Responsibility and running things come easy? But you’re no visionary founder? Maybe the corner office is in your future.
Some of our finest CEOs didn’t found the firms they lead—like GE’s Jack Welch. Nonfounder CEOs can take firms to unthought-of heights. Sometimes reinventing is easier than creating from whole cloth, so while founder-CEOs usually rank higher in mega-wealth, just becoming CEO pays big. And it is a rich road indeed—even if you don’t aspire to billionaire status. Fully half of America’s largest-firm CEOs make in excess of $10.8 million.1
Warning: Heavy is the head wearing the CEO crown. Firm successes are rarely wholly, directly attributed to CEOs—as in, “Success has a thousand fathers but failure is a bastard.” The bastard is the CEO, always. So a big failure can kill your future. CEOs must be tough—more now than ever. Failed CEOs don’t just lose their jobs—they frequently end up vilified by the media, even indicted! And CEOs are often demonized just for their big pay—which they get precisely because of the career risk they face.
On this road, you need leadership and executive qualities to rise, be anointed, and keep the throne. The world loves successful CEOs—heroes! But the difference between a hero, a zero, and a weirdo often isn’t much, as we’ll see.
Where to start? Like in Chapter 1, start where you’re passionate. Most CEOs, except for some very few founders, aren’t young. It takes time, so you better enjoy the ride. Working for a firm you love, in a field you have passion for, is critical—and the more profitable the better (see our exercises in Chapter 7), but to endure long enough to become CEO, passion trumps profitability. Enjoy it.
Though there are shortcuts to being CEO (covered later), you toil long and pay your dues. But there’s good news: If successful, you can keep your seat a long time—like Hank Greenberg.2 Former AIG CEO founder Cornelius Vander Starr tapped him as CEO in 1968—a post he held until 2005. Greenberg was worth $2.8 billion when this book first came out, but he lost about 90 percent of it when AIG imploded in the financial crisis because he never diversified.3 (In all fairness, a good chunk of his stock was probably restricted.) Former Google CEO Eric Schmidt ($11.3 billion) held the post for a decade before graduating to Executive Chairman, where he remains today.4 Former Microsoft CEO Steve Ballmer (worth $27.5 billion)5 was a longtime ride-along (Chapter 3) to Bill Gates and got the throne in 2000. As a ride-along-turned-CEO he rode two roads well. Nonfounder CEOs are often a ride-along variation who switched to the hot seat. To do this, study Chapter 3 on how to be a ride-along.
But if you aren’t successful, you can be booted fast—even though you had paid your dues. Consider Stan O’Neal, who joined Merrill Lynch in 1986. Long seen as David Komansky’s heir-apparent, he became president in 2001 and CEO in 2003. His stint ended in 2007.6 Booted, basically! Still, by my count, including severance, his pay totaled about $307 million during his short CEO tenure.7 Not bad. Or, consider Marissa Mayer, brought in to resurrect Yahoo! in 2012. She didn’t, instead selling the business for scrap after four years of withering media scrutiny. Most see her leaving when Verizon completes its acquisition in 2017. If so, she’ll walk away with nearly $60 million in severance, bringing her total comp to nearly $220 million.8
The single most important CEO trait is leadership. If you can’t lead, you can’t be CEO. It’s not something you must be born with, though some are. You can develop it. But it’s necessary. You don’t need charisma, but you must lead.
How can you learn to lead? Well, I assure you I wasn’t born to be a leader—very far from it—so let me take you through my personal evolution to show you what I did, because yours can be similar. For me, it began with my father, Philip Fisher. He was supremely smart but suffered a then-undiagnosed condition now widely known as Asperger’s Syndrome—a form of near-autism often called “Geek’s Syndrome” because sufferers often seem “geeky.” They have ultra-high IQs, are great with math, verbal, and written skills, but have poor social skills. Typically, they’re physically twitchy, pace the floor, and can’t keep their hands from tapping. They have almost no ability to fathom how others feel. That is the defining feature of someone with Asperger’s. My father was classic. He could say the cruelest things, yet wasn’t cruel. He simply didn’t know you would react that way when anyone else would’ve—like a vacuum in the feelings department.
