Dave: I’d refine your point as follows: I think more than a few of the people in charge really don’t fully understand the complexity of the operations they are running and at both the micro (individual deals and projects) and macro (enterprise wide) levels.
Citi is an excellent case in point. You don’t take a large market bank (Citibank), national insurance company (Travelers) and investment house and throw them together. You not only have major cultural issues (because, God knows, insurance folk and investment banking folk don’t even speak the same language, business-wise), but the logistics and mechanics of running the “one stop financial and insurance shop” that uber-optimists put together is mind-boggling.
Let’s face it: Most CEOs are salesmen and saleswomen, pure and simple. The CFO ideally should be a watchdog, but the complexity has overwhelmed more than a few CFOs as well, and many have been co-opted by “performance incentives”, which is nothing other than the CEO buying loyalty. At some point, you cross a complexity threshold, where the size and breadth of an organization makes it inherently unmanageable.
At that point, you have CEOs, who are pro-growth and pro-revenue to begin with, with very limited attention spans, reviewing potentially multi-billion dollar deals and making decisions with little to no forethought or foresight.
That’s when reliance on analysts, ratings agencies and other so-called “experts” becomes tremendously important and presents a huge vulnerability. I’m certainly not excusing the CEOs and management teams, far from it. They should have known better and were handsomely paid to know better, but didn’t.
Again, not criminality, but stupidity, cupidity and greed. Akin to those senior managers I worked with that didn’t know how to read a P&L properly, the cheerfully and willfully enthusiastic idiots were running the show. And, they were being told by those who should have been practicing diligence and probity, like Moody’s and Andersen (remember Enron?) and Jones Day, that all was well.
It wasn’t and here we are, arranging deck chairs on the Titanic.
