03/19/2009 05:12 am ET | Updated May 25, 2011

Antitrust Suits Kill Enterprises

There he is, the CEO -- expensive suit, commanding smile, persuasive communicator, compelling story -- standing in front of the room, imploring our continued support. The media are wrong, we are told. We will rise again. In fact, we will be bigger and more profitable than before. We will be the "last firm standing." We are asked to wear tokens and symbols of our undying loyalty to the cause.

We see him again, this time on TV. Interviewed by a Cable TV News maven, the response is the same. The industry is facing huge headwinds, but our company will be fine. Yes, it is true we have borrowed to the limits of our credit. However, our incomparable leadership, unmatched business model and "valued-employees" will save the day. We have come through tougher challenges.

But we know the truth. We listen to the rhetoric, but the reality is far different. Something inside has died. This distortion proves what we have long known -- the employees are not valued at all. We are pawns in a larger game. The motivations at the top are not as stated, not meant to benefit our various constituents -- shareholders, employees and communities. They are selfish and driven by greed and meant only to satisfy the insatiable lust for wealth of the few at the top. Our belief system has now been shattered by The Antitrust Suit.

There was a time when people would have walked through the gates of hell for this individual. But the veil of this Wizard has been pierced. Walk behind the curtain. There isn't much there -- all smoke, mirrors, and a litany of "trust me's" and "it will be fines."

In a fit of desperation, we are told by the Antitrust Suit to stick with him, and we will make millions. We are told that those who have done so before, are wealthy now. I'm sad to sense that people still believe him. Over time, all realize the truth. It is over. It is done.

Credibility Lost

If I were to pick the one characteristic essential to leadership it would be credibility, meaning that the leader says what he is going to do, and does it. The leader keeps his promises.

Credibility is the soul of leadership. Credibility determines one's perceived ability to lead. Credibility comes from the integrity that causes others to place their trust in the leader. Integrity involves a certain reliability that enables followers to know that the leader will, within reasonable boundaries, be predictable. A leader who is unpredictable will soon lose followers.

A major reason why so many executives, managers, and supervisors fail in their leadership responsibilities is that they lose credibility, either in a dramatic event or in a series of damaging actions, by putting their interests above the interests of their constituents. One executive put it well: "People don't give you their trust; they only lend it to you."

An Oft-Told Tale

I wish the above tale were but of one lone institution. Alas, it is a tale about many.

Half a decade ago, the nation was shocked when award-winning "innovator" Enron turned out to be little more than a cash-shredding pyramid scheme. The crucial failing for investors was Enron's use of opaque, "mark-to-market" accounting. The problem surfaces when the market is uncertain or difficult to assess, and so assets are marked to a model, often based on generous assumptions.

In the end, we learned that Enron's accounting was "mark-to-fairy-tale", with the company booking enormous gains from assumed future profits on schemes that sounded great, but had little chance of producing anything besides headlines. The misbehavior of Enron's Ken Lay and WorldCom's Bernie Ebbers, gave us our many sweeping reforms.

Why didn't we learn our lessons about fantasy accounting after Enron? The Enron scandal supposedly ushered in an era of corporate responsibility and accountability. We all thought that it would happen, but it didn't. In fact, things actually got worse. Last year's version, the implosion of real estate, got downright ugly. Alas, this dream's "income" wasn't actually matched by real cash flows, just bank loans -- this Enron-like "income" was all hot air.

Many stocks have been decimated. The losses at those companies most directly victimized by their own housing-bubble ineptitude -- such as Bear Stearns and Fannie Mae -- are easy to understand. But, the losses extend far beyond that. These tales represent corporate culture (at its worst). And leave us with chills down our spines at the horror of the deceit and arrogance.
Indeed, we have now discovered many companies built on deceit, fraud, power, and greed.

Dick Thornburgh, examiner in the WorldCom bankruptcy proceedings, says companies aren't doing enough to promote accountability, transparency and compliance -- responsibilities that usually fall on corporate directors, in-house and outside counsel, and internal and external auditors. "Had the gatekeepers of Enron, and WorldCom been more effective, shareholders would not have suffered the huge losses,"

After such scandals as Enron and WorldCom, Congress hastily passed the Sarbanes-Oxley Act (SOX) to protect U.S. capital markets and shareholders. "While SOX may have increased investor confidence in the short-term, ongoing compliance with its requirements, as well as the heavy fines imposed by the SEC, have proved extremely expensive for some companies," said Michael Missal, lead counsel to Thornburgh in the WorldCom case.

The past is often prologue. Confidence in the disciplines in our economy is at historic lows. Clearly, we still lack disciplined governance on accountability, transparency and compliance. Other examples abound:

• May 2008 marked the end for the 85-year-old financial powerhouse Bear Stearns. Problems appeared in July 2007, after two of the company's hedge funds imploded. After months of heavy write-downs due to the subprime mortgage crisis, rumors swirled. In March 2008, JP Morgan offered $2/share for the company and in late May the fifth-largest investment bank was no more.

• Arthur Andersen (1913 to 2002) spent decades as a leading accounting and consulting firm. Its downfall was its role as Enron's auditor. In 2002, the firm surrendered its licenses to practice as CPAs after being found guilty of criminal charges, resulting in the loss of 85,000 jobs.

• Remember E.F. Hutton? "When E.F. Hutton talks, people listen," chimed its slogan. Well, it seems people stopped listening when E.F. Hutton & Co. was caught check-kiting and money-laundering.

• The AIG and Lehman Brothers debacles still have people shaking their heads.
Malfeasant practices continue to choke our economic system. We deserve better--and we should demand it of ourselves, and of those in whom we place great trust and power.

Two decades ago, James Kouzes and Barry Posner reported that the most essential element in successful leadership was "honesty." Also in the top ten traits were "straightforward" and "fair-minded." Clearly, some CEO's did not get the memo.

What can we do to repair the eroding standards of leadership? We must turn up the heat on our leaders--and hold ourselves to the highest standards--out of faith that it's the right thing to do, not out of fear of legal consequences. Let us model leadership that exudes these qualities:
* The vision to spell out clearly what we will do for those who depend upon us.
* The drive to share that vision broadly with those who share a stake in our success.
* The courage to challenge the status quo, stimulate change, and to make decisions that move us forward, even in difficult times.
* The ability to inspire people to action, individually and in teams, to achieve our goals.
* The foresight to empower people to learn new skills and stretch their capabilities.
* The wisdom to listen, learn, and translate that knowledge into value-added performance.
* The willingness to recognize accomplishments and celebrate individual and team successes.
* The integrity to serve as a good example through actions that reinforce our basic values.

Implementing a new strategy requires a leader who can energize operations and inspire people. Such a leader must personify the organization's purpose, values, culture, and character; inspire commitment to the strategy and goals; and to secure the allegiances required to make any bold purpose succeed. Clearly, the best leaders evoke trust. They match their words with their deeds and keep their promises through thick and thin. They pass the true test of leadership -- translating their promises and commitments to consistent, purposeful action, often under fire (downturns and budget crises). Without such character and integrity, an organization is "built to fail" not "built to last." As Edward R. Murrow said: "To be persuasive, we must be believable; to be believable, we must be credible; to be credible, we must be truthful."

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Michael G. Winston has worked for almost three decades as a business leader, change agent, strategist and leadership development officer for five esteemed Fortune 50 companies. He is an expert on change, innovation, leadership and organization integration. Please visit Michael at