Can CEOs Be Super Heroes? - Yale School of Management · range of issues—including debt...

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New York Stock Exchange | June 4 - 5, 2013

Can CEOs Be Super Heroes?Do We Expect Too Much from the Boss?

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Table of Contents

Yale CEO SummitJune 4-5, 2013 | New York Stock Exchange

Can CEOs Be Super Heroes? Do We Expect Too Much from the Boss?

PaNEliSTSMichael a. leven, President & COO, las Vegas Sands CorporationGen. Peter Chiarelli (Ret.), 32nd Vice Chief of Staff, U.S. army6HL½�*KDVHPL, Chairman & CEO, Rockwood HoldingsFrancisco luzón, Former Executive Vice President, Banco SantanderMichael H. Posner, assistant Secretary of State (2009-2013)Patricia F. Russo, Former CEO, alcatel-lucentTom Tait, Mayor, City of anaheim, Californialynn Tilton, CEO, Patriarch PartnersKeith E. Williams, President & CEO, Underwriters laboratoriesR. James Woolsey, Director, Central intelligence (1993-1995)

RESPONDENTSDavid D. Blakemore, Business President, The Dow Chemical CompanyBrian G. Bowler, Retired ambassador to the United Nations, Republic of MalawiWendy Hayler, Vice President Global aviation Security, UPSSimon C. Hemus, President & COO, Tupperware BrandsDave Muscatel, CEO, Rand McNallyS. Prakas Sethi, Professor, Baruch College/CUNYBruce Speechley, Travel & Transportation Services leader, iBM

Covering the Map: How Much of the Globe to Visit — How to Have Impact When in Town 7

The CEO as Statesman: Your Voice in Public Policy 10PaNEliSTSashton B. Carter, Deputy Secretary of DefenseRichard J. Berry, Mayor, City of albuquerque, New MexicoWilliam H. Donaldson, 27th Chairman, U.S. Securities and Exchange CommissionR. David Edelman, Senior advisor for internet, innovation & Privacy, The White HouseRichard B. Hoey, Chief Economist, BNY MellonRobert D. Hormats, U.S. Under Secretary of StateStuart a. Miller, President & CEO, lennar CorporationDuncan Niederauer��&KLHI�([HFXWLYH�2I½FHU��1<6(�(XURQH[WJ. Stapleton Roy, Former U.S. ambassador to China, Singapore, and indonesiaDavid M. Walker, 7th Comptroller General of the U.S.Robert Wolf, Former Chairman, UBS americas

RESPONDENTSZhiwu Chen, Yale School of ManagementZack Cooper, Yale UniversityJoele Frank, Managing Partner, Joele Frank, Wilkinson Brimmer KatcherHarry Greenspun, Senior advisor, Health Care Transformation, Deloitte Center for Health SolutionsChristopher Shays, Member of Congress (1987-2009), State of Connecticut

Key Themes from June 2013 CEO Summit 2

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Building Up or Breaking Up: When Is Bigger Better; When is Smaller Beautiful? 14

The Time Needed for Innovation and Impact: Enough Rope to Climb Out, or for a Hanging? 12PaNEliSTSJohn C. Bogle, Founder, The Vanguard GroupWalter W. Buckley iii, Chairman & CEO, iCGPeter J. Devlin, President, Fish & RichardsonRobert E. Diamond Jr., Former President & CEO, Barclays PlCSean J. Egan, Managing Director, Egan-Jones Ratings Co.Jim Gray, Mayor, City of lexington, KentuckyFred Hassan, Chairman, avon ProductsStephen W. Hasselmann, North america Strategy leader, iBMMichael F. Holland, Chairman, Holland & CompanyRay lane, Former Chairman, Hewlett-Packard Company; Managing Partner, Kleiner PerkinsNell Minow, Co-Founder, GMi RatingsGary P. Naftalis, Partner and Firm Co-Chair, Kramer levin Naftalis & FrankelWilliam R. Nuti, Chairman & CEO, NCR CorporationJed S. Rakoff, Judge, Southern District of New York, U.S. District CourtBenjamin a. Walter, CEO, Hiscox USa

RESPONDENTSardeshir Contractor, CEO, Kiran EnergyDebra Crew, President, americas Beverages, PepsiCoJohn H. Eyler, Former Chairman & CEO, Toys “R” UsFrederick Frank, Vice Chairman, Burrill & CompanyHarvey J. Goldschmid, Commissioner (2002-2005), U.S. Securities & Exchange CommissionJonathan R. Macey, Professor of Corporate law, Yale law SchoolSteve Papa, Founder, EndecaWilliam D. Perez, Former President & CEO, Wm. Wrigley Jr. Company

PaNEliSTSStephen a. Schwarzman, Chairman & CEO, The Blackstone GroupThomas W. Horton, Chairman & CEO, american airlinesJohn J. legere, President & CEO, T-Mobile USaSteve Miller, Chairman, aiGTodd R. Peters, CEO, GENCONicholas T. Pinchuk, Chairman, President & CEO, Snap-on incorporatedGarry O. Ridge, President & CEO, WD-40 CompanyFrederick O. Terrell, Vice Chairman, Credit Suisse

RESPONDENTSEdward J. De la Rosa, President, De la Rosa & CompanyWilliam H. Fuessler, Financial Services Strategy & Transformation leader, iBMBarry M. Gosin, CEO, Newmark Grubb Knight FrankWilliam P. Putsis, Professor, Kenan-Flagler Business School, University of North CarolinaJohn a. Quelch, Professor, Harvard Business SchoolMary C. Tanner, Senior Managing Director, Burrill & Company

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Staying Current on Customers and Your Business While Living Your Life: What to Read; When to Breathe? 17PaNEliSTSJames D. Wolfensohn, President 1995-2005, World Bank GroupSaul J. Berman, Global Strategy Consulting leader, iBMKelly Evans, Co-anchor, Squawk on the Street, CNBCGreg Fischer, Mayor, City of louisville, KentuckySteven H. Grapstein, CEO, a/X armani ExchangeSly James, Mayor, City of Kansas City, MissouriJoseph J. lhota, Former Chairman & CEO, Metropolitan Transportation authority (MTa)Mark Penn, Corporate Vice President, Microsoft Corporation; Former CEO, Burson-MarstellerCarl Quintanilla, Co-anchor, Squawk on the Street, CNBC Stephanie Rawlings-Blake, Mayor, City of Baltimore, MarylandRobert B. Simonds, Film Producer, The Robert Simonds CompanyScott Smith, Mayor, City of Mesa, arizona

RESPONDENTSElisabeth DeMarse, Chairman, President & CEO, TheStreet, inc.James S. Denton, Publisher & Editor, World affairsStephen a. Greyser, Harvard Business SchoolThomas a. Kolditz, Professor, Yale School of ManagementRenée Mauborgne, Professor & Distinguished Fellow, iNSEaDDavid W. Miller, Director, Faith & Work initiative, Princeton UniversityDan Raviv, National Correspondent, CBS Radio

Legend in Leadership Award: James D. Wolfensohn, President 1995-2005, World Bank 20PRESENTERWilliam H. Donaldson, 27th Chairman, U.S. Securities and Exchange Commission




The stage of the industry in a particular market.

