Sunday, April 7, 2013

Are Leadership and Accountability Mutually Exclusive?

I always thought that one of the criteria that made a leader, well a good leader, stand out from the crowd was their unwavering self-belief in taking real accountability for their actions, and setting the example for others.
Maybe it’s the exception, I don’t know, but there seem to be more and more reports of executives making serious errors of judgement or not knowing what’s going on in their own organisations, sometimes bordering on the criminal, yet seemingly oblivious to taking any responsibility whatsoever.
Take SSE, one of the UK’s six big energy groups that as Juliet Samuel reports, “has been forced to make a grovelling apology after being hit with a new record £10.5 million fine for mis-selling by Ofgem.”
Regulators found that at least 23,000 of its customers had been mis-sold products, netting a minimum of £4 million for the group.
Juliet highlights that “SSE had refused to settle with Ofgem, the energy watchdog, forcing the case to go to a hearing with the regulator’s top markets authority. That body handed down a stinging judgement on Wednesday 3rd April that found ‘failures at every stage of the sales process’, going right up to the top levels of the company, where it said that ‘insufficient attention was paid to compliance at board level.”
It’s worth highlighting as well that “SSE’s breaches of the rules by its phone and door-to-door sales force took place up until September 2012. They involved failing to include  the costs of all charges when estimating what a customer’s bill would be and making false statements about rivals’ price rises and providing inadequate estimates of customers’ energy bills.”
Yet no one has been fired and not a single executive has resigned. What does this say about leadership and accountability?
On the SSE website Ian Merchant their CEO, who is leaving this summer, but not because of mis-selling to 23,000 of their customers, has written a blog that states; “At SSE we try to do the right thing. We aim to put customers first, we attempt to be clear with them, and we strive to be fair in everything we do.  Today’s Ofgem fine makes it clear we have failed to live up to our own standards. On behalf of the whole company, sorry.”
But one has to ask if ‘sorry’ is enough? What has the Board and other stakeholders been doing during this case and what standards do they demand in respect of governance and operational leadership. The chairman, Lord Smith of Kelvin, has been bullish about SSE’s results, praising Ian Merchant for profit generation and dividend pay-out’s.
This is just one of a few instances of the relationship between leadership and accountability – or lack thereof - that were reported on the same day. For example, Patrick Hosking reported that “the Royal Bank of Scotland (RBOS) action group got over the start line on 3rd April when court proceedings were issued in the high court against Fred Goodwin the former CEO; Sir Tom McKillop, the former chairman; Johnny Cameron, the former investment banking chief; and Guy Whittaker, the former finance director. The group says that shareholders were misled about the financial health of the bank when it tapped them for £12 billion in fresh capital in the spring of 2008, less than six months before its collapse. Where the group represents 12,000 private investors and more than 100 institutional investors.”
Another example is Barclays, where Sam Coates and Katherine Griffiths, highlight how in a 236 page report (also published on 3rd April) by Anthony Salz, executive vice-president of Rothschild and a former senior partner of Freshfields Bruckhaus and Deringer, he found “an organisation fighting a war of attrition against regulators and its own directors. How Barclays was arrogant and aggressive over the past decade as it sought to avoid tax, evade regulation and protect huge pay packets for the 70 most senior figures.”
So are leadership and accountability mutually exclusive? No, they shouldn’t be. But Boards; Shareholders; Regulators; Academic and Institutional Bodies; and Advisors need to focus on what leadership really means for an organisation, its culture and performance. They need to start taking leadership much more seriously and implementing a no-nonsense approach to failings in taking real accountability. Otherwise bad leaders are going to keep making bad decisions simply because they can get away with it (and be paid a lot in the process).
What is also true in the 21st Century is that we shouldn’t be having debates about good and bad leadership – we should be having debates about good and great leadership.
Coates, S. and Griffiths, K. (2013). Barclays ‘too clever by half’ over tax, pay and rulebook. The Times, 04.04.13, p.41.
Hosking, P. (2013). Court fires starting gun at RBS claim. The Times, 04.04.13, p.44.
Samuel, J. (2013). SSE issue apology after record £10.5 million fine for mis-selling. The Times, 04.04.13, p.43.

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