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Why senior executives do
incredibly stupid things
Jean Pousson
Board Evaluation Limited
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Jon Corzine
I have no idea where the money
is …
MF Global
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Tough at the Top
…I do attend Board meetings but I have
no idea about their content.I only provide
medical advice. Dr.Hayadisha .Olympus
…I didn’t understand anything!
Mercedes Rojo-Izquierdo Ex Bankia
Director
(€ 374k pa 2011)
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How long have you got?
80% of S & P 500 CEO’s do not
make it to retirement
Average tenure of FTSE100 CEO?
6 years!
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Executive Failures
 Overconfidence
 Mental Accounting
 Status Quo bias
 Anchoring
 Sunk Cost Effect
 Herding instinct
 False Consensus
McKinsey Quartely(2003)no 3
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Executive Failures(ctd)
 Terminally self absorbed
 Celebrity CEO
 Keen to leave a legacy
 Right about most things
 Rely on what has worked in the past
 Listening has become waiting to speak
 You have become entwined with the company
 Avoid derailment
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Groupthink
 Illusion of invulnerability
 Absolute belief that the group is right
 Stereotyping of outsiders
 Illusion of unanimity
 Intolerance of dissenters
 Bodyguards to protect leaders
 Mentioned in the UK Corporate Governance
Code!
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Board Malfunction
 Mix and composition
 Poor challenge. Ugly baby syndrome! Omerta!
 Avoid incest
 Reliance on processes
 Blind faith on professionals eg Auditors.
 No true independence
 No evaluation, no learning, no unlearning
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Strategic Failures
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Failure to adapt
Strategy set by CEO(or consultants)
Fatal attraction to spreadsheets
Testosterones
Mirage of acquisitions
Obsession on short term results
Risks not properly understood
Too narrow definition of competitors and
industry
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Current Influences
 Customers and markets
 Regulatory
 Environmental
 Convergence
 Connectedness
 Globalisation
 Commoditisation
 Economic downturn
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Strategy is Not Easy!
 Over 600,000 books on the subject
(Amazon).
 Approximately 90 well used models.
(www.valuebasedmanagement.net)
 About 7000 new business books written
every year.
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How Strategy Happens
“ The nicest thing about not
planning is that failure comes
as a complete surprise and is
not preceded by a period of
worry and depression”
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“Bureaucracy:
A device for converting energy into
solid waste.”
Anonymous
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What Really Works
 Clear and focused strategy
 Flawless execution
 Structure
 Company culture
Source HBR July 2003 - Nohria, Joyce & Robertson
Study of 160 companies over a 10 year period
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4+2
 Talent
 Innovation
 Leadership
 Mergers and Partnerships
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Other Determinants of Success

Luck

Overwhelming resources

Superb or stupid implementation

Enemy errors
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You get what you tolerate!
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