The understanding of the local market, including the culture.

The skills, cost, and productivity of the workforce.

The proximity of customers and the importance of being located near customers.

The ability to form positive, stable, long-term relationships with unions and government. Also, whether the government would provide support, such as infrastructure and tax relief, or if the government might prove a barrier.

The amount of innovation possible in a given market, due to the education and creativity of the workforce and the ability to protect IP.

While often challenging and frustrating, it is important that business make its voice heard in Washington, D.C. Participants expressed frustration with legislation and regulation, mentioning Dodd-Frank and the Affordable Care Act, which are seen as imposing significant costs on business. Some criticized President Obama for acting like a legislator, not a leader, or for being the CEO of just one party, not the nation. While a few participants defended the president’s leadership and economic policies, others see the coun-try’s slow but ongoing recovery as taking place despite these policies, not because of them. (Mayors noted that elected officials are not CEOs; they cannot make unilateral decisions and cannot fire those who disagree with them. Elected officials must work collaboratively with multiple stakeholders to build support, which is very differ-ent from the role of a CEO. Several mayors encouraged the CEOs in attendance to serve at some point as an elected official, which is extremely difficult but highly rewarding.)

In a real-time poll of CELI participants, 71% felt that the voice of business is not being heard in Washington, and 77% felt lost or over-whelmed when trying to influence government. And, while seeing the need for collective action among the business community on a wide range of issues—including debt reduction, tax reform, trade policies, and health care—the business community and particular industries often have difficulty aligning. Businesses are typically focused narrowly on their own self-interests and speak with their own voice.

Companies see opportunities in markets across the globe, and use numerous criteria in deciding which opportunities to pursue. Despite the relatively slow growth of the U.S. economy, many CEOs remain bullish on the U.S. and are investing in America. Reasons include relative stability, a generally business-friendly environment (compared to many other countries), proximity to established cus-tomers, prospects for future growth, a large and affluent population, protection of intellectual property, and an ability to form positive relationships with state and local leaders. Also, the ideas of “national interest” and revitalizing the manufacturing sector evoke passions.

Beyond the U.S., some business leaders see opportunities in Western Europe, with Germany and Spain mentioned. For particular indus-tries and opportunities, these countries have workers with the req-uisite skills, and those pursuing opportunities in these markets have had positive experiences building relationships with unions and the government. (Other participants were less positive about conditions in Europe, citing often inflexible unions and governments.)

Also, participants continue to see opportunities in Asia, particularly China and India, and in Latin America. However, protection of IP is a significant and growing issue when doing business in China, giving some business leaders pause.

In general, the criteria mentioned when assessing various markets include:

The time horizon being considered.

The relative opportunity and the associated risks.

The 72nd Yale CEO Leadership Summit, held on June 5 and 6, 2013, brought together business executives, federal government officials, mayors, investors, academ-ics, and heads of nonprofits and was led by Yale professor Jeffrey Sonnenfeld, the founder and president of the Chief Executive Leadership Institute. This Summit dealt with a wide range of topics including how companies decide which countries to enter, how CEOs and companies have their voices heard in the public debate, the similarities and differences between public officials and CEOs, how boards measure CEO performance, whether CEOs are heroes—and much more.

Key Themes from June 2013 CEO Summit

Edward Snyder and Jeffrey Sonnenfeld


In polling results, 79% of participants indicated that business trade associations do not fully represent their interests, which reflects businesses’ perceived need to “go it alone.”

Despite these frustrations, business leaders were in agreement about the need to participate in the political system to attempt to have their voice heard by policymakers. The general perspective was that poli-cymakers tend to be well intentioned, want to do the right thing, are overwhelmed by information, and often don’t understand the specific issues facing a particular industry. Therefore, it is incumbent on busi-ness leaders to be present to educate and inform policymakers. Failing to do so will result in decisions made without the input of business. (A Yale professor observed that business students are educated in ar-eas like finance, but not in how to shape government policies, which should perhaps be added to the curriculum.)

Current and former government officials encouraged business lead-ers to be strategic in whom they approach. A comment was shared that business leaders often want to speak just with the president or senators, but many other government officials can be important allies, including members of the House, regulators, and even local officials.

One government official noted that beyond specific regulations, it is important for the U.S. government to work with business to strengthen the entire system of market capitalism. It is not just U.S. companies competing against foreign companies (particularly from China); the U.S. market-based system is competing against countries with a government-based system. Therefore, America needs greater business/government cooperation.

Education is an area where business and local governments are collaborating. There is general agreement that for the U.S. to successfully compete requires a more educated workforce. This is in the best interests of companies and communities. Across the country there are many positive examples of companies that have worked at the local level on training and education programs to improve workers’ skills. Even more focus is needed on programs that involve career and technical education.

Boards require judgment and courage when assessing CEO performance. Several examples were shared of situations where boards made deci-sions about their CEO based on short-term political or media pres-sure, or based on relying too heavily on the simplistic criteria of proxy advisory firms. Too often boards have not demonstrated sound judg-ment and have failed to have the courage to make long-term decisions in opposition to the sensationalistic press. As a result, it can at times seem random when a CEO or chairman is dismissed.

In particular, participants focused on whether there should be a split of the chairman and CEO roles. Several participants supported the concept of a non-executive chairman who is focused on governance and oversight, with a CEO running the day-to-day business. Yet even most advocates of this idea would not mandate it.

