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Best Business Books 2004: Leadership

Sex, Shame, and Shareholder Value

We’ve been forced to go a bit afield in choosing this year’s best leadership books. In addition to the usual how-to manuals — two of which provide practical guidance for anyone interested in business — we’ve included two biographies, both abounding with lessons for executives. We’ve also included a work of fiction, and even one journalist’s salacious screed about corporate malfeasance. Given the observed dearth of leadership in the public and private sectors, it is not surprising that the authors of this year’s list of standouts focus on the mistakes leaders make, why they fail so often, and what they need to do to become both more effective and more ethical.

Intel Chairman Andy Grove, surveying the wreckage wrought by the business scandals of the first years of the 21st century, confessed that, “These days I’m ashamed I’m part of corporate America.” Three of the four business books we review here cite Tyco’s Dennis Kozlowski as their poster boy for leadership misbehavior. The implicit conclusion of the authors is that the “take charge” leadership treatises published in the late 1980s and early 1990s didn’t generate the right kind of behavior, so now they say it’s “back to basics.”

Authentic Leadership
During the 1990s, CEOs of most American companies focused on the bottom line with the single goal of creating shareholder wealth. The idea was for CEOs to look tough, act tough, and talk tough. Many of them would not have been caught dead discussing soft stuff like ethics, values, openness, or corporate responsibilities to customers, employees, and host communities. When the Enron/Andersen scandal broke, followed by a tidal wave of revelations of similar corporate crimes, the initial reactions among American business leaders ranged from deafening silence to “it’s just a few bad apples.” Not many spoke out in condemnation, and even fewer suggested the need for better executive behavior.

There is something refreshingly old-fashioned, therefore, about Bill George’s Authentic Leadership: Rediscovering the Secrets to Creating Lasting Value (Jossey-Bass, 2003). During the 10 years George was CEO of the medical technology company Medtronic Inc., he practiced a philosophy in which “shareholders come third” — the belief that investors can benefit only as the result of efforts of empowered employees who effectively serve customers. To that end, George promulgated such business values as producing top-quality products, treating employees with respect, and acting with integrity in dealing with all his company’s stakeholders. The bottom line: Medtronic created $60 billion in value on his watch, and investors saw shares appreciate at a compound rate of 32 percent a year.

He says the secret to his stewardship was the practice of “authentic leadership,” the traditional approach to running companies that had been the hallmark of such now nearly forgotten CEOs as Max DePree (Herman Miller), Jim Burke (Johnson & Johnson), David Packard (Hewlett-Packard), Ken Dayton (Dayton Hudson), and J. Irwin Miller (Cummins Engine). These are leaders, in George’s words, who were “committed to stewardship of their assets and to making a difference in the lives of the people they serve,” leaders who had “a deep sense of purpose” and who recognized “the importance of their service to society.”

In fact, unless young leaders are willing to commit themselves to such higher corporate purposes, George believes they shouldn’t bother to enter the profession of business. And he offers eight questions they need to ask themselves before making that commitment, including “How do I balance the conflicting needs of my customers and my employees with the requirement to make bottom-line numbers?” Importantly, he says there is no inherent contradiction between making one’s numbers (he did so himself 55 out of 56 quarters) and demonstrating ethical leadership; instead, he argues that leaders will not find the way to realize those two ends simultaneously if they don’t first establish doing so as their goal.

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