Like most Asperger’s sufferers, my father spent lots of time alone thinking. He was a great thinker—just didn’t feel much. He loved sitting alone thinking—hours on end in solitude! But he was generous with his time with me. He may have been the world’s best bedtime storyteller. Every night he told the most marvelous stories until I fell asleep. Action stories he invented with vivid protagonists—superheroes, natural leaders. At the time, I couldn’t see how they applied to me or why he was telling them.
His career was in OPM (Chapter 7) as a sole practitioner. Alone! He was an amazing analyst of business managers and CEOs in particular. He analyzed their actions. He knew little about their feelings. I recall as a young man watching him interact with executives. When conversation turned toward feelings, my father steered them back to actions. He was right about emotions relative to business functions. For 40 years our society has focused too much on feelings—too touchy-feely for its own good! Bernesian psychology taught me why our feelings follow our actions and not the other way around. Act certain ways and your feelings follow. Trying to adjust your emotions otherwise simply goes nowhere—no matter what you do. Do the right things, you feel better. Do the wrong things, you feel worse. Your actions determine how your feelings trend. Early motivationalists like Dale Carnegie and Napoleon Hill got this. Freudian psychoanalysts didn’t.
As a child I didn’t get it, either. The youngest of three, my family nickname was Poco, from Spanish meaning “little” or, as I thought it applied to me as a youngster, “of little significance.” Both my brothers were bigger, older, smarter. I was a sleepy school kid—bad grades, lazy, the dog ate my homework, daydreaming—generally going nowhere fast. My eldest brother was the opposite: six years older, perfect grades, star athlete, perennial teacher’s pet, popular, handsome, articulate. He was student body president of his elementary, intermediate, and high schools before becoming valedictorian, winning a Rockefeller scholarship, and going off to Stanford. I was Poco!
In sixth grade—don’t know what happened—the dog stopped eating my homework and I studied, got good grades, joined the Boy Scouts. I read a lot. However, studying and good grades aren’t really too tough for a child of someone with Asperger’s. You think through what’s needed and do it. Skip the feelings.
Since my brother had been student body president, I decided I should, too—youngest brothers are great copycats. But to win, I had to run against a really popular kid, Robert Westphal. No one else would—only I was that stupid.
The school president was elected by fourth-, fifth-, and sixth-graders. I knew I couldn’t win sixth-graders who knew us well—no chance. But I figured sixth-graders would be generally snotty toward younger kids, and fourth- and fifth-graders couldn’t tell one sixth-grader from the next. So I spent my time with younger kids while Robert spent his time with sixth-graders, assuming the younger kids would follow. It worked. I lost the sixth-grade vote big but won the election.
And it dawned on me: You get out of life what you put into it. I put time into the younger kids so I got their vote. It worked so well, I repeated my success in seventh and eighth grades, winning by appealing to those who didn’t really know the candidates. So I had these leadership positions where I should have been a leader, but I wasn’t. Like any politician I didn’t really care about my fourth- and fifth-grade constituents; I only cared about what it took to get elected. Leaders care about those they lead, even if they’re only fifth-graders. I knew what I was doing politically, but didn’t have a clue what a leader was until I discovered JC.
In California public high school, I needed a foreign language for college and picked Latin. Howard Leddy, my Latin teacher, had the class read from the text. Every day, someone would query him about the story and he would launch into storytelling mode— particularly about Julius Caesar. We liked that better than reading Latin so we baited him whenever we could.
One aspect boosting Caesar’s success was he led from the front of his troops, whereas Roman officers otherwise marched behind.