The preference is for directors to be highly engaged and to make the best decision for the company, which might entail support for one individual serving in both roles. Specifically, the general view was that even with J.P. Morgan’s recent high-profile losses, the company under Jamie Dimon has performed exceptionally well and there was no reason for the board to strip Dimon of one of these posts. Partici-pants want directors who are engaged and make the most appropriate judgments for a particular company at a particular moment in time, not relying on a formula or mandated rules. And, they want chairmen and CEOs who are strong leaders.

From CEOs’ perspective, they don’t want directors who see their primary role as being auditors and monitors. CEOs want directors who understand the business, act as partners, and have a long-term perspective.

Companies can achieve success as public or private companies. Participants discussed the tradeoffs of being privately owned or pub-licly held. Leaders from privately owned companies see advantages with patient capital which can allow a company to think long term, take more risks, and focus on the business as opposed to constantly having to spend time and energy satisfying shareholders. These are particular advantages for smaller, younger companies.

However, leaders from public companies see advantages in access to capital, the discipline brought by demanding investors, and the ability to attract talent. Also, even at public companies, executives acknowledged that boards can be patient and have a long-term per-spective if management can articulate a compelling vision. What mat-ters most is not necessarily whether a company is public or private, but the people on the board and in management, and their vision, perspective, and capabilities.

While CEOs may not rise to the level of “super heroes” many are in fact heroes. One participant stated that CEOs are not heroes at all; that all indi-viduals have unique value that they contribute to an enterprise. But there may be more to the story. Research shows that leaders of corpo-rations and other major organizations are in fact different. In addition to having soaring ambitions they commonly engage in self-sacrifice. CEOs often have heroic stature as well as a heroic mission to create a lasting legacy. They have always been leaders and have aspired to leadership. Importantly, many successful leaders have persevered through a near-fatal derailment which served to make them stronger. CEOs are heroes who provide branding and a code of conduct for their organizations.

As one participant said, perhaps the proper term for a great leader isn’t “super hero” but being super humble, sacrificing for others and serving others first.




Covering the Map: How Much of the Globe to Visit – How to Have Impact When in Town

Despite problems with the U.S. economy, many companies—mainly foreign ones—still see great opportunity in the United States. A former government official from Africa said that the United States is still the greatest place on earth and remains the country that all other countries aspire to. The United States has the rule of law and civil liberties, and uses its power and wealth in places where policies are not working to make the rest of the world safe.

Beyond America’s democratic ideals, which are admired in other countries, the CEO of a global chemical company proclaimed the best place for his company to invest as the United States. He sees the U.S. as having a large, stable, and affluent population. The U.S. has a huge GDP, which even if only growing around 2%, is still significant. And despite comments from many business leaders about the level of regulation in the U.S., this leader sees the U.S. as having a business-friendly environment with IP protections.

While doing business in Europe comes with challenges, some business leaders see attractive opportunities there. The same chemical company CEO who sees attractive opportunities in the U.S. also sees opportunities in Europe, particularly Germany. This company has made acquisitions in Germany and has been im-pressed with the highly trained, productive workforce and the flexibility of the unions. During the recession, the German unions agreed to reduce their salaries by 20% to avoid layoffs. When the economy picked back up, it was much easier for this company to ramp up production. An executive from another chemical company sees opportunities in Spain.

OverviewTo grow their businesses, CEOs are looking at opportunities across the globe, and are considering numerous criteria in deciding where to invest and which opportunities to pursue. Criteria include the time horizon, the workforce, relationships with the government and unions, the relative opportunity, and the associated risks. Interest-ingly, despite the buzz about the fast growth in developing markets and the general view of stagnant economies in the developed markets, CEOs still see attractive opportunities in the United States and Europe where there are large markets, stability, IP protections, and economic growth, albeit modest.

ContextPanelists discussed how they are thinking about different regions and markets, and the criteria they use when considering whether or not to invest in a market.

Key TakeawaysThe context for global commerce is changing dramatically. As a backdrop for discussing which markets and opportunities to pursue and how to pursue them, a leading academic reminded at-tendees that three billion people in developing markets are joining the world economy at the same time that new technologies are disrupting established industries. These changes are putting tremendous pres-sure on the middle class in developed countries and on governments, which citizens expect to buffer these changes. As these changes are occurring, the U.S. economy has not worked as well as it once did and overall support for a market economy has decreased.

Key Themes SummaryDavid D. Blakemore, Business President, The Dow Chemical CompanyBrian G. Bowler, Retired ambassador to the United Nations, Republic of

MalawiWendy Hayler, Vice President, Global aviation Security, UPSSimon C. Hemus, President & COO, Tupperware BrandsDave Muscatel, CEO, Rand McNallyS. Prakas Sethi, Professor, Baruch College/CUNYBruce Speechley, Travel & Transportation Services leader, iBM

Michael a. leven, President & COO, las Vegas Sands CorporationGen. Peter Chiarelli (Ret.), 32nd Vice Chief of Staff, U.S. army6HL½�*KDVHPL, Chairman & CEO, Rockwood HoldingsFrancisco luzón, Former Executive Vice President, Banco SantanderMichael H. Posner, assistant Secretary of State (2009-2013)Patricia F. Russo, Former CEO, alcatel-lucentTom Tait, Mayor, City of anaheim, Californialynn Tilton, CEO, Patriarch PartnersKeith E. Williams, President & CEO, Underwriters laboratoriesR. James Woolsey, Director, Central intelligence (1993-1995)

Panelists Respondents


The president of a leading international gaming company also sees opportunity in Spain, which he acknowledged is a contrarian perspec-tive. For gaming, he sees an oversaturated U.S. market that is heavily regulated at the state level. In contrast, he sees strong unmet demand in Europe, a Spanish workforce that excels in providing hospitality and is hungry for jobs, and governmental support.

Not all business leaders shared such favorable views of doing busi-ness in Europe. The former CEO of a large global telecom company said that the ease or difficulty of dealing with European governments and unions is largely based on whether a company is growing and creating jobs, or restructuring and shedding jobs. In areas such as the automotive industry and manufacturing of telecom equipment, there is overcapacity in Europe and growth is coming from Asia. In Europe, this requires a contraction in capacity and reductions in the labor force, requiring that business leaders navigate somewhat adversarial political issues and inflexible unions. This is a different environment than when fast-growth companies are creating jobs.

