Jeffrey Sonnenfeld: Governance by Cliché, or Judgment?

Under increasing pressure when it comes to CEOs, boards too often either circle the wagons or pull the trigger rather than take considered action

by Jeffrey Sonnenfeld

Some corporate boards miss the signals that it's time to make a change; others act too hastily. And there are boards that live by the Tammy Wynette maxim to "stand by your man." The sudden leadership change at JetBlue (JBLU), investor activist Carl Icahn's losing bid for a seat on the Motorola (MOT) board, and failed challenge to chief executive officer Ed Zander provided compelling drama last week. Motorola's owners happily endorsed their current CEO's efforts to reposition the firm (something that the board didn't do with Zander's predecessor) while Jet Blue's board denied their founder that opportunity.

Just a week earlier, BP's (BP) board had displayed a different methodology by circling the wagons around its imperiled leader. For far too long BP's board failed to notice that the responses of its former CEO, Lord Browne, to massive environmental and safety disasters as well as to market-manipulation scandals did not jibe with BP's widely promoted corporate principles. In recent years, troubled boards, such as at Morgan Stanley's (MS) during Phil Purcell's reign, Computer Associates' (CA) under Sanjay Kumar, Home Depot's (HD) under Bob Nardelli, and of course Tyco's (TYC) under Dennis Kozlowski, also showed remarkable neglect.

While these situations differ greatly from each other, they all highlight the importance of a board taking appropriate action at the appropriate time. To avoid being seen as acting too hastily, a board can make the wrong choice in supporting a CEO who should be jettisoned. However, just as dangerous is the premature dismissal of a CEO so a board can tell itself that it is governing properly.

Quick Action

JetBlue's maverick founder, David Neeleman, the very personification of the airline, built a culture that was the envy of all in the airline business, including Herb Kelleher, the boss who fired Neeleman a decade earlier at Southwest Airlines (LUV).

Spurred by that earlier failure, Neeleman was able to lead competently and courageously during times of adversity, including the grounding of JetBlue's fleet for several days in February because of bad weather. Neeleman quickly pushed the company to diagnose and fix the operational problems, take preventive steps, offer reparations to inconvenienced passengers, and even take a leadership role in customer service in the airline industry with Jet Blue's "passenger bill of rights."

Even more importantly, Neeleman showed true leadership by not passing the blame or finger-pointing, as former HP (HPQ) CEO Carly Fiorina was wont to do. Neeleman took personal responsibility, apologized publicly, and showed accountability while getting the problems fixed. His actions are in stark contrast to the cowardly silence consistently maintained by BP's Lord Browne following far more serious business and human catastrophes.

Entrepreneurs and Great Leaders

Neeleman says he has been criticized for taking "the system failures too personally." The same cannot be said of the rogue CEOs of the early part of this decade, who took no personal responsibility.