How CEOs Would Handle Rove


By Francesca Di Meglio Much has been made of the fact that George W. Bush is the first U.S. President to hold an MBA (Harvard Business School, class of '75). So how's this for a B-school management problem: You're the CEO. One of your most trusted and powerful subordinates has been implicated in an internal probe of leaking highly sensitive corporate secrets to the media.

This isn't culled from the textbooks: Bush's right-hand man, White House deputy chief of staff Karl Rove, has been publicly identified as someone who talked to a reporter about a CIA agent. The leak of that covert agent's identity is now the focus of a Special Prosecutor's criminal probe. After the White House and Rove initially claimed the latter had no involvement in the episode, the President's aide now says through his lawyer that he did talk to one reporter about the CIA agent but never revealed her identity.

NIXON ADMINISTRATION COMPARISONS. Perhaps it's time for the President to return to some crisis-management lessons he learned in B-school. Already, the White House appears to be breaking a cardinal rule, some B-school experts say. For starters, top management should find out exactly what happened and disclose as much information as possible, says Michael Useem, director of the Center for Leadership & Change Management at the Wharton School at the University of Pennsylvania in Philadelphia.

The idea is to get all damaging evidence out as quickly as possible, so the public -- and especially the media -- can parse the details and move on. It's what the Clinton White House tried to do with the pesky Whitewater scandal, with limited success.

And it's what the Reagan White House did in trying to get all the details of the Iran-contra scandal out when the story broke. Yes, Congress later held lengthy dramatic hearings on Iran-contra. But most people had made up their minds long before lawmakers got into the act, and the scandal's damage to Reagan and the White House was largely contained.

So far, the Bush White House has been unfavorably compared to the Nixon White House in its refusal to discuss any particulars of Rove's involvement. Their reasoning from White House press secretary Scott McClellan: The Administration can't comment on an ongoing Justice Dept. investigation. The White House press corps has pushed for more information, comparing this approach to the "stonewalling" during the Watergate scandal.

"BUSH'S BRAIN." Perhaps the President should revisit the case of drugmaker McNeil Consumer Products, a subsidiary of Johnson & Johnson (JNJ), which successfully dealt with a Tylenol product-tampering scandal. In 1982, when seven people in Chicago died after ingesting extra-strength Tylenol laced with cyanide, the company was quickly open and honest with a terrified public.

Business profs say it remains the textbook example of how to get through a scandal the right way -- by being forthright, says Benjamin Hermalin, the Willis H. Booth professor of banking and finance at the Haas School of Business at the University of California, Berkeley.

The President's other option as chief executive -- and the one he appears to be choosing for now -- is to stay mum in the hopes that the controversy will blow over when the Special Prosecutor's report is completed. After all, Rove is among Bush's oldest and most trusted advisors. He has been called "Bush's brain." The two men can reportedly finish each other's sentences.

FAST ACTION NEEDED? But the professors warn that although this can be a savvy move sometimes for CEOs, Bush is vulnerable because he has long made it clear he detests unauthorized information leaks from his Administration. In fact, the White House is on record as saying it would fire anyone directly associated with leaking the identity of the CIA operative.

In this instance, the less the President and his staff say, the harder the White House press corps will bore in on the story, says Robert J. Bies, management professor at the McDonough School of Business at Georgetown University in Washington, D.C.

What the White House can say is limited, given that the investigation continues. But some experts suggest that the President might want to take action now, explain what he thinks went wrong, ask the public for forgiveness, and even ask for Rove's resignation, says Austan Goolsbee, economics professor at the University of Chicago Graduate School of Business and a senior research fellow at the American Bar Foundation, a nonprofit legal research outfit.

That approach presumes that Rove should go now, even if he has done nothing illegal or even wrong. And Bush is legendary for his loyalty to his staff. But the question is whether the Presidency suffers bigger losses if Rove -- architect of Bush's two election wins -- becomes a political liability and stays.

"DON'T MESS WITH MY FRIENDS." It's a tough management call. Anyway you slice it, the facts surrounding the outing of Valerie Plame, the CIA operative in question, will be difficult to verify, most legal experts agree (see BW Online, 7/29/04, "Iraq and Niger: A Twisted, Tangled Tale"). Determining whether Rove knowingly revealed a CIA agent's identity -- thus breaking the law -- will be a difficult legal case to prove. The targets and strategies of the Special Prosecutor probe have been cloaked in mystery, so it's still impossible to say what the outcome will be.

Yet in the White House, as in corporate America, sometimes perception counts for as much as reality. Why not a moratorium on Rove's access to privileged or confidential information, suggests Jeffrey Sonnenfeld, founder of the Chief Executive Leadership Institute at the Yale School of Management in New Haven, Conn. This would show the American people that Bush is sensitive to public safety concerns in a post September 11 world.

As it stands, Bush is standing by his pal, making sure that Rove is seen walking beside him in photo-ops. But Bush should remember that there's no room for friends at the top. "'Don't mess with my friends,' is what a mob boss says," cautions Sonnenfeld. "We're not watching The Sopranos. This is The White House."

SPECIAL PRESIDENTIAL TOOLS. As President Nixon discovered 31 years ago and plenty of influential CEOs and powerbrokers have learned since, sometimes the perception of a cover-up can be as damaging as the facts at issue. The Rove controversy carries the added risk of dragging down White House morale as the Administration prepares to name a replacement for Supreme Court Justice Sandra Day O'Connor. Winning Senate confirmation of the nominee may be the defining moment of Bush's second term. "Any beleaguered CEO needs the support of employees to weather these kinds of storms," says Bies.

Still, not everyone contacted for this article agrees that Bush needs a B-school refresher course right now. The rules of corporate crisis management don't apply well to political leaders, says Irv Schenkler, co-author of The Guide to Media Relations (Prentice Hall, 2003) and director of the management communications program at the Leonard N. Stern School of Business at New York University.

He points out that CEOs don't have the tools available to Commanders-in-Chief, who are also leaders of political parties. Presidents have immediate access to polling to determine the impact and reward of disclosing information, political supporters who can speak on their behalf, and the abilities to impose political pressure on detractors as well as create other White House news every day to shift the headlines away from the Rove controversy. CEOs don't enjoy such perquisites.

But most experts -- in business and politics -- agree. Dusting off his old primer from Crisis Management 101 certainly couldn't hurt Bush right now.

Di Meglio is a writer for BusinessWeek Online


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