Regulatory uncertainty, quarterly earnings pressure and other external factors make CEOs less risk-averse, said author and former Fortune editor Hank Gilman at the New York installment of a three-city Gibbs & Soell conference May 2 focused on corporate disruptors.
Gilman said CEOs today face a dual mindset of being certain of where they want to take a company, against the uncertainty of factors like Washington budget woes, disruptive technology and even issues like global warming.
Such constraints likely contribute to the decline of average CEO tenure from 10 years in 2000 to less than four today, panelist said.
One of the biggest factors hampering risk-taking among CEOs is Wall Street and the pressure to meet quarterly figures at the expense of long-term goals.
The April ouster of J.C. Penney CEO Ron Johnson after less than two years surfaced at several points during the G&S event, which included simultaneous events in Chicago and Raleigh and was dubbed "Global Street Fight: Are Your Ideas Disruptive Enough to Win in This Economy?"
Gilman said Johnson is a prime example of a CEO trying to make bold moves while carrying Wall Street on his back. "You may make the right decisions, but other forces are weighing on you," said Gilman.
|Alcoa VP Paula Davis and Gibbs & Soell managing director Ron Loch
Johnson, an Apple retail vet hired in 2011, tried to revamp the old department store chain with a multi-year strategy but a slumping share price and the loss of support from hedge fund titan Bill Ackman ultimately led to his downfall after just 18 months.
Robert Fronk, executive VP for reputation management at Harris Interactive, said Johnson's "boldness" overran his ability to manage the company's finances as the company burned through 90 percent of its cash while he was "innovating."
Fronk said polling finds the public to associate "bold" leadership with terms like daring, charismatic and strategic thinking, as opposed to abrasive or rude. He said demographics of Americans over 34 show an eroding sense of leadership over the past five years, and the number of entities identified as great companies is lower now than it was even as recently as the Great Recession of 2007.
On the flip side of J.C. Penney is Amazon. Gilman, acknowledging that most companies can't follow the model, noted Amazon is a corporation that doesn't worry about Wall Street. "If they have a bad quarter they say too bad, but we're investing in our business," he said. "A lot of companies can't do that."
Fronk said Amazon CEO Jeff Bezos is not constricted to make decisions catering mostly to one stakeholder – in J.C. Penney's and many cases, shareholders – which allows him to run a retail giant like Amazon like a small business. "Successful small businesses are purpose-driven, and successful large businesses are purpose-driven as well," said Fronk.
Part of that purpose, in the eyes of the public, is meeting a perceived "social role," said Fronk, who noted it's not a philanthropic or corporate social responsibility role.
He pointed to Amazon's simple mission statement – "To be Earth's most customer-centric company where people can find and discover anything they want to buy online" – as a good example of a company thriving with a social role. "They meet that," he said. "From a customer standpoint, it's 'Does this business do something to make my life better or easier?'"
Part of crossing the threshold into being perceived as a great company is moving beyond the sector that got it there. "It's companies that transcend the business they came up in that turn into the great companies," said Fronk, asking whether Google is a tech company or a software company, or whether Amazon is a bookseller or a retailer.
So who should burnish a company's social role? Fronk said it's a job tailor-made for PR. "Nobody is more qualified than a strategic communicator to convey the idea of social role," he said, adding that shorter CEO tenures have also upped the ante on corporate communicators who have less time to shape a chief executive's image.
But Wall Street and shareholder pressure can also affect titans of the corporate world. Steve Halsey, principal and managing director, business consulting, for Gibbs & Soell, noted that Apple of late has become more defined by financial performance than by innovation, a turnaround from its years as the darling of tech media. "Apple is judged on its hits," he said, which comes with short-term demands at the expense of innovation. Halsey said competitor Samsung is given more license to fail because it is chasing the leader, not leading the pack.
Fronk said it appears Apple is trying to temper the Wall Street pressure as it held a media availability in late April for the first time that didn't involve a new product. He said: "My hope is that they're not out of ideas but wanted to send a message that 'We don't need to give you a new product to drive our share price.'" He said the company's massive debt deal was in part to pay off people looking for short-term gains so it could focus on innovations.
Companies 'Wed' Communities
In a separate panel, Paula Davis, a veteran corporate communications exec for Siemens and The Pepsi Bottling Group who is now VP for Alcoa and president of the Alcoa Foundation, talked about the mining and aluminum giant's efforts to woo communities in which it operates around the world.
She said the company faced "huge distrust" and disruptions at a mine operation in Jamaica before a community relations effort, including efforts to educate school children, smoothed its relationship there. She said the company created community advisory boards, a model followed throughout the world, to find out local concerns and needs.
"You have to go into a community as a marriage," she said. "You can't just build a factory and put up walls these days."
She said Alcoa will look at an Amazon operation as a place where it will operate for 100 to 150 years and ask itself, "When we're done mining, what will the community look like?"
Selling the Story
Davis said Alcoa's industrial focus as a B2B company can be a difficult pitch to media, especially when President Barack Obama is not zeroing in on U.S. competitiveness and manufacturing.
She noted research that found only 20% of parents want their kids to go into manufacturing, a troubling statistic Alcoa has tried to mitigate by educating about advanced manufacturing and technology.
Rick Newman, chief business correspondent for U.S. News & World Report, said he gets about two dozen pitches per day, deleting nearly all of them because they aren't relevant for his audience.
"The stories I do are ones with something important to convey to my audience," he said. "Inside the corporate bubble you have executives convinced it's a great story when it's a yawner. A lot of times a company is just doing what's it's supposed to. That's not a story."