What Makes for a Good CEO?

As the topic of corporate governance has been in the news more and more during the past several years, it is useful to reflect on what boards of directors have to do in terms of their roles and responsibilities. Acting on behalf of shareholders, one of the board's most important jobs is selection of the CEO, who will provide strategic direction for the firm, and in turn, hire the top management team. But how does a board go about hiring a CEO? Certainly, this has got to be one of the toughest jobs of selection in the business world. In recent years, so many contentious issues have surrounded CEOs that the board's task is no small one. Many CEOs have been implicated in ethics scandals, and many of them have been criticized for what the public considers excessive compensation. Today especially, boards want to be sure they hire CEOs with high integrity and impeccable character. It is a lofty goal and things don't always turn out the way boards wish. With a record number of CEO firings in the past five years, it is little wonder boards of directorsare always seeking insights as to how to make these selection decisions. Business people are always on the alert for guidance, for suggestions, for tips that would make their hiring more successful or run more smoothly. But if an elusive quality such as character is so important, how does one gauge a prospective CEO's or top executive's character? Or, for that matter, how can we gauge the character of any level of management? Surely, this is a vital ingredient no matter what the level of management in the organization. SWANSON'S UNWRITTEN RULES

In a recent (2006) USA Today article, it was revealed that Bill Swanson, CEO of Raytheon, the defense contractor based in Waltham, Massachusetts, that has 80,000 employees and more than $22 billion in annual sales, had published a booklet containing 33 brief leadership observations. The booklet was titled Swanson's Unwritten Rules of Management. It turns out that Raytheon has given away 300,000 copies of the booklet to members of its own organization and to virtually anyone who inquires about it. The book is filled with commonsense maxims, observations, rules, and guidelines considered to be something of a cult hit in corporate America. Among the 33 guidelines or rules compiled in the booklet is one rule that Swanson has said never fails in terms of helping to assess someone's character.

THE WAITER RULE

Known as the"Waiter Rule,"the observation basically says that"A person who is nice to you but rude to the waiter, or to others, is not a nice person."A number of CEOs and other corporate executives have all agreed with the Waiter Rule. They basically concur that how a privileged corporate executive treats people in subordinate roles, whether they be waiters, clerks, maids, bellmen, golf caddies, or any other service-type worker, reveals insights into the executive's character that should be taken into consideration in hiring decisions. Office Depot CEO Steve Odland recalls that when he was working in a restaurant in Denver many years ago, he spilled a glass of purple sorbet all over the expensive white gown of an apparently important and rich woman. Though it occurred over 30 years ago, he can't get the spill out of his mind. But what struck him most was her reaction to his careless spill. The woman responded in a very kind and understanding way. She kept her composure and in a calm voice said,"It's okay. It wasn't your fault."Years later, the now-CEO of Office Depot recalls what he learned about this incident:"You can tell a lot about a person by the way he or she treats the waiter."

CHARACTER REVEALED

As it turns out, just about every CEO has a waiter story to tell. The opinion they hold in common, moreover, is that the Waiter Rule is a valid way to gain insights into the character of a person, especially someone who may be in a position of authority over thousands of workers. The cofounder of Au Bon Pain, the leading urban bakery and sandwich café, Ron Shaich, became CEO of Panera Bread. He tells the story of interviewing a woman for general counsel, who was"sweet"to him but turned"amazingly rude"to the person cleaning tables. She didn't get the job. Author Bill Swanson is quoted as having written, "Watch out for people who have a situational value system, who can turn the charm on and off depending on the status of the person they are interacting with." Related to this observation, Steve Odland of Office Depot has been quoted as saying,"People with situational values have situational ethics, and those are people to be avoided."

QUESTIONS FOR DISCUSSION

1. Is character an essential ingredient in ethical leadership? Is it especially important in managers? In leadership, especially among CEOs, is character important? Why?

2. Do you agree with the Waiter Rule? Does it provide useful insights into who might be an ethical or unethical leader? Should corporate boards consider character when hiring someone for the top position?

3. Is using the Waiter Rule too simplistic a guideline for hiring people in important positions such as CEO?