You can’t lead from the back, and Caesar knew it. The Roman model assumed if the general was killed, the troops were vulnerable, so he remained behind—win or lose. This is the chess model—protect the king. Problem: Front-line soldiers are vulnerable moving forward—a wrong move can lead troops to battle, have them decimated, retreat, and the “leader” is still personally safe. Soldiers knew that. When Caesar led from the front, his troops knew he wasn’t asking them to take a risk he wouldn’t take himself, so they were more confident, fought harder, and won always. Latin put Caesar in my bones.
After finishing a confusing college stint (it was 1968 to 1972—Northern California was crazy), I had no particular direction. Beyond my sole-practitioner father, I had no real-life business leader role models. Caesar led soldiers, but what else would you lead? So I worked for my father. No better ideas. If that didn’t work, there was always graduate school. And after a year, I didn’t want to stay. My father couldn’t identify my feelings, and I wasn’t feeling too good. I’d either kill him or he me. Not good. So I quit—started my own firm. I didn’t know I was too young to be able to do that, so I could. There I was, alone, the sole-practitioner son of an Asperger’s sole practitioner spending lots of time alone thinking.
The Other People’s Money (OPM) world (Chapter 7) was vastly different then—more primitive, less specialized. Brokers were still on pre–May Day monopoly commission rates but also dominated asset management. Financial planners existed but weren’t what they are now. They were tax shelter salespeople who vanished with the 1986 Tax Reform Act. Independent registered investment advisers, my ticket, existed, but were few and could have been doing any darned thing in terms of fees and activities. I basically drifted for a decade, getting and losing a very few clients, while getting paid for some crazy things.
I got paid for library research projects—a lot like school. In those pre-Internet days you could get paid for library capability because information wasn’t otherwise easily available. I got paid to provide information on stocks, industries, and various oddities. For example, I did a study of over-the-counter drug side effects and which drug firms were affected. I got paid for specific stock ideas. I had clients paying for investment advice—I think they thought they were secretly getting my father’s views. I built portfolios and financial plans for folks. I helped several tiny firms get bought.
I took side jobs in construction to make ends meet. For a year, I got paid every Wednesday night to play slide guitar in a Bay Area bar. Anything for a buck! And no employees—never thought of that! I had a part-time secretary once, briefly, about nine months. She quit—said I was a lousy, imperious boss. Probably was. Besides, who would work for me? I was no leader.
But I read a lot. Books about management and business—and maybe 30 trade magazines a month for years, such as Chemical Week and American Glass. I studied companies. At various times I studied steel making, glass making, fiberglass, fertilizers, shoes, farm implements, cranes, coal mining, machine tools, surface mining, chemicals of all kinds, and electronics. During this decade, I did my original studies of price-to-sales ratios, which later largely launched my career. I was drifting, but learning lots.
Around 1976, I drifted toward packaging venture capital deals. There were very few real VC firms then, maybe 30 nationally. I met occasional entrepreneurs who had a novel idea but couldn’t raise money to fund it. I helped them. I didn’t see that if they couldn’t raise their own money, it was a bad reflection on them. Still, I helped put together prospectuses and tried to raise equity capital from the existing VC firms and wealthy Bay Area individuals.
I really tried hard on four deals: a laser maker, a restaurant, an airport limo service, and an electronic materials maker. I got paid cash and/or equity for done deals. Fortunately, the restaurant never got funded. I’m sure it would have flopped. The laser company was great in all ways and motivated me to do more. The limo firm funded but failed almost instantly. But the most important on my path toward leadership was the electronic materials maker.
The company was called Material Progress Corporation (MPC) and was funded with mostly East Coast venture money and some Bay Area rich individual money. It had leading-edge scientists and was to grow an array of exotic garnet crystals used in electronics. It had proprietary technology in crystal growing and polishing. It got funded, yet wasn’t going well.
Eventually the board demanded a new CEO. They still loved the concept and technology so they ran a search for a top-tier CEO and put up more money to expand. Meanwhile, MPC was rudderless and bleeding money. To stanch that, I got to play part-time, interim CEO. My charter was simple. I was to cut costs as much as possible to reduce losses without losing the key scientific or operational people. It was 1982. Things were tough everywhere. The world was in recession. Poco was starving and pretty recessed himself. I needed income. This was it.
