How the Mighty Fall

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What, if anything, have we learned from Enron, WorldCom and other corporate failures?

What have we learned from the collapse of Bear Stearns and Lehman Brothers?

What have we learned from the alleged misdemeanors of media giants, Hollywood moguls, unicorn leaders, and others who we treated as icons till recently?

It appears that we refuse to learn anything.

When Carlos Ghosn arrived in Japan in 1999, many expressed surprise. After all, Renault was not in good shape and taking on the responsibility of the troubled Nissan appeared to be an unnecessary risk.

In fairness to Ghosn, he proved his critics wrong. With a ruthless focus on cost-cutting measures combined with engineering precision, he turned the company around.

The success of Nissan was instrumental in the acquisition of Mitsubishi. The conglomerate of Renault, Nissan, and Mitsubishi became one of the world leaders in automobiles.

The success story was not without its downside. For a start, Ghosn’s lifestyle contrasted wildly with the frugality of Japanese culture. Ghosn’s larger-than-life image was the antithesis of Japanese CEOs who cherish group success over individual limelight. Ghosn’s compensation was several times that of his Japanese counterparts.

At another level, Ghosn’s personality glorified flamboyance. With a dual Brazilian and French nationality, and having spent years in the Middle East, Ghosn epitomized the emerging “global leader.” Once, he hosted a party complete with period costumes and lavishness bordering on a mindless show of wealth and a long-forgotten era in history.

Ghosn’s detention on November 19 on alleged charges of having misreported his earnings, among other things, once again holds a mirror to the limits of hubris.

We would be very short-sighted if we were to view this case in isolation.

Have we already forgotten the scandal involving Volkswagen? Could deliberate tampering of the software to mislead regulators about emission levels under testing conditions have been carried out by operation level people? The readiness and willingness of the company to pay billions of dollars in punitive fines and the promise to fix the cars already on the roads tell a story of leadership malaise that is frightening.

Close on the heels of what Fortune magazine called ‘Hoaxwagen’ came the report of Audi’s CEO Rupert Stadler’s arrest on charges that he knew about “dieselgate.”  As of this writing, six executives have gone to prison for their role in the scandal.

Are customers bothered about any of this? Volkswagen continues to advertise its automobiles aggressively. Audi’s positioning continues to be that of a luxury car. Sales of Renault, Nissan, or Mitsubishi are unlikely to be affected by Ghosn’s behavior.

In other words, our value systems have declined to such an extent that even the thought of ostracizing organizations for what appear to be actions with far-reaching consequences related to integrity, safety, and sustainability appear to escape us.

I have said this before, and it is worth repeating.

Organizations don’t fail.

People do.

Today’s world needs leaders who look beyond themselves and for the larger good.

What we see is the exact opposite. We see more and more examples of leaders acting in self-interest and often at the cost of stakeholders and society.

What do you think?

Note: My views are that of an academic with an inside look at the corporate world for decades. I do not have any commercial interest in any of the companies that I discuss.


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