Countering CEO Disengagement in the Age of TARP

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Vanishing Acts

The next sign of disengagement is a lack of visibility, conspicuous absences especially during times or in places that call for the CEO's attention. "I was working with a client company in Britain, and they thought one division was inviable," Jacobs recalls. "One of the people who was involved in trying to save the division went on an unrelated side trip. That was a very bad sign. The CEO who is committed to bringing an organization through difficult times has a high degree of visibility, being a role model and making sure his or her voice is heard within the organization."

Little signs, too, can mean a lot, according to Jacobs. If the CEO starts taking a bit longer to return phone calls or messages from anyone in the organization or isn't as quick to set up meetings as usual, it could mean he or she is looking around at other employment opportunities.

For those CEOs who prefer to remain in their jobs, however—while at the same time recognizing their own growing disengagement—there is much they can do to reinvigorate their own morale.

"CEOs need to go back to the front lines of their business," says Jacobs, "and see the people who are manufacturing the cars or bottling the fizzy drink at the plant, so they can remember who they're working for and why. That's very powerful."

Accepting Blame

A commitment to honesty on the part of the CEOs can bring about a morale-raising renewal of the trust between them and employees at all levels of the organization. Blanchard points to the U.S. President's willingness to accept blame as a good example. "Obama has already apologized three time times to the U.S. people. That's the first time I know of that happening since Kennedy," Blanchard says. "[Likewise], CEOs need to get real with their people."

Another route to reengagement: a better attitude toward feedback. Whether it's a factory worker complaining about poor working conditions or the board president announcing a proposal to reduce the CEO's salary, the CEO should respond by saying, "Tell me more. How might that help?" Blanchard suggests.

Of course, not all chief executives can be counted on to heal themselves. It's the board's job to counsel the CEOs and guide and teach them, particularly when they see leaders exhibiting another dangerous type of disengagement: an unwillingness to take chances in order to stimulate stagnant business.

"CEOs should not be so paralyzed by the pressures society is putting on them today that they don't take risks in their roles as managers," says George Davis, a Boston-based partner of the executive recruiting firm Egon Zehnder International. "Good engaged CEOs and boards know how to gauge the risks and opportunities."

"Boards need to think about how to encourage senior leaders to take well-thought-out risks," says Brian Kropp, senior director for the human resources practice at the CEB. "And they should look at whether CEOs are making the right decisions—not necessarily whether those decisions are getting results [right away]."

In addition to encouraging the CEO to take well-thought-out risks, the board may also want to hire an executive coach. "Coaches can engage CEOs by unlocking their blind spots," says Jacobs.

A Measure of Success

And one way or another, boards have to let their CEOs know that they don't subscribe to the negative generalizations made about chief execs because of the financial crisis.

"Pitchfork populism has gone too far," says Davis. "The public is painting the CEO population with too broad a brush. A lot of good CEOs are underappreciated."

Even when economic necessity compels the board to reduce some component of compensation—salary, bonus, or stock and stock options—that they award the CEO, the board should know it won't necessarily disengage the CEO if they handle it correctly.

"If you earn $50 million instead of $70 million, does it really make a difference?" says Jacobs. "Does more money mean more, or is it more important that the CEO feel engaged?"

Cohen believes most CEOs want large compensation packages not because they're greedy for more money but because it represents a measure of their success. "If CEOs believe in their own talent, they're less likely to become demoralized and worried about compensation," he says.

Of course, it wouldn't hurt if the general public's image of CEOs could somehow be rehabbed, says Meyer: "Many people have the wrong image of CEOs, that they're flying in corporate jets and are in the lap of luxury. The reality is these people are in the hot seat, working strenuously to turn their companies around."

Click here to view a slide show of top execs who received a raise or reduction this year.

Rebecca Reisner is an editor at BusinessWeek.com .