On Mondays I worked from my normal office doing my work and theirs. Tuesdays at 3:00 AM I’d drive two hours to Santa Rosa where MPC was located. I’d stay through Thursday evening, drive home, and work Friday in my office again. I got paid by MPC by the day, like a consultant. There were about 30 employees in one facility. I’d never managed anyone. Now I had to. And I did OK—much, much better than I expected. And do you know what I learned?
I learned the most important part of leadership is showing up. Could have fooled me! That wasn’t in the books I read. Turns out, eagerness is infectious. I moved the CEO’s office to an open glass conference room where everyone could see it and me. You couldn’t get in or out without seeing me and me seeing you. I made a point to be the first there every day and the last to leave. I took employees to lunch every day and dinner every night—at cheesy cheapo diners—but I gave them my time and interest. I wandered around endlessly talking to them, focusing on every single one and what they thought.
I brought them all together regularly to talk them up. The effect amazed me. And them! That I cared made them care. This is a basic truism of management and leadership—straight from Julius Caesar. Suddenly, I felt what it was to lead from the front. They worked harder and smarter, innovated, and just generally gave a darn, whereas they hadn’t before. I did this for nine months. We cut costs and boosted sales—got to cash-flow positive and breakeven on the income statement. We even developed new products for the next CEO’s arsenal. I felt needed and was sad when they found their new CEO. My time was done.
Meanwhile, a “normal life” client hired me for a consulting project. I took a week from MPC to travel with him, interviewing leading investment names for a mutual fund venture of his. He was young himself, and I acted like his sidekick—helping him think through what he was doing real-time.
We interviewed the legendary John Templeton and Arnold Bernhard, Valueline’s founder and CEO—a big name back then. And John Train—then a Forbes columnist who ran a money management firm and had just written a bestselling book, The Money Masters, with a section on my father. And we interviewed many more. Most of these folks didn’t know any more about running a real business than I did. These guys were running real money with real employees—and they didn’t know the leadership basics I was just learning but feeling in my bones at MPC. That was an amazing eye-opener. If they could, I could.
Maybe I could get a few employees who would work for me, just like at MPC, and do as well as these guys at building a business, or better. Templeton’s investment prowess impressed, but none of these guys’ business and leadership acumen wowed. Templeton was super rich and successful, but none of them were what Ken Iverson of Nucor (covered later in this chapter) was. None were what I considered a role-model CEO.
Back at MPC, I had to pay for my own hotel rooms and was starving. The cheaper the hotel, the more alone you feel. One night, alone in my $18 flophouse hotel room, I sat thinking. Alone, alone! No TV. No phone. No air-conditioning. Son of Asperger’s before Asperger’s was known. Dots started connecting. My father had written a book, and it had been good for him in the 1950s. I had the price–sales ratio thing. Even my childhood political foray made sense—you get out what you put in. I could manage and lead at least a few folks. Maybe I could learn to write. Maybe about price-sales ratios. Maybe I could build a firm that just did money management. So after MPC, I started building my firm. (That’s the founder-CEO route in Chapter 1, not this one.) But for any CEO there are two major issues: How to lead and how to get the job.
Hey, I just told you how to lead—from the front. Show up, care, focus on people, be there—early and late. Focus on every rung of the ladder separately and together. Spend time with managers. Spend time with line soldiers. Give your time—from the front. Don’t ask them to do anything you wouldn’t do. Make them know you care. Go with sales folks to see their customers—your customers. Go with your folks to see your vendors—their vendors. If you travel and they fly coach, you must also. Stay in the same hotel and class of room they do. You’re with them. If you don’t put yourself above them, they will put you above them in their hearts, which is where it matters. If you care, they will. If they care, they will do as well as they can.
