter Gelb’s management and artistic responsibilities are simply too much for any one executive to shoulder, no matter how creative and hardworking.
Why didn’t the Met’s board of trustees demand early on the development of an economic model that held promise of a viable financial future?
In meeting privately with Gelb, I was struck by his response when I asked what would happen if his effort to hike ticket prices and raise unprecedented amounts of funding for ambitious programs, infrastructure improvements, and working capital were not successful. What if seeking surpluses from operas in movie theaters did not work according to plan? What if price increases met with significant resistance?
Peter’s response was surprising.
“It has to work. There is no Plan B.”
I know of no successful CEO without a backup plan in the event of failures or shortfalls. Gelb’s insistence that he had charted a course and was going to pursue it no matter what obstacles he faced, foreseen or otherwise, struck me as bordering on dangerous. The Met’s board of directors should have seen to it that considered alternatives were seriously entertained.
If the New York Philharmonic faced chronic operating deficits, and the Metropolitan Opera’s economic model seemed seriously flawed, the New York City Opera’s devolution also occurred not suddenly, but over at least a decade.
Ten years or more of spending well in excess of annual income and of drawing down on an endowment until there was hardly any left would surely weaken any artistic organization. What Paul Kellogg, Gerard Mortier, and George Steel had in common as successive CEOs was a board of directors and a chair who simply refused to call a halt to irresponsible management. One wonders whether they even recognized the harsh realities. Sometimes in human affairs, the capacity for self-delusion knows no limits.
Even worse, recall that board members indulged Paul Kellogg by traipsing around the island of Manhattan, looking to build a new opera house with no prospect whatsoever of being able to raise the funds to build or sustain it.
The famous sociologist Albert Hirschman wrote a treatise on what to do when you disagree in principle with an institution’s policy. He referred to the choice as voice or exit.3 Either protest the organization’s direction inside its corridors with a view toward change, or leave it entirely, in the hope that others will follow or that leadership, stunned by defection(s), will change course or resign.
Clearly, every difference of opinion is not a difference of principle. One should not take lightly offering a strong dissenting view or a resignation in protest.
In my general experience at Lincoln Center, very few trustees or staff exercised either option: voice or exit. Those who choose either course of action deserve a special place on any trustee honor roll.
The failure to engage in “voice or exit” is hardly confined to Lincoln Center’s constituent artistic organizations or to nonprofit institutions more generally. Consider contemporary American foreign and domestic policy.
The Iraq conflict led by President Bush has been called a war of choice.4 That choice and the way the war was conducted became publicly controversial. But who raised a contrary voice in the Bush administration during the course of a conflict that was costly in lives and treasure and was unjustified by the rationale of weapons of mass destruction readily available for use by Saddam Hussein? As to exit, one can search in vain for any high-ranking official who even threatened to resign on principle.
Instead, it seems to be a rule of human behavior that to get along, you must go along. One can count on fewer than two hands those in significant positions who expressed strong dissenting views inside almost any post–World War II administration or those who resigned on principle over policy differences.
Secretary of State Cyrus Vance in the Carter administration did so over the Iranian hostage crisis policy. Attorney General Elliot Richardson did so rather than carry out President Richard Nixon’s orders during the notorious Watergate affair. FBI Director Robert Mueller and Deputy Attorney General James Comey threatened to resign if President Bush compelled Attorney General John Ashcroft to authorize the illegal surveillance of American citizens. Before his untimely and premature death, Ambassador Richard Holbrooke spoke forcefully about President Obama’s “mistaken” policy toward Afghanistan and Pakistan. Christina Romer, President Obama’s chair of economic advisors, argued that the economic stimulus package of the administration was too small to promote a rebound sufficient to overcome the most drastic downturn in America’s financial history since the Great Depression. These are notable exceptions to the general rule of passivity in the face of important policies or practices with which one strongly disagrees.
Notwithstanding his reputed differences with President Bush, Secretary of State Colin Powell never gave voice loudly or clearly enough to be heard inside or outside the administration. The director of the Central Intelligence Agency, George Tenet, who called finding weapons of mass destruction and victory in Iraq a “slam dunk,” and General Tommy Franks, largely responsible for a failed occupation policy, were not held accountable for deficient performance. Instead, each was granted the highest award our nation can bestow, the Presidential Medal of Freedom.
What is it about speaking truth to power, or about holding authorities accountable for their acts, that is so difficult?
As I write, no one, not a single senior executive of Bear Stearns, Countrywide, Lehman Brothers, Merrill Lynch, Goldman Sachs, Fannie Mae, Freddie Mac, the Bank of America, or Credit Suisse, has been found guilty of a felony. Indeed, no official from these firms has even been indicted for gross failures of omission and commission that brought our country to the “brink of economic Armageddon” in 2008 and 2009. That is the phrase used by none other than the former chairman of the Federal Reserve Bank, Ben Bernanke.