“Managing in Europe can be a big

challenge. There are structural

issues and the workforce in not

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- Former CEO, large telecom company

When deciding which markets in which to invest, business leaders consider multiple factors. Some business leaders are focused on Asia or Latin America, while others see the best opportunities in the U.S. or Europe. In all situa-tions, business leaders offer thoughtful explanations for where they are investing. Key criteria include:

The time horizon being considered, with some executives looking for returns in the next few years, and others looking 15 or 30 years down the road.

The relative opportunity and associated risks. The U.S. may not be as dynamic as other markets, but it is seen as more stable and predictable, with lower risks.

The stage of an industry in a particular market. Industries that are mature in developed markets may have more upside growth potential in developing markets.

a company’s understanding of a market, including the culture. Even if a market is growing rapidly, if a company doesn’t under-stand it, the risk increases. Conversely, even if the conventional wisdom is to shy away from a market, if a company understands it well, it can take a contrarian view and invest there.

The skills, cost, and productivity of the workforce. Every panelist mentioned the capabilities of the workforce as a factor making a market an attractive investment.

The proximity of customers. One executive mentioned the desire to be close to customers in China and India as a driver for estab-lishing facilities there. A global company with customers in the U.S. cited that as a key reason for maintaining operations in the U.S. as opposed to moving them offshore.

Relationships with governments and unions. Several partici-pants stressed the importance of having positive, stable, long-term relationships with national and local governments, as well as with unions. Also a consideration is the willingness of the government to provide support, such as infrastructure and tax relief, or if the government will prove a barrier.

amount of innovation possible. Panelists noted that the amount of innovation differs by market, based on the education and cre-ativity of the workforce, the ability to protect IP, and the culture in a country.

%XVLQHVV�OHDGHUV�DQG�JRYHUQPHQW�RI½FLDOV�RIWHQ�KDYH�different perspectives on the role of government. One participant noted that in China, mayors also have the title of CEO and getting promoted depends on their ability to grow their local economy. As a result, local officials may offer various induce-ments. This happens in other countries, as well as in the U.S. on occasion, where a government may provide support such as targeted tax relief or infrastructure. Business leaders mentioned this govern-ment support and the overall attitude of the government as important in deciding where to locate and invest.

But a mayor from a major U.S. city sees the role of government some-what differently. He doesn’t see his role, or that of a city, as favoring individual companies or picking winners and losers. In addition, U.S. cities are already financially strapped, with too little money to currently

Michael leven

Patricia Russo


afford even basic needs, such as having enough police officers, let alone take steps to subsidize businesses. This mayor sees the role of government not as supporting particular businesses, but as creating an overall environment that is conducive for all businesses.

“The best thing for businesses in

America is for the government to

��ȱ�ȱ��ȱ��¢��ȱę��ǯȄ- Mayor of a large American city

leaders have different perspectives on the basic role of business.The CEO of a major conglomerate of many manufacturing companies has a mission of putting Americans back to work, creating jobs by bring-ing manufacturing back to the U.S., and making U.S. manufacturers competitive. She sees the U.S. as in trouble and is focused on how busi-ness can help the country.

A fellow CEO, who identified himself as a patriot who loves America, argued that business leaders have a responsibility to do what is best for their company and benefit shareholders in a globally competitive environment.

ȃ��ȱ��ȱ��ȱę��ȱ��ȱ��ǰȱ��ȱproductive places on the globe for

business.”

- President, major global company

lynn Tilton




OverviewDespite the often acrimonious relationship between business and government, they both need each other. Government needs business to drive economic growth; business needs government in order for a market-driven system to work.

This means that business leaders must play an active role in the politi-cal dialogue, educating politicians about specific issues and mak-ing sure the voice of business is heard. However, as each individual business leader and company wants its voice heard, the result can be a fractured business community with each participant focused on its own self interests instead of business speaking with one voice. Opti-mism was expressed that businesses can set aside their own short-term self interests to align on major long-term issues like fixing the national debt and tax reform.

ContextPanelists discussed the importance of business leaders participating in the political dialogue.

Key TakeawaysTo be successful, government needs business and business needs government.A senior government official said it is essential for the U.S. government to be proactive and pro-business. The government knows that the U.S.

economy is dependent upon business, and business support is needed for foreign policy and security. At the same time, business needs the support of government. Even though the U.S. is fundamentally a market-driven system, it is necessary to have an active government in order for this market-driven system to work.

Business leaders also need to recognize that in this global economy, American companies are not just competing against other companies, but entire systems are competing against other systems.

ȃ��ȱ��ȱ�� ȱ�¢��ǰȱnot just companies.”

- Senior government official

Business leaders must have a voice in the political dialogue.A former Congressman said that elected officials deal with so many different subjects, they are often ignorant about specific topics and how various decisions will affect key stakeholders, such as the busi-ness community. He said that political leaders actually want to hear from business executives to understand their perspective and to be educated.

However, the business community rarely speaks with one unified voice and most CELI participants (71%) don’t believe that the voice of business is being heard in the political debate.

The CEO as Statesman: Your Voice in Public Policy

Zhiwu Chen, Yale School of ManagementZack Cooper, Yale UniversityJoele Frank, Managing Partner, Joele Frank, Wilkinson Brimmer KatcherHarry Greenspun, Senior advisor, Health Care Transformation, Deloitte

Center for Health SolutionsChristopher Shays, Member of Congress (1987-2009), State of Connecticut

ashton B. Carter, Deputy Secretary of DefenseRichard J. Berry, Mayor, City of albuquerque, New MexicoWilliam H. Donaldson, 27th Chairman, U.S. Securities and Exchange

CommissionR. David Edelman, Senior advisor for internet, innovation & Privacy,

The White HouseRichard B. Hoey, Chief Economist, BNY MellonRobert D. Hormats, U.S. Under Secretary of StateStuart a. Miller, President & CEO, lennar CorporationDuncan Niederauer��&KLHI�([HFXWLYH�2I½FHU��1<6(�(XURQH[WJ. Stapleton Roy, Former U.S. ambassador to China, Singapore, and

indonesiaDavid M. Walker, 7th Comptroller General of the U.S.Robert Wolf, Former Chairman, UBS americas


Robert Hormats


There are many issues where business leaders can come together, speak with one voice, and attempt to shape policy.Several participants noted how frustrat-ing and acrimonious the legislative process now is. The narrow interest of a CEO and company in one area causes opposition to an entire piece of legislation if their specific area of interest isn’t addressed. With so many companies each having so many specific areas of interest, getting broad support among businesses for any legislation seems ex-tremely difficult. Also, businesses realize the permanence of any new legislation and the difficulty of ever revising it, making any legisla-tion viewed as extremely high stakes. So, even though many business leaders agree conceptually (and off the record) with major pieces of legislation such as Dodd Frank or the Affordable Care Act, if there is even a small area of disagreement, the executive is likely to oppose the entire legislation (when on the record).

One former government official called on business leaders to put aside their differences and align on those issues that could benefit America and all companies, such as fixing the debt, tax reform, trade policies, and regulatory policies. This individual said that “doing nothing is not an option” and urged CEOs to work together to pro-mote growth and innovation.

ȃ��ȱ��ȱ��ȱ�ȱ��¢ȱ��ȱ��ȱ�¢ȱ�¡��ȱ�¢ȱpromoting growth and

innovation. CEOs need

��ȱ��ȱ��ǰȱ��¢ȱ��ȱ��¢ǯȄ- Former government official

Other Important Pointsleverage your employees. A former politician said that in addition to CEOs dealing with politicians in a top-down manner, an effec-tive strategy is for companies to mobilize stakeholders—particu-larly employees—at a grassroots level. If a politician hears from a large number of employees in their district, they take notice.

Part of the reason that business isn’t heard is because there is not one uniform “voice of business.” Instead, each business advocates nar-rowly based on its own specific agenda and self interests. For politi-cians, the result is numerous different voices, resulting in confusion about where the business community really stands.

ȃ�¢��ǰȱ��ȱ��ǰȱ��ȱ��Ȭterm self interest have reached

epidemic proportions in D.C.”

- Former government official

A business leader said that not showing up in Washington D.C. and not participating in the political debate is not a viable option for business leaders. Even though there are many different interests and voices, businesses that don’t participate in the process will be left out. By adding their voices to the political debate, CEOs help educate poli-ticians; they bring the perspective of consumers and of the market. Regulators and politicians, who usually try to do the right thing in very complicated situations, listen to these many voices and create an imperfect knitting together of lots of different ideas and perspectives.

“You have to show

��ȱ��ȱ��ȱ¢��ȱ��ȱ��ǯȱ��ȱ¢��ȱ��ȱ��Ȃ�ȱ��ǰȱ¢��ȱ��ȱ��ȱnot understood or

considered.”

- CEO of a major corporation

One participant stressed the importance of being highly strategic in selecting whom to speak with. Typically, CEOs want to speak with senators, yet there are other individuals, including members of Con-gress, their staffs, and regulators who can also be extremely important for specific issues.

David Walker.

Duncan Niederauer

Stuart Miller




OverviewAs industries face disruption, innovation is essential in order to sur-vive. As a country, innovation is needed in renovating the infrastruc-ture, and in the educational system to build a capable workforce. Such innovation requires collaboration between government and business in entirely new ways.

As CEOs lead their organizations and industries, there will be times when they will face inevitable criticism. In such circumstances, the best approach is to be proactive and in front of the issue while avoid-ing “triumphalism.”

ContextPanelists discussed innovation and impact, as well as the methods used by elected officials to secure support and the most effect ap-proach of CEOs in dealing with controversy.

Key TakeawaysTremendous innovation will take place in the media industry.A leading filmmaker said that consumers are consuming content in entirely new ways, causing major disruptions in the media business, and causing all players in the industry to completely rethink their business model.

The major movie producers are making fewer, bigger budget films,

resulting in the emergence of smaller boutiques. As consumers ac-cess content in new ways, new distribution channels are emerging, including through mobile devices, sites like YouTube, and even Xbox and PlayStation devices. The changes in the media industry have just begun and tremendous innovation will take place in all aspects of the industry.

There are areas where business and government can work together for impact, particularly education.One area where the government and business can work together is the creation of an infrastructure bank, which has some bipartisan support. Every $1 billion loaned by an infrastructure bank creates 25,000 new jobs and every dollar loaned has a 1.6 times multiplier effect on the economy.

Another area where government and business must work together is on education. There is currently a huge gap between the workforce skills needed by employers and the capabilities being provided by the educational system.

There are examples of successful public-private partnerships where businesses have collaborated with other stakeholders on a local basis. Business has communicated the skills that are needed and has pro-vided support for education in the form of money and resources.

The Time Needed for Innovation and Impact: Enough Rope to Climb Out, or for a Hanging?

ardeshir Contractor, CEO, Kiran EnergyDebra Crew, President, americas Beverages, PepsiCoJohn H. Eyler, Former Chairman & CEO, Toys “R” UsFrederick Frank, Vice Chairman, Burrill & CompanyHarvey J. Goldschmid, Commissioner (2002-2005), U.S. Securities &

Exchange CommissionJonathan R. Macey, Professor of Corporate law, Yale law SchoolSteve Papa, Founder, EndecaWilliam D. Perez, Former President & CEO, Wm. Wrigley Jr. Company

John C. Bogle, Founder, The Vanguard GroupWalter W. Buckley iii, Chairman & CEO, iCGPeter J. Devlin, President, Fish & RichardsonRobert E. Diamond Jr., Former President & CEO, Barclays PlCSean J. Egan, Managing Director, Egan-Jones Ratings Co.Jim Gray, Mayor, City of lexington, KentuckyFred Hassan, Chairman, avon ProductsStephen W. Hasselmann, North america Strategy leader, iBMMichael F. Holland, Chairman, Holland & CompanyRay lane, Former Chairman, Hewlett-Packard Company; Managing

Partner, Kleiner PerkinsNell Minow, Co-Founder, GMi RatingsGary P. Naftalis, Partner and Firm Co-Chair, Kramer levin Naftalis &

FrankelWilliam R. Nuti, Chairman & CEO, NCR CorporationJed S. Rakoff, Judge, Southern District of New York, U.S. District CourtBenjamin a. Walter, CEO, Hiscox USa



ȃ��ȱ��ȱ��¢ȱ��ȱ��ȱ��ȱ��ȱ ��ȱ��ǰȱ��ȱ��ȱ��ȱ��¢ȱ��ȱ��ȱvocational schools. This is a model

that can be used in other areas.”

- Senior government official

One barrier that needs to be removed would allow business people into schools to work with teachers in the educational process (which is prohibited in some states). Representatives from industry won’t re-place teachers but will supplement them and will provide real-world perspective.

ȃ��ȱ��ȱ��ȱ�� ȱ��Ȭ��ȱ��ȱ��ȱ��ǯȱ��¢ȱ��ȱ��¢ȱ�ȱ��ȱ��ȱ��ȱ��ǯȄ- Mayor of a major city

It is also necessary to increase the emphasis on career and technical education. This involves providing funding and support, and impor-tantly changing the general perception of technical fields, like weld-ing, so that individuals see such fields at attractive careers. Failure to change the perception of these fields and attract students/workers will result in jobs disappearing from the U.S.

The methods that political leaders must use to have impact are very different from those used by business leaders.The mayor of a large city described how business leaders can articu-late a vision and strategy, can hire their team—and fire those who aren’t in agreement or who aren’t performing well—and can shape the organization through the strength of their leadership.

But political leaders such as mayors must do it differently. This mayor explained that mayors can’t fire and can’t force other parties to sup-port their ideas. To have impact, mayors must cajole and collaborate; they must bring together individuals and organizations that are fo-cused on their own self interests. Working in this way takes different skills and a different approach.

ȃ��¢��ȱ��Ȃ�ȱę��ǯȱ��ȱ��ȱ��ȱ��ȱand collaborate . . . we have to bring

people together.”

- Mayor a major city

Companies and CEOs want to get in front of controversial issues, which avoiding “triumphalism.”PR experts and the CEO of a major corporation agreed that it often is appropriate to respond to critics, and being proactive and out in front of issues is always preferable to being reactive. A recommended approach when an entire industry is being criticized is to work with trade associations, so they can be the voice of the industry. However, CELI participants don’t always see the value in industry associations. In a poll of participants, only 35% believe that trade associations are a better voice than individual CEOs.

But, when speaking out on a particular topic, CEOs need to avoid “triumphalism,” which is an attitude of being triumphant and arrogant. As an example, the major-ity of CELI participants believe that Jamie Dimon—of whom CELI participants think extremely highly—has largely brought upon himself the media criticism he has received through his triumphalism. One PR expert said that Dimon made assertions that were quite memorable and in doing so, “He asked

for it [his treatment by the media].” The media, which always wants to knock down people who are riding high, thought it was fun to get him.

The lesson: Be in front of things, but avoid triumphalism in the process.

“Triumphalism is bad for CEOs.”

- Communications expert

Other Important PointsBig data. A key to future innovation is going to be the ability to aggregate and analyze data to glean meaningful insights. This ca-pability will allow innovations to be based on better understanding and to be precisely targeted.

Nell Minow




A major airline is taking a different route by going through bankrupt-cy. This process is allowing the company to restructure and renew itself so the company is well positioned for the future.

Thus, decisions on whether to build up, break up, or restructure are based on a company’s industry and specific situation.

Decisions about building up or breaking up are LQ¾XHQFHG�E\�ZKHWKHU�D�FRPSDQ\�LV�SXEOLF�RU�SULYDWH�A company’s ownership structure and governance greatly affects its strategy. However, an experienced investor expressed frustration that companies today are largely owned by speculators, and not patient, long-term investors. He said that $30 trillion in equities is traded on public markets. Of this, only $150 billion is truly invested; the rest is engaged in speculation. This means there is 200 times more capital involved in speculation than in investment. Professor Sonnenfeld suggested that this short-term speculation is a key reason that leaders at companies such as Dell and Harrah’s have gone private or are planning to do so.

OverviewBoards and corporate leaders face critical strategic decisions about whether to build up or break up, and how to go about it. Such deci-sions will be greatly influenced by whether a company is public or private, by the composition and focus of the board, by a company’s organizational structure and governance, and by an organization’s leadership.

But regardless of whether a company’s chair and CEO are combined or spilt, and whether a company is public or private, CELI partici-pants see the keys to success as having supportive investors, a board with a long-term perspective, a leader who can articulate a clear vi-sion, and a strong management team.

ContextPanelists and participants discussed reasons a company might build up or break up, and factors that influence such decisions.

Key Takeaways%XLOGLQJ�XS�RU�EUHDNLQJ�XS�LV�LQ¾XHQFHG�E\�D�company’s industry and situation.A huge telecom company is focused on building up. This company has $25 billion in revenue, invests $5 billion in CAPEX per year, and has 44 million customers and 50,000 employees. It is competing against other large players and is focused on growing market share and growing through the addition of new services. In this industry, investments take significant scale and the stock can move quickly on customer acquisitions or losses. Building is the strategy here.

In contrast, a major global financial services company is in the process of breaking itself up by divesting certain parts of the business. This company is interested in decreasing its debt and strengthening its bal-ance sheet, which requires selling off some valuable assets.

Building Up or Breaking Up: When Is Bigger Better; When is Smaller Beautiful?

Edward J. De la Rosa, President, De la Rosa & CompanyWilliam H. Fuessler, Financial Services Strategy & Transformation leader,

iBMBarry M. Gosin, CEO, Newmark Grubb Knight FrankWilliam P. Putsis, Professor, Kenan-Flagler Business School, University of

North CarolinaJohn a. Quelch, Professor, Harvard Business SchoolMary C. Tanner, Senior Managing Director, Burrill & Company

Stephen a. Schwarzman, Chairman & CEO, The Blackstone GroupThomas W. Horton, Chairman & CEO, american airlinesJohn J. legere, President & CEO, T-Mobile USaSteve Miller, Chairman, aiGTodd R. Peters, CEO, GENCONicholas T. Pinchuk, Chairman, President & CEO, Snap-on incorporatedGarry O. Ridge, President & CEO, WD-40 CompanyFrederick O. Terrell, Vice Chairman, Credit Suisse


John Bogle


Regardless of whether a company is public or private, it must have a board with a long-term focus.Several participants commented that their boards understand the company’s industry and business, are patient, are focused on the long term, and have aligned executives’ com-pensation with long-term results. Having a knowledgeable, supportive board is particularly important when an industry is going through challenging times, when diffi-cult decisions must be made, and/or when a company is pursuing a contrarian strategy that goes against conventional wisdom. One CEO describe the long-term decision his company made—which was sup-ported by the board—to invest heavily even while the industry was performing poorly. This decision, which was criticized at the time by outsiders, has proven prescient.

