BUSINESS

MAKING SENSE OF BUSINESS BLUSTER

A new book cuts the spin, and reveals what CEOs are really saying

KATHERINE MACKLEM April 3 2006
BUSINESS

MAKING SENSE OF BUSINESS BLUSTER

A new book cuts the spin, and reveals what CEOs are really saying

KATHERINE MACKLEM April 3 2006

MAKING SENSE OF BUSINESS BLUSTER

A new book cuts the spin, and reveals what CEOs are really saying

KATHERINE MACKLEM

In their last for-

mal letter to Enron shareholders before the company’s collapse, chairman Kenneth Lay and CEO Jeffrey Skilling used the words “strong” and “large,” or their derivatives, five times. Included in Enron’s annual report for 2000, the letter runs almost 1,800 words, and describes a growing, gargantuan enterprise immune to the vagaries of the marketplace, including a possible downturn in the economy. Using the language of sports, the letter states that the company continued in 2000 to “outdistance the competition”—in 36-point font, no less—and that with its “size, experience and skills,” it would overcome any future impediments. Conjuring images of U.S. military might, the leaders promise shareholders that the company is “laser-focused” on earnings per share. Yet within nine months, as the authors of a soon-to-be released book on the language of CEOs point out, Enron was broke,

with no earnings per share and nothing in its arsenal to keep it out of bankruptcy.

The Enron letter is a perfect example of “exaggeration to the point of outright lying,” says Russell Craig, an accounting professor on sabbatical from the Australian National University, currently based in Toronto. He’s coauthor, with Joel Amernic, professor at the Rotman School of Management at the University of Toronto, of CEO Speak, The Language of Corporate Leadership. The Enron letter offers a “barrage of blarney, bluster, and business-suited hucksterism,” Amernic and Craig say. What’s more, the letter provides insight into the way Lay and Skilling view the world—and themselves. Not only do they have a love affair with markets, the two leaders emerge as so egocentric and full of hubris that the authors question whether they were “affected by delusional psychosis.”

The Enron senior executives are just two examined by the accounting professors. Amernic and Craig look at the written works of a range of U.S. and Canadian CEOs, in-

FORMER NORTEL CEO JOHN ROTH SWITCHED FROM USING T TO ‘WE’ TO DOWNPLAY PERSONAL FAILURE

cluding Jack Welch, formerly of General Electric, Bill Gates of Microsoft, and John Roth, who led Nortel as its stock price peaked and then entered into a free fall. The book introduces a novel approach to business analysis, as Amernic and Craig dissect the letters, speeches and policy statements of CEOs. Line by line, they sift through public documents, in-house newsletters and annual reports to show how corporate leaders portray not only their companies, but also themselves. And they find that much of the language of CEOs is rife with manipulation, delusion, and even deceit. “What you see is collections of narratives, which, honestly, are gross examples of hyperbole and exaggeration,” says Craig.

Amernic and Craig also explain how CEOs use language to build themselves up. A number of metaphors emerge: CEO as messiah, warrior chieftain, modern saint, or great healer. Bill Gates, for instance, is a liberator. The world’s richest man and CEO of Microsoft is presented on the technology company’s website as an easygoing, nice-next-door-neighbour type of guy. A photograph of Gates with glasses, tousled hair and a big grin, alongside

“Bill’s Letter,” is meant “to condition readers to accept that such a clean-cut wholesome individual could only have sound and reliable financial information to report.” Meanwhile, on the site, there’s nothing about the impact of a 1999 antitrust case on the revenue, income and viability of the corporation. A hyperlink, scribbled by hand beside Gates’s photo that says “any time, any place, any device,” implies that the company will always be able to satisfy its customers’ needs. “Thus,” conclude the authors, “Microsoft indulges in crude self-eulogy, portraying itself as a universal, almost divine, being.”

Some CEOs, too, see themselves as godlike. Jack Welch, CEO ofGE from 1981 to 2000, wrote a shareholder letter in his last year at the company that is an “almost biblical manifesto,” where he presents his “credo of values and beliefs.” Nicknamed “Neutron Jack” for his policy of regularly firing the bottom-performing 10 per cent of his staff, Welch declares that to keep these individuals on would be not only a failure of management, but also an act of “false kindness.” And then there are the vacant messages, disguised with jargon, a crime often seen among CEOs of technology companies. Sol Trujillo of the Australian telecommunications giant Telstra Corp. promises in a letter to shareholders the company would deliver “a powerful, seamless user experience across all devices and all platforms,” and its customers could expect a “new expe-

rience at literally every touch point.” “You tell me,” says Craig, “what does this mean?” Easier to decipher—but no less disconcerting—are the messages of John Roth. In 2000, the then-CEO of Nortel Networks was the epitome of business success. He led Nortel as its stock shot through the stratosphere in July, 2000, to reach $124-50 a share. He was still leader when the company’s fortunes turned and its stock price plummeted. It was on its way down, in March 2001, when he issued what Amernic and Craig call an “extraordinary letter” to shareholders, published in newspaper ads across the country. Released three weeks after the company warned it could get caught in a U.S. economic downturn, the letter/ad—“the work of a virtuoso,” say Amernic and Craig—pulls blame away from Roth. Using positive language— Nortel is “an industry leader” and an “innovator”—Roth creates an image of financial well-being. This part of the letter is “powerful, reassuring, feel-good rhetorical bluster, rounded off by hyperbole,” they say. But by shifting from the use of the word “I” to “we,” Roth makes the bad-news story of the impact of a lousy U.S. economy a collective story, and not his own personal story of failure. In the end, the letter is hollow, Amernic and Craig write. “When times were good, Roth let the cult of CEO personality prevail,” the authors say. “But when times were tough, he distanced himself from personal liability.” In a world increasingly focused on accountability, Amernic and Craig argue for more monitoring of the written and spoken words of CEOs. “All the rules, regulations and accounting standards under the sun will not ensure good corporate behaviour in the absence of effective monitoring,” they say. “CEOspeak requires a good dose of accountability.” And maybe investors can better protect themselves, if they just learn to listen. M