CEOs risk losing credibility with employees, shareholders, customers and damaging their companies when they refuse to hold themselves accountable.
What do Mark Parker of Nike, Kevin Plank of Under Armour and Dennis Muilenburg of Boeing have in common? Yes, each holds the CEO title (although Parker and Plank will step down at year-end). However, we are referring to the fact that Messrs Parker, Plank and Muilenburg have held company executives accountable while failing to hold themselves to the same standard – a failure of corporate culture. Parker, Plank and Muilenburg are the proverbial ship captains who bailed the damaged vessel, leaving passengers and the crew to go down with the wreckage. The Army Captain who deserted his company. This fundamental lack of accountability and self awareness – some may view as a moral blind spot – hurts employees, customers, shareholders and damages company culture.
Mark Parker: During 2018’s #MeToo movement Parker was quick to terminate employees – including direct reports – who were accused of inappropriate workplace behavior. Parker failed to recognize that he was the custodian of the culture that accepted unacceptable behavior. As such he should have accepted responsibility and immediately stepped down from his CEO and Chairman posts. Nike’s Board should have immediately conducted a search for an outsider to the lead the company. Instead, Parker received a personal record $13.97 million in total compensation for fiscal 2019. Last week Nike named ServiceNow CEO John Donahoe as Nike’s next CEO effective January 2020.
Kevin Plank: Similar to Nike, Plank led a “boys club” culture at Under Armour. Plank’s sin in investors’ eyes was his becoming disengaged from the company he founded at a time when the company was not performing well. Under Armour began to struggle in 2015 and Plank was increasingly spending time with his holding company (Plank Industries), which owned a portfolio of businesses unrelated to UAA. Some months after investors voiced their displeasure with Plank’s leadership, Under Armour hired Patrik Frisk as Chief Operating Officer (July 2017). Last week Under Armour announced that Frisk will become UAA CEO in January 2020. UAA shares were up 6.4% on the news. On November 3rd, days after this article was published, the Wall Street Journal reported that Under Armour is the subject of a federal investigation into the firm’s accounting practices. This includes an examination as to whether UAA shifted revenue from quarter to quarter. If found guilty, our view is that the Board ought to wipe the slate clean regarding UAA’s management team even if certain executive team members “were not aware”. This includes CEO in-waiting Patrik Frisk. Here is the link to the WSJ article: https://www.wsj.com/articles/under-armour-is-subject-of-federal-accounting-probe-11572819835
Dennis Muilenburg: Unfortunately for Dennis Muilenburg he was CEO when Boeing suffered the two recent deadly 737 MAX crashes that claimed the lives of all 346 people onboard. It seems that with each passing day more information is released about Boeing’s prior knowledge that the 737 MAX aircraft was difficult to fly. Yesterday the New York Times reported that Boeing pushed for a law that undercut oversight prior to the two Boeing 737 MAX crashes. Last Tuesday Boeing fired Kevin McAllister, the first high-level termination since the fatal 737 MAX jet crashes. Muilenburg ought to have voluntarily resigned his CEO chair the day of the first 737 MAX crash as it appears Boeing knew far more than it is letting on. Muilenburg was stripped of his Chairman title two weeks ago but remains CEO. This is an enormous red flag that Boeing’s corporate governance is weak. BA’s Board is slow to take action, apparently content to obfuscate, happy to oversee a culture that hoards information while loathing transparency and accountability.