That’s leadership—getting them to care so they do as well as they can. People often ask why I don’t have a private jet. It would demoralize my people if I did. I fly commercial. They love that. When I’m with them, I fly coach. It amazes clients who see me on board! If you crave CEO bucks, don’t be a big jerk. Focus on your people. Skip the perks that may bug your people. That’s leading from the front. You can’t lead from the back, really. Ask yourself what Ken Iverson would do. Or Julius Caesar. OK—maybe he should have gotten a few bodyguards.
I’ve read lots of books on CEOing. Some are listed at this chapter’s end. But the most important things I ever learned about leadership and being a CEO, I learned from Julius Caesar and at Material Progress. Whether you’re a founder-CEO as I am or a replacement CEO as I was at Material Progress, it’s all about how you get it in your employees’ bones that you care—about them, the firm, the customers, the outcome. They need to believe you aren’t just in it for the bucks. They need to believe. You need to make them believe. The best way to make them believe is to believe yourself. The more time you put into people, the more fun it becomes. Staying in lousy hotels and flying coach aren’t fun. But it works.
There are four best paths to becoming a nonfounder CEO:
Riding along (Chapter 3) then switching paths is fairly common for CEOs—the technique used by Jack Welch, Steve Ballmer, Stan O’Neal, Lee Raymond, Tim Cook, and so many more. This is the rise-through-the-ranks model. It’s lower risk, but it’s still hard to get started. It requires ride-along skills, yet has no certainty.
Or just buy a small firm (if you have the money). It’s basically a one-man private equity transaction. This can be easier than being a founder. Buy it, fix it, and make it huge—like Warren Buffett did with a tiny textile firm he built into Berkshire Hathaway. Or like Jack Kahl when he bought a tiny plumbing products firm, Manco, in 1972 for $192,000. One product they had was an unassuming, silver industrial tape that was versatile. He rebranded it “Duck Tape” and gave it a duck mascot. Kahl sold Manco to the Henkel Group nearly three decades later when sales topped $180 million.9 Not bad!
Many CEOs come from VC, private equity, and major consulting firms. Just as I got the job when Material Progress faltered—because I knew the VC people—you can, too. Had I not been too young and inexperienced, I might have kept that job permanently. One VC firm that invested in Material Progress was Boston-based Ampersand Ventures. Among its young associates assigned to MPC was a chap named Steve Walske. Steve and I spent lots of time together then and were pretty good friends. Great guy. Smart. Savvy. He knew Ampersand’s holdings well.
One holding, Parametric Technology Corporation, a Boston-based enterprise software firm, was struggling. Steve quit VC to run it. When he became CEO in the early 1990s, it was a public stock with a total market value of about $100 million. By then, he had the chops to step in as a full-fledged CEO. Before he left in the late 1990s, it grew to a market value of more than $10 billion.
Coming from a VC background, Steve had a great CEO career, prospered, and split. One reason to work for a VC firm out of school isn’t to do VC but to bide your time until one of its wobbling portfolio companies becomes an opportunity for you to be a CEO, like Steve Walske. You can do the same thing from a major consulting or private equity firm.
The final path I propose sounds strange and is perverse, but it works:
Don’t recruit low-end firms, but top-tier executive search firms like Spencer Stuart (www.spencerstuart.com) or Russell Reynolds and Associates (www.russellreynolds.com). When boards need new outside CEOs, this is where they go. Recruiters and board members will disagree with me completely about this, but the process is pretty simple and superficial. It starts with resumes, goes to telephone interviews, in-person interviews, background and reference checks, and then interviews with the board.
As such, it’s more about interviewing skill and the appearance of management skill than real leadership skills. I’ve seen blokes I wouldn’t hire as a dogcatcher get hired repeatedly as CEO this way without ever really doing much in real life because they’re dynamite interviewers. This is where acting comes in. Acting helps you make a great first impression and bowl someone over briefly.