This pronounced tendency to avoid both conflict and the risk of alienating friends and colleagues runs rampant in all sectors of our society. It is no small part of the reason that our major institutions are far less trusted by citizens than they were decades ago.
The failure to exercise the option of voice or exit can badly maim an organization, even bring it to the brink of dissolution. Acknowledging grave mistakes and resigning, or being asked to take one’s leave, may be difficult, uncomfortable, and painful for those directly involved. But it is sometimes the only honorable course of action and best for the institution or country.
DURING THE LAST two years of my tenure as the president of Lincoln Center, Katherine Farley, my chair, whom I had known for two decades, did not hesitate to give strong voice to her opinion if she felt that management, sometimes a euphemism for me, needed clear criticism.
For example, Farley argued for reducing the cost base of Lincoln Center’s artistic programs. She felt that too many were too expensive and were attracting too small an audience. She examined the deficit of various program series—expenses minus ticket income—and expressed concern that the gap to be bridged by contributed funds was growing too large.
She credited management with first-rate cost controls, particularly over administrative expenses. They rose on average only 3 percent per year, including escalating health-care costs and collectively bargained salary and fringe benefit increases. She also acknowledged that on more than one occasion, program expenses had already been reduced to lower levels.
Still, since program cost commitments often extended several years ahead of the next budget cycle, Katherine felt that “out year” expenses needed to be reduced and contained even further.
We joined issue.
I argued that Lincoln Center was operating within the context of more than a decade of balanced and surplus budgets during my tenure. I advanced the view that daring, unusual, and challenging programs are precisely the kind that attract donors and that bring needed subsidies. The Andrew W. Mellon Foundation was not about to offer a major grant to support the presentation of mere entertainment. Besides, surely the only measure of Lincoln Center’s artistic success could not be the size of a paid audience attracted to a given set of programs.
What about our obligation to commission new work, world and American premieres? What about our dedication to promoting new and exciting artists, ensembles, choreographers, and composers? What about the important positive recognition accorded our senior artistic curators, Nigel Redden and Jane Moss, by audiences and critics for their adventurous programming? What about the fact that very often what is produced and presented first at Lincoln Center is then performed elsewhere, nationwide and worldwide?
Didn’t such considerations deserve a place in Lincoln Center’s performance box score? Weren’t these salutary consequences of our programming central to Lincoln Center’s mission? Not everything that counts can be measured. Not everything that can be measured counts. We should not run the risk of weighing the costs but ignoring value that doesn’t fit so neatly on a spreadsheet. Like the power of Lincoln Center’s brand and the trust it enjoyed among artists, patrons, and critics for high quality. Like the audience its programs attracted outside of our campus venues, through tours, run-out performances, and digital media.
Farley pushed back. She acknowledged these other Lincoln Center roles and recognized that management enjoyed a praiseworthy track record of balanced and surplus budgets.
But Lincoln Center should climb a wall of worry when it comes to its financial condition. Economic times change. The fund-raising climate can become more forbidding. Box office business can disappoint. And my successor should be given an easier budget to balance, the best possible flight path to a smooth landing.
To pull Katherine’s leg at one finance committee meeting, I played a song from Steven Sondheim’s musical Merrily We Roll Along, falsely suggesting that my chair preferred the easy and the popular over the challenging and the worthy.
Farley grimaced at the mere suggestion that she failed to appreciate Lincoln Center as the progenitor of high art. And she was right to do so. I had overstepped my bounds.
It was tough for me to debate a friend whom I respected enormously. But our differences were about matters of degree, and the contention between us was creative and constructive. Fortunately, good humor prevailed, compromise was struck, the cost basis of programming was reduced (yet) again, and budget guidelines for the “out years” were established. But the board allowed for exceptions if artistic opportunities warranted and if financial planning for larger budgets proved sound.
Good for Farley. She is a rare board chair, and I tip my hat to her. Hold management accountable even if it comes at the cost of more than a little discomfort. After all, one definition of leadership is speaking uncomfortable truths. Lincoln Center is too important a place to smother genuine differences rather than to air them. Our friendship was too precious to be based on false pretenses. In the end, I learned a few lessons. I may have disagreed with the board’s judgment, but ultimately, I served at the pleasure of its members, not the other way around. Given Farley’s responsibilities, her cautiousness was entirely merited. Holding management accountable for sound performance is precisely what an excellent chair should be about.
Would that all of my CEO colleagues experienced similar debates and were compelled to respond to trustee pressure to perform better or differently. Lincoln Center would be far stronger if the options of voice or exit were exercised more frequently. As would our country’s corporations, not least its financial institutions. And so, for that matter, would the management of our nation, the United States of America.
What is needed to close the deficit of trust that Americans harbor toward virtually all institutions is responsible, accountable leadership. And one of the most important responsibilities is knowing when to walk away. Nothing less will do.