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Opinion | Of hubristic leaders and obedient company boards

Boards have responsibilities towards shareholders, and not just to the high-power CEOs

What is it about chief executive officers (CEOs) and other leaders that results in their entry and then an ignominious exit from the organizations they help create and grow? What leadership lessons can one draw from the Jet Airways fiasco? The story of Naresh Goyal and Jet is one of power asymmetries, with ramifications for corporate behavioural governance.

Research in neuroscience has focused on what power does to the brain. Jeremy Hogeveen, Michael Inzlicht and Sukhvinder S. Obhi in their paper find that power impairs the mirror-neurological activity, the neurological function that indicates the ability to understand and associate with others. They find that high-powered individuals suffer from reduced motor resonance, resulting in reduced interpersonal sensitivity.

A recent book by R. Gopalakrishnan, Crash: Lessons From The Entry And Exit Of CEOs, deals with the effect of power on leaders’ brains. He refers to derailers which cause lack of emotional capability in the leader, impeding the leadership journey. Such derailers include visibility addiction, parallax misjudgement, unpredictability, distrust of others and disconnected relationships. Leaders can prevent power from causing irreversible damages to the brain by mitigating such derailers.

Undoubtedly, the impact of power on the human brain appears to be a strong explanatory factor for explaining lapses in reasoning and behaviour—leading to the exit of CEOs. Even so, leadership examples the world over point to the presence of initial virtues in such leaders, which take on a different hue as time goes on. The very virtues that allowed the entrepreneur/promoter to rise above competition and build a business metamorphose into vices with the acquisition of power, leading to a breakdown of emotional capacity and the ability to empathize.

Some of these virtues, which helped make Goyal the business leader he was, included putting work above everything else, exerting tight control over his business, a high level of confidence and seeing opportunities where others saw none, dreaming big, going it alone, possessing a keen sense of timing and strong perseverance. However, as time lapsed and Goyal spent more time in the hot seat, the mirror images of such virtues became apparent as large vices. Goyal’s workaholism with little work-life balance, lack of delegation and control, over-confidence bordering on arrogance and ego, loss of humility, lack of teamwork and lack of succession planning posed challenges to his leadership which transmitted to his business as well.

Can leaders prevent such a metamorphosis of their initial leadership traits? How can the positive elements of these initial leadership traits be preserved so as to prevent the detrimental effects of such transformations on the individual and the multiple stakeholders of the business that (s)he has created?

Leaders will need to understand and practice avoiding what Gopalakrishnan terms “the behavioural bonsai traps" which prevent leaders from growing mentally and experientially. Leadership training will need to include proactively encouraging managers and would-be-leaders to practice empathy and compassion towards fellow workers. Such training should be incorporated into management education—not at a theoretical level, done through mere case studies, but through curriculum re-design, which allows students to experience compassion, empathy and power asymmetries.

Another important aspect of such power asymmetries is the role of corporate boards in the face of such leadership behaviour. At the heart of a robust corporate mechanism is the presence of independent reasoning which can manifest itself in the form of dissent. However, as corporate history bears testimony, corporate scandals, financial or otherwise, involving leaders of such organizations have rarely been accompanied by voices of dissent from within corporate boards.

The absence of dissent has been explained in terms of an innate loyalty response that human beings possess. Yale psychologist Stanley Milgram, in 1961, conducted the Milgram experiments to study the conflict between obedience to authority and personal conscience. The experiments required participants playing the role of “teachers" to administer electric shocks every time their counterpart—“learners", confederates of Milgram—made mistakes in answering questions. The experiments, conducted by an authority dressed in a coat, were ostensibly to study the “effect of punishment on learning and memory". These experiments revealed that people obey authority if it is seen as legitimate and/or morally based, going to the shocking extent of even hurting people.

While business schools teach subjects such as ethics and corporate governance, it is important to recognize the role of dissent in preventing corporate disasters. Participants in management programmes should be encouraged to actively voice their opinions on issues that matter and not be driven by blind loyalty to an authority who is physically and emotionally more proximate. At the end of the day, boards have fiduciary responsibilities towards their relatively powerless public shareholders, and not just to the high-power CEO.

The Jet fiasco is as much about a quiescent board driven by collective obedience as about a hubristic CEO and his downfall.

Tulsi Jayakumar is professor of economics at S. P. Jain Institute of Management and Research. These are her personal views.

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