CEO recruitment isn’t pretty. Recruiters think they can see through a gilded-lily resume. Some may, but many can’t. If you haven’t been CEO yet, those who can’t are your market. You can gild your resume by packaging it well. It isn’t lying—it’s packaging. I’ll bet two-thirds of you reading this book not only know a lot more about packaging a resume than I do but have done it multiple times. If you haven’t, there are books on this trivial part of job searches.
You aren’t trying to start as IBM’s CEO. You want a tiny private firm with an external board needing someone to come fix it. You needn’t be any better than I was when I was at Material Progress to make your own material progress.
Folks who do this well never stop interviewing or marketing themselves to executive search firms—never ever. Once you’re CEO of one tiny private firm, immediately start interviewing at firms twice the size. You can’t do that through the search firm that got you the first position. They can’t and wouldn’t want to take you away from where they just put you. But you can market yourself everywhere else. Right after becoming CEO of a 20-person firm, take to lunch every recruiter you can find. Keep updating them on your firm’s progress. You want to be off to a bigger CEO job within two years so you’re not too associated with the lousy little firm you’re actually running and its faults. Keep moving. Never stop. Don’t worry about leaving the smaller firm behind. You can make a lot of progress there in two years, just like I did at Material Progress in nine months.
I saw one guy—great at this—who to my certain knowledge was a former securities criminal (whose name I leave out so he won’t sue my sorry arse). He used this process to get four CEO jobs of increasing size in eight years—all through headhunters—one he used twice. He did OK at these jobs and never broke the law again, as far as I know. Once he made it past the first job, he never really got background checked in a way that would have uncovered his past. My point is, for this, interviewing skills are more critical than any other skill.
Another guy—I like him, nice guy—but he’s a rotten leader. He used this process to go from running a company division that was no good before, during, and after he was there, to running a string of progressively bigger firms until he was selected to run a Fortune 100 firm, which he promptly led to be taken over—giving him a great golden parachute. I love the guy, but he couldn’t manage his way out of a paper bag—no leadership skills at all, tries to lead from the back. Couldn’t analyze a pair of dice for their dots! Never kept a job more than two years from when I met him. But he got progressively bigger CEO jobs and pay because he interviewed so well and was so personable, charming, engaging, and made you believe him—at least long enough. He was also great onstage as an actor. Take a few acting classes. They help. You can do this.
Your goal? Big-firm CEOs (and some smaller ones) collect big pay, stock options, deferred comp (salary set aside in tax-advantaged ways), and other perks. Smart CEOs negotiate great terms and their potential exit package—up-front.
Who makes the most? Table 2.1 shows America’s 10 best-paid CEOs in 2015. Note: The top 10 names change, sometimes radically, year-to-year, based on which industries flew high, who personally blew up, or who negotiated the best terms. In this book’s first edition, the top 10 (from 2007) was heavy on high finance, featuring Morgan Stanley’s John Mack, Goldman Sachs’ Lloyd Blankfein, and Merrill Lynch’s John Thain. All are out, and no bank or brokerage CEO cracked the current top 30. Energy and natural resources firms also featured prominently in 2007—with oil and commodity prices down the tubes now, none made 2015’s top 10. Only one of 2007’s highest-paid made it to 2015’s list: CBS’s Leslie Moonves. CBS is the only company still in the top 10, too. Lots of flux here—well-paid career risk.
Table 2.1 Top Paid CEOs in 2015
|David M. Zaslav||Discovery Communications||$156.1 million|
|Michael T. Fries||Liberty Global||$111.9 million|
|Mario J. Gabelli||GAMCO Investors||$88.5 million|
|Satya Nadella||Microsoft||$84.3 million|
|Nicholas Woodman||GoPro||$77.4 million|
|Gregory B. Maffei||Liberty Media & Liberty International||$77.8 million|
|Larry Ellison||Oracle||$67.3 million|
|Steven M. Mollenkopf||Qualcomm||$60.7 million|
|David T. Hamamoto||Northstar Realty Finance||$60.3 million|
|Leslie Moonves||CBS Corp||$54.4 million|
Source: Equilar, “Equilar 200 Highest-Paid CEO Rankings.”
