What can the world of business learn from Blatter’s downfall? About Governance and Time
We cannot rely on our leaders to show integrity, we need robust governance and control systems to keep them in check. FIFA, of course, was in a unique position – it had no competition, it had control over a product that everyone wanted a piece of, and it based itself in Switzerland. It was essentially unaccountable, which of course is why Blatter was able to hold on for so long. In comparison, big corporations are held in check through a range of formal and informal mechanisms:
• Internal controls – non-executive directors, audit committee, risk management systems
• External regulation – auditors, analysts, shareholder meetings, earnings calls
• External competition – activist shareholders, corporate raiders
• Public transparency – whistleblowers, glassdoor.com, bloggers, press articles
Why on earth do some companies still get away with dodgy or fraudulent activities, despite all these controls? I think the key variable is time. We all know that power corrupts, but it doesn’t corrupt instantly. Over the years, leaders who lack integrity gradually take control of the various levers of power, they surround themselves with acolytes, and they reduce the strength of the mechanisms designed to hold them in check. The problems at Lehman, RBS, Vivendi, Tyco, Olympus and Enron were brewing for years.
So what can we do differently? Strangely enough, we should probably draw inspiration from the world of politics. In the recent UK general election, David Cameron, Ed Miliband and the other party leaders had to submit themselves to direct, often plain rude, questions from the public, on live television. They were subject to ritual humiliation on satirical quiz shows.
But it helped to keep the party leaders egos in check. Can you imagine Sepp Blatter, or some of the corporate leaders mentioned above, submitting themselves to this sort of public accountability?
The idea of term limits – no US president can spend more than ten years at the top. It is almost axiomatic that the longer someone stays at the top, the more powerful and therefore the more dangerous they become.
These are not crazy principles for the business world. Partnerships, such as law and accounting firms, have elections and term limits. There are even some business organisations, WL Gore for example, that elect their leaders. If we cannot guarantee that our leaders show personal integrity – especially over the long term- we need to find more robust ways of keeping their power in check.