Learning from Leaders

Questions on how we respond to shady accounting, conflicts of interest, and corruption were taken up by faculty at the Fuqua School of Business and by Duke graduates and supporters at an August forum. The Fuqua School teamed with the Athletics Department to produce the first Coach K/Fuqua School of Business Leadership Conference.

Stephen Cooper of Enron addresses the audience. Les Todd.

Rick Wagoner, president and CEO of General Motors, discusses leadership in turnaround firms. Les Todd.

Headlining were several high-profile alumni, including Betsy D. Holden '77, co-CEO of Kraft Foods; Alan Schwartz '72, president of Bear Stearns; and Rick Wagoner Jr. '75, CEO of General Motors. Also participating were Stephen F. Cooper, a Duke parent and acting CEO of Enron; former Duke basketball players Grant Hill '94, of the Orlando Magic, and Billy King '88, general manager of the Philadelphia 76ers; President Nannerl O. Keohane; basketball coach Mike Krzyzewski; and Fuqua dean Douglas Breeden.

" Executives as role models are now more important. Successful leadership across industries and different situations--and this was reinforced from sports leaders like Coach K, too--has many commonalities," Holden said. "The common traits I noticed included creating a shared vision; establishing core values; developing a game plan that stretches the organization; providing frequent, open, and honest communication; and building employee commitment and trust."

But managing long-term strategies isn't easy in a short-term world, Wagoner told a panel on corporate turnarounds. He said recent business failures and huge bankruptcies teach a fundamental economic truth: The growth that matters most is economic value. That led him to a complaint about corporate behavior. "I think constantly shuffling management is oversold. Some outside expertise on fixing a problem is fine, but it pays to know something about the business you are in," he said.

" There is pressure to make big-bang changes, and that contributed to the bubble," he continued. "But managers should ask if you can rehabilitate before you restructure. Can you go from stupid to smart? My answer is yes, and the guys in Canada are proof. The same guys are running the factory. They made consistent progress, and that takes leadership at the factory and at the corporation."

Wagoner said he believes the seeds for a meltdown of Adelphia, Enron, Tyco, and WorldCom were planted when short-term results replaced sustainability as management's key driver. "The whole background of this was expectations and the elements of pressure to keep up the pace of earnings or sales. Which leads to another question that is part of leadership: Are we in this business short-term or for fifty years?"

" Scandal 101" could be the name of a number of courses being offered this fall on college campuses. Fuqua reintroduced an ethics course last spring as an elective and plans to offer it again this spring, although there are no plans to make it mandatory. Breeden says the intention at Fuqua is to instill ethical thinking into all courses.

Schwartz, who helped organize a business-ethics roundtable at the conference, said, "Of course, the problem with Enron was that no one stepped up. You can't wait for the big game to address the issue...ethics is an everyday issue."

And a personal responsibility, he added. "Ace Greenberg, who was a legendary leader at Bear Stearns and a prolific memo writer, was absolutely rigid about ethics. He used to put out memos that said, 'If you see something that doesn't make sense, speak up.' I remain a big fan of whistleblowers."

In the business environment of the 1990s, Schwartz said, the attractiveness of making even more money meant that imperial CEOs would adopt bet-the-ranch strategies and suspend legal and ethical rules. "The public now thinks most CEOs put themselves first. Karl Marx is probably in his grave saying, 'I'm right.' The nature of capitalism is to overshoot equilibrium. It is messy sometimes, but the market will respond."

Enron, of course, has become Exhibit A in Congress and in the ethics debate in B-schools. Case Western Reserve University offers a two-part course, "The Short Road from Unbelievable Success to Unmitigated Disaster" and "Enron 101." Enron whistleblower Sherron Watkins is lecturing at the University of California at Irvine.

Only at Fuqua, however, has the acting CEO and chief restructuring officer of Enron already given a lecture on "Emerging from a Crisis." In a packed auditorium, Stephen F. Cooper's presentation was remarkable in that he ripped into the lush perks and sweet deals granted to dozens of corporate heads, including those at Enron.

" Everybody wanted to put their balance sheets on steroids," said Cooper, the co-founder and managing principal of Zolfo Cooper, a turnaround firm. "We turned CEOs into rock stars, their boards were either misinformed or uninformed, and the advisers--lawyers, bankers, Wall Street analysts--did nothing but paint and promote a picture of health. There was a sense of entitlement, and I see it in almost every situation where management calls us in to fix their problems."