Many of these aren’t household names. Ironically, top pay doesn’t always link to which firms did best. It often reflects who had great career prospects and could have been CEO at any of many firms, but took a huge career risk to live for a few years in head-on-chopping-block status—betting his career on what happens in a short time span. Stanley O’Neal gambled his future and lost. History may show Marissa Mayer did the same. Probably no one will pay them again to be big-time CEOs, but they negotiated terms up-front paying them for that risk.
Beware: CEO pay often leads to media harping, “They aren’t worth it.” Maybe, maybe not. But it’s up to their board (and to a lesser extent shareholders), so complaining won’t help. If you don’t like it, don’t buy the stock. If you like it—great! Maybe this is your road. The media was apoplectic when Lee Raymond, former ExxonMobil CEO, retired in 2005 with a $351 million exit package.10 Did he deserve it? I don’t know. I’m sure most, if not all, was part of a contract negotiated beforehand. It works like this: I make a deal where if I do this, the stock does that, sales and profit do the other, then I get paid X, Y, and Z. The formula says what I get if you fire me or I quit. Both sides think the deal favors them. It usually works better for one side than the other.
Timing helps. In 2005, Exxon recorded the largest single-year profit of any firm, ever—$36 billion.11 Effectively, Raymond got 1 percent of that. He oversaw the big Exxon-Mobil merger—no small feat. During his 11-year reign, the stock rose about 400 percent.12 Put simply, $1,000 in the S&P 500 over the period became $3,323, but $1,000 in Exxon became $5,000.13 Millions of Exxon stockholders—individuals, institutions, pension funds—benefited. Don’t forget about Exxon’s 80,000+ employees14 and their pay and retirement assets received. If most big firms could guarantee their stocks and firms would do so well for so long, they would eagerly pay Raymond’s compensation or more. The problem is, there’s never certainty.
Big pay seems “obscene” to some, especially in this era of Occupy Wall Street and the vilification of the “One Percent.” If that’s you, this isn’t your road. Most observers aren’t so upset at big pay for successes, but they really hate failed CEOs (perceived or otherwise) getting a huge check going out the door. They hate “rent-seeking” CEOs in banking and finance even more. Crucify them! Still, if you become CEO, fail, and get crucified publicly—you still almost always end up well off financially. (Unless you pull a Hank Greenberg and don’t diversify, but even he had $28 million left after AIG tanked.15)
It’s tough becoming CEO, and tougher lasting long-term. One way to boost your odds is: Think hero. Be a swashbuckling risk taker—the one with vision, fearlessness to pursue it, and fortitude to recognize mistakes, alter course, and plunge fearlessly ahead again. Good heroes make exceedingly lonely decisions, but sell the board, employees, and shareholders on why the road less taken is better. Those unpopular decisions can flop, but real heroes usually bounce back.
One former superhero CEO was GE’s Jack Welch (net worth $720 million).16 Welch became CEO in 1981 when GE was a great company, turned it upside-down (read: layoffs), and made it greater. Welch didn’t just trim payrolls—he decimated whole business lines. To him, if GE wasn’t a world leader or a close second at anything, it shouldn’t be in that business. Throughout his career, he fired the bottom 10 percent of managers yearly.17 While those fired managers likely weren’t pleased, there are few CEOs in modern history as well regarded as Welch.
Nonheroes shy from massive restructuring, viewing major overhauls as risky. They fear backlash. Employees and the media hate terminations. Welch wasn’t frightened. Now, many emulate Welch’s style, which fared well for GE—$1,000 invested in GE during his 21-year reign became $55,944, whereas in the S&P 500 it became $16,266.18
Ken Iverson, former CEO of Nucor, was among the all-time greatest CEO heroes ever. People adored him. Heck, I adored him. Iverson brought Nucor back from bankruptcy’s brink in the 1960s and built Nucor in an otherwise unprofitable world of steel. Nucor is today America’s largest steel firm. He did it the old-fashioned way. He developed technology, low-cost production, and novel management techniques. He challenged conventional steel head on, underpricing them—eating their lunch. He built a lean, mean machine and a model of superior management—a model now globally emulated.
