Last week I participated in a small conference of executives and scholars at NYU on the interplay of law and voluntary initiative in setting the tone in business.
The panelists all hailed from large professional services firms, and there wasn't much disagreement in the group about the best way forward: to curb the excess and malfeasance that roiled markets in the last decade, from Enron to the London Whale to the LIBOR scandal, the speakers all thought "tone at the top" matters. Education and regular training of employees are key--and pay more attention to selection to begin with to "root out the bad apples." Finally, in a world of radical transparency, nothing will be secret for very long, so it's best to move fast to get ahead of the problem--come clean when the chips fall.
The only real heat in the discussion came from one participant who said this just isn't good enough--heads have to roll. Judging by the response of others, this was a distinctly minority view. Few people in the room were willing to tie the costs of the mortgage meltdown back to CEOs of major banks--or if they were, they didn't want to say so publicly. Claw back ill-gotten gains? Absolutely. Even consider pay incentives to reward the "right values" if you can figure out a way to measure good behavior--but no one demanded that those at the top resign.
Contrast this attitude--prevailing in board rooms and classrooms--with events in South Korea, where a ferry accident has left a community bereft. The analysis of what went wrong when the ferry was swamped and so many young lives lost will continue to claim headlines for months and maybe years, but the heads are already rolling. Last week, a school vice-principal along for the outing with 300 of his students took his own life. The crew of the ship is under arrest. And now, the Prime Minister of the country has resigned.
In Asia, taking responsibility at the very top for a situation gone bad is a point of honor. Here, we spend unlimited resources on public commissions and private investigations aimed at assigning blame close to the action. There is a lot of attention paid to what the head dude knew when--but absent a smoking gun, the leader lives on to rule another day. This is a cultural difference in the East I don't truly understand but find refreshing. It reinforces societal values of accountability and taking responsibility for one's actions. Suffice it to say, Chris Christie would no longer be in office if the George Washington Bridge were located in Seoul.
Given our celebration of leaders in the West, one would think it impossible to survive when things go horribly wrong. We pay executives enormous amounts of money, presumably because they contribute more than anyone else to the performance of the enterprise. When the actions of the company come at the expense of the taxpayers and stockholders, why don't we insist the CEO take the fall?
Further, the scale of a global bank, or a populous state, or large city, makes these enterprises practically ungovernable from the confines of the executive suite. After a change of Mayor, the buses and trains in NYC are still working (and the tulips are just as radiant this year under DeBlasio as they were under Bloomberg.) We survived an abrupt change of Pope and the Sistine Chapel celling didn't fall down. My ATM is still working after multiple changes of leadership at Citigroup. Barclays didn't fall apart when Bob Diamond was forced to resign. In short, life goes on. Large enterprises are designed to be resilient at the crux of change.
The importance the speakers at NYU placed on setting an ethical culture--so-called "tone at the top"--makes our reluctance to replace executives in times of crisis a curiosity. I am less interested in rooting out the bad apples, than in fundamental conversations about what constitutes success and health of the system. More "public executions" in crisis offers a fresh breeze to blow-- it's time for a spring cleaning.
Honor, South Korean style, may not avoid another man-made disaster, but it sends an important message: we expect a lot from our leaders; and when things go horribly wrong, there is a need to connect the bad apples to the health of the whole barrel. In a way, the Koreans are saying that leadership DOES matter - or at least it should.