ȃ��ȱ��ȱ��ȱ��ȱ��ȱ�� ǰȱ ��ȱ��ȱ��ǯȱ��ȱ��ȱ��ȱ��ȱ��ȱ��ȱ��ȱ��ǰȱand governance and compensation

are geared for the long term.”

- CEO of a major public insurance company

The former CEO of a large investment company noted that he started his company in 1974 and it took 18 years for the company’s model to take hold. Throughout this time the company’s directors were patient and stayed the course. This individual wondered if any directors would have the same patience in today’s world.

Opinions differ on whether the chair and CEO roles should be split.An experienced investor said that the principle of having a chair who over-sees governance and a CEO who runs the business makes good sense. These are different roles, requiring different skills and different areas of focus. A former chairman from a major corporation added that a chair needs to have the credibility to lead the organization, often through major changes. If a chair lacks that internal and external credibility, he or she should step down, which is what he did.

Most participants were uncomfortable with the idea of a mandated separation. One participant noted that all of the financial services companies in Europe that failed in the recent financial crisis had split roles, which didn’t prevent these companies from failing. The general consensus is that what matters most is having the right leadership.

CEOs from private companies see huge advantages in being private. The CEO of a high-tech company said that being private allowed the company to be more patient in growing its revenue and enabled the company to take more risks. The former CEO of a major consumer products company said that a huge advantage of being private was being able to focus on operating and growing the business, as op-posed to having to spend time meeting with and satisfying investors and analysts.

“If we were public in this volatile

��ȱ��¢ǰȱ �ȱ��Ȃ�ȱ��ȱ��ȱ��ȱ��¢ǯȄ- CEO of a fast-growing technology company

But CEOs of several publicly traded companies didn’t express dis-satisfaction at being public; in fact, they cited numerous advantages in their public status. These advantages include:

Creating a clear, publicly stated goal that the entire organization rallies behind

Having the market impose pressure and discipline

Having analysts and investors provide feedback on the company’s strategy

Earning respect from customers who know they are doing business with a public company

Being tested on a daily basis, with rewards to those who perform well

“Conversations with investors

��ȱ�ȱ��ȱ��ȱ��ȱ��ȱ��¢ǰȱ��ȱ��ȱ��Ĵ��ȱ��ǯȄ- CEO of a major public company

These CEOs of public companies believe that despite the short-term pressures, the keys to success are having a clear vision, a strong management team, and supportive investors who understand and buy into the company’s vision. One CEO stressed that in an era of scorecards and metrics, CEOs need to have con-fidence in their own judgments.

ȃ��ȱ��ȱ��ȱ��ȱ��¢ȱand there are rewards to those who

survive.”

- Executive from a major technology company

Ray lane

Steve Miller

Stephen Schwarzman


The sense was that the decision of whether to combine or split the roles of chair and CEO should be left to the board based on the orga-nization’s situation and leadership. Also, despite the recent contro-versy related to Jamie Dimon, participants still think highly of him and support him retaining the chair and CEO roles.

ȃ��ȱ��ȱ��ǰȱ��ȱ��ǯȱNo one is mandating separation.”

- CELI participant

There was also agreement that at times the media seems to somewhat arbitrarily and unfairly subject a chair or CEO to enormous criti-cism, which can lead to an individual’s ouster. History has shown that boards often lack courage and respond in a knee-jerk fashion to appease critics. This has occurred at companies such as Motorola and HP. Boards must be held accountable for a company’s performance. But accountability does not necessarily mean responding to the whims of the media or adhering to a series of metrics from third-par-ty entities. Boards must have the courage to stay the course over the long term and support strong leaders, even in the face of controversy, if it is in the best interests of the company.

Other Important PointsGupta’s guilt. In a poll of CELI participants, 94% believe that Rajat Gupta is guilty. One indi-vidual with knowledge of the case said the environment for Mr. Gupta was very difficult as there is general hostility for business and many people believe there is a criminal answer for every economic problem. This individual also believes that jurors may have been influenced by the media. Another individual with deep knowledge of the trial said that Mr. Gupta was convicted for no other reason than the fact that the evidence against him was overwhelming.

Jed Rakoff




:KLOH�UDUH�DQG�H[WUHPHO\�GLI½FXOW��VRPHWLPHV�WKH�best thing is for a CEO to step aside.The former CEO of a large British-based financial services firm de-scribed his decision process when his company became embroiled in a controversy, resulting in personally-directed criticism from the press and the British government. The governor of the Bank of England wanted this individual to step down as CEO. The board, customers, and other stakeholders were supportive of him staying on. Having be-come a lightning rod, this CEO decided that asking the board to fight for him wasn’t in the company’s best interests. Ultimately, he decided that the best thing he could do for the company was to step aside.

This humble, noble action is in contrast to other CEOs (including past CEOs of BP) who, amid crises, have uttered memorable state-ments such as, “I’ve suffered too,” or “I want my life back.”

OverviewThis session, as well as the entire Summit, showed the strengths and weaknesses of the United States. It was an open discussion that showed how well many companies and cities are doing, and that em-phasized rapid strides in innovative technologies. But while areas are doing well, the country as a whole isn’t keeping up. There is divisive-ness, the educational system is in decline, and much needs to be done. Moving the country forward requires heroic yet humble leaders who are focused on serving others.

ContextIn the Summit’s final broad-ranging session, panelists and partici-pants continued discussing the relationship between the board and the CEO, looked at the impact of technology on how people com-municate, and talked about how leaders define themselves and how others see CEOs.

Key TakeawaysCEOs want to partner with their boards.In a discussion about what CEOs really want from their boards, Professor Sonnenfeld mentioned a Harvard Business Review article indicating that CEOs want more than directors who serve as monitors and auditors and deal with other compliance matters. They want a partnership with their board and directors.

Staying Current on Customers and Your Business While Living Your Life: What to Read; When to Breathe?

Elisabeth DeMarse, Chairman, President & CEO, TheStreet, inc.James S. Denton, Publisher & Editor, World affairsStephen a. Greyser, Harvard Business SchoolThomas a. Kolditz, Professor, Yale School of ManagementRenée Mauborgne, Professor & Distinguished Fellow, iNSEaDDavid W. Miller, Director, Faith & Work initiative, Princeton UniversityDan Raviv, National Correspondent, CBS Radio

James D. Wolfensohn, President 1995-2005, World Bank GroupSaul J. Berman, Global Strategy Consulting leader, iBMKelly Evans, Co-anchor, Squawk on the Street, CNBCGreg Fischer, Mayor, City of louisville, KentuckySteven H. Grapstein, CEO, a/X armani ExchangeSly James, Mayor, City of Kansas City, MissouriJoseph J. lhota, Former Chairman & CEO, Metropolitan Transportation

authority (MTa)Mark Penn, Corporate Vice President, Microsoft Corporation; Former

CEO, Burson-MarstellerCarl Quintanilla, Co-anchor, Squawk on the Street, CNBC Stephanie Rawlings-Blake, Mayor, City of Baltimore, MarylandRobert B. Simonds, Film Producer, The Robert Simonds CompanyScott Smith, Mayor, City of Mesa, arizona


Mark Penn, alfred Spector, and Kristin Russell


CEOs are increasingly getting their information from a wide variety of sources.When asked where they get their daily busi-ness news, only 28% of attendees said Wall Street Journal and 13% said New York Times, and another 16% said CNBC or Fox. The most common response, by 40% of participants, was “other print/online” sources.

In responding to the session’s title about what to read, one academic suggested reading Moby Dick as well as the books from one’s faith.

While CEOs and other senior leaders may not realize it, many are heroes.One CEO doesn’t believe that CEOs are super heroes or deserve spe-cial treatment. He said that everyone brings unique value and talent to an organization. CEOs are like others in putting their unique value to use.

But Professor Sonnenfeld cited research showing that many CEOs and other leaders are different and are in fact heroes. Heroes were not like the other kids in the group; they always had soaring ambi-tions, engaged in self sacrifice, and separated themselves from others through “heroic stature” and a heroic mission with a lasting legacy. Many came from common origins and had a near-fatal derailment at some point, but their perseverance made them stronger.

Being a hero doesn’t just mean saving lives. It is a code of conduct in how one lives, behaves, and inspires others. It is about being bold, confident, taking risks, and assuming leadership, often in difficult situations. Heroes are not about grandiosity; they are about hope and courage.

ȃ��ȱ��¢ȱ��ȱ��ȱ¢��ȱ��ȱ��ǰȱ��ȱ¢��ȱ��¢ȱ��ǯȄ- Jeffrey Sonnenfeld

An academic said he chafes at the idea of considering business leaders as super heroes. He believes that the most effective leaders are those who are “super humble.” They serve others first and sacrifice for others.

Mayors are leading the way in getting things done locally.While the federal government was criti-cized for its divisiveness and inability to get things done, mayors from several cities said they are having success getting things done at the local level through strong leadership and collaboration. Several of the mayors in attendance combined long personal histories in the cities they are now running with extensive business skills learned in the private sector. A personal history provides credibility; business experience provides the ability to get things done.

The participating mayors were in agreement that serving as a mayor is challenging, with a fast decision cycle, but is a tremendously rewarding experience. They called on busi-ness leaders to take the opportunity to run for office and take a turn as a public servant.

ȃ��ȱ��ȱ�ȱ��£��ȱ��ǯȱ��¢��ȱ��ȱ��ȱ��ȱ�Ĝ��ȱ��ȱbe involved in public service at

some point. Business leaders can

do tremendous good. You should

all run.”

- Mayor of a large city

Technology is rapidly transforming how people live and communicate.The major technology trends that have already taken hold are smart mobile devices and social media. A professor said that Twitter and other forms of social media have already become critical to many brands. And, the power of social media will only grow, as 600 million people in China already have access to it.

A mayor added that Twitter is a great tool for local government. It al-lows leaders to easily communicate with citizens and enables citizens to easily and immediately provide feedback on day-to-day issues like road conditions or the need for snow removal. The downside, said this mayor, is that this always-on technology is extremely intrusive.

Participants with knowledge of technology identified two other trends that will be occurring going forward: 1) the Internet of things, which will take unconnected devices and technologies and will seamlessly connect them; and 2) wearable technologies, including such things as glasses and clothes. It is anticipated that once these technologies eventually take hold and become embedded in people’s lives, they will change people’s behavior. An issue is that as devices produce data and as more data is shared more broadly, privacy will be given up.

Sly James.

Kelly Evans.

Joseph lhota


Other Important PointsWhat’s taught in business school. One participant observed that a key theme from this Summit has been the role that business leaders play in shaping policy. However, this is not something currently taught in business schools, but perhaps should be.

imperfect leaders. One participant said that everyone today seems to believe there are perfect people in the world, are only looking for and willing to hire someone they view as perfect, and will imme-diately disregard someone once there is a sign of an imperfection. This is a mistake. This individual said that James Madison was phenomenal at drafting America’s constitution but was terrible as the commander in chief.




Individuals in other countries are hungry to learn about the West, il-lustrated by the number of students from China and India who come to the U.S. to study. Yet Americans lack interest in learning about the rest of the world, as few American students journey to these rapidly growing countries to learn about them. To prepare for the future it is important for the U.S. and other developed countries to become more international. It is important to teach students about the culture and history of other countries, so we better appreciate these nations and are better able to work with them.

PresentationJames Wolfensohn has had a distinguished career on Wall Street and as head of the World Bank. He is deeply respected throughout the business community and has made enormous contributions that go far beyond business, having served in government entities and on the boards of numerous philanthropic organizations.

Based on his extensive international experience, Mr. Wolfensohn sees major imbalances in the world, as a minority of the world’s popula-tion has the vast majority of the planet’s wealth. Big changes lie ahead for this imbalanced world, as the emerging markets grow much faster than the developed world.

Legend in Leadership Award: James D. Wolfensohn, President 1995-2005, World Bank Group

William H. Donaldson, 27th Chairman, U.S. Securities and Exchange Commission

Presenter

Jeffrey Sonnenfeld, James Wolfsohn, and William Donaldson

Can CEOs Be Super Heroes? - Yale School of Management · range of issues—including debt...

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