American steel was dying for decades from bloated bureaucracy, union strangulation, and government protectionism. Iverson decentralized decision making, axed executive perks, and mandated only four management layers between factory workers and him. He demanded innovation—from everyone. His employees loved him and would have marched off a cliff for him. His story is in a truly great 1991 book, American Steel, by my friend Richard Preston.
I first met Iverson in 1976. Few could then see Nucor’s future. But Iverson simply bowled me over, and I’m not that easily impressed. He was bigger than life. Within minutes he made you a believer. He was more comfortable in the mill with his crew than in fancy office buildings—but he was comfortable there, too.
And that quality is key to being a hero-CEO. You must make your employees adore you while also being seen as a tough son-of-a-bitch. You must be fair and even-handed, though heavy-handed when needed—but always without a hot temper. Willing to take the big risk but also shrewdly calculating, not scheming. A man of the common people who is as happy or happier with his smallest customer or lowest-level employee as with the board! Usually a hero-CEO sets his compensation up in advance so he trades off base compensation for big upside. Then when he gets rich, few complain. Most wannabe hero-CEOs fall down on one or more of these qualities.
Carly Fiorina, ousted from Hewlett-Packard in 2005, fell short as a hero-CEO. She adorned TV and magazine covers—widely seen as a glamorous hero. She led HP through its merger with rival Compaq. Initial results were rocky, as mergers often are. At first, she seemed bigger than life. But HP’s culture was built on the “management by wandering around” style of cofounder David Packard. She seemed aloof. If employees don’t adore you, a wannabe hero-CEO won’t endure. She seemed more comfy with media and her board than her smallest customers and lowest employees. It’s here, in my view, she fell short and lacked support from underneath when things got tough—so she got axed. Of course, she made out OK with a $21 million parting gift.19 But in my opinion, no one will ever make her CEO of a top-tier firm again. Done. But she still kept busy, running (and losing) first for US senator from California, then the Republican nomination for president in 2016. Turns out, she was no better at politics than running a business. America didn’t adore her any more than her employees did.
Fiorina’s failure leads to a basic rule: Every CEO, every month, must spend time with normal bread-and-butter customers and bottom-of-the-org-structure employees. Forget this and you’re lost. Ivory-tower CEOs get by with it briefly, easing their own lives—but eventually fail. Top CEOs never forget what makes the firm tick. It’s why employees adore hero-CEOs—they aren’t aloof. They seem like one of troops—they are comfortable with and interested in them—but are still bigger than life.
Mind you—Fiorina, O’Neal, Yahoo!’s Terry Semel, Countrywide’s Angelo Mozilo, and so many others who tumbled from their thrones still traveled this road well. Even if you don’t turn out to be a lasting hero-CEO like Welch or Iverson, you can still make huge bucks, bank it, and retire—or get a paid board position! Lots of firms will hire former CEOs for their boards.
The big pay isn’t the reason to travel this road. The greatest part about being CEO is helping build people to be more than they were when you met them and more than they thought they could or would be—very rewarding. Money aside, once you get the feeling real leadership imbues (that I got at Material Progress Corporation), you become of the people—your people. You can’t get that out of your system. Once you become that kind of CEO, it takes you over.
This is a road I encourage anyone to aspire to because if you’re a real success, you help people and build something of social value beyond the firm’s financials. A GE or Microsoft provides huge social benefits to our world. Were they run badly, it would be terrible. Ditto for smaller firms—where you may start on this road. It’s a terrible waste when a CEO manages badly. You see that happen and you know it’s bad. You can do better than that gal or fellow. She or he wasn’t leading from the front. Remember my experience—you don’t need to have tremendous training to manage, just focus first on showing up, caring, and leading from the front. It’s a caring position if done right.
To continue your journey on this road, these books can help: