Tag Archives: 99 percent

A Second Note on The First CEO: the CEO As Agent of Historical Change

Susy Jackson, an editor at Harvard Business Review, emailed me last week to tell me that she and her colleagues had discovered an illustration of the acronym “CEO” that predates the early instances discussed in my previous post on this subject.  Time to update that post and, while we’re at it, the entry on CEO in the Oxford English Dictionary. (I’ve emailed them to let them know).

A search through the HBR archives (one of Jackson’s colleagues described it as “not really very scientific, but fun”) turned up an article in the May June-1970 issue of HBR by Joseph O Eastlack, Jr. and and Phillip R. McDonald entitled “The Role of the CEO in Corporate Growth.” As we might expect, the article takes care to spell out and abbreviate the term in its first use: “chief executive officer (CEO)”; the speculation is that this was “standard treatment for a term that was thought to be known to HBR readers, but not so familiar that they could dispense with spelling it out altogether.” In 1970, after all, the CEO had just arrived on the scene.

A few thoughts about that entrance.

In my previous post I speculated that the term CEO may have come into wider use at HBR under the editorial direction of Ralph Lewis, who was appointed editor in chief in 1971, and oversaw several changes in editorial direction. This 1970 illustration of CEO predates that appointment; Edward Bursk was the editor in chief of HBR in 1970. Still, there’s no doubt HBR under Lewis’ direction helped define and disseminate the term.

Whether this more frequent recourse to the acronym in the pages of HBR was the result of Lewis’ policy or just a sign of the currency the acronym was gaining in management and governance discourse is hard to say. But it’s pretty clear that the wide acceptance of the acronym in the 1970s marks a shift – not just in editorial convention, but also in ideas about governance, leadership and power, within and without the corporation. By the mid to late 1970s, CEO is well on its way to becoming not just a convenient tag but an important construct of corporate power, social status and (by the 1980s) cultural celebrity.

The temptation to start painting on a broader canvas is almost irresistible. After all, big things are happening in the early 1970s, in business, in American society, around the world. When the figure of the CEO emerges in the 1970s, the heyday of the man in the gray flannel suit has reached its nadir. In America and throughout the industrialized West, the postwar boom – which witnessed the rise of the managerial class – has yielded to a grim post-industrial reality.

Indeed, the CEO will be one of the defining figures of the period that runs from roughly 1970 to 2010, the post-industrial period. In response to falling profit rates in manufacturing, we see during this period “a shift from productive enterprise to financial manipulation” (as Chomsky, summarizing economic historian Robert Bremmer, recently put it); I think it’s no coincidence that with the arrival of the CEO on the scene, the “financialization” of the economy has begun. (I understand the word is controversial; but let it stand for now: these are just broad strokes.)

The CEO emerges from this shift. He is its creature and creator – an agent entrusted with its execution – and the period of the CEO’s glory extends from the triumph of neo-liberalism during the Reagan-Thatcher era all the way to the financial crisis of 2008 and the institutional failures and social collapse it precipitates.

Bank of America Shareholder Meeting – A Failure

The Bank of America Board of Directors was on the defensive yesterday. There were protestors gathered outside the annual general meeting; security was high; inside, the mood was testy. In his opening remarks, Chairman of the Board Chad Holliday flubbed an announcement about question and answer time, prompting a shareholder to interrupt the preliminaries; and when Q & A on shareholder resolutions began in earnest, CEO Brian Moynihan stuck to terse, one-sentence, boilerplate answers to most questions, until one stockholder stood up and asked for “more nuance and explanation” and “a more thoughtful response” to the owners’ questions. General applause ensued, but the dialogue did not really improve. In that respect, the meeting felt like a lost opportunity: the Board simply refused to engage.

There were six shareholder resolutions but (as the Q & A revealed) really just three big issues on shareholders’ minds: executive compensation, predatory mortgage and lending practices, and political contributions.

One shareholder seemed to sum up the feelings of many in the room when he said that “it’s a comedy” to be a Bank of America shareholder, given the gap between the stock’s performance and the compensation of its executives. Several people directly asked Brian Moynihan to forgo (or, as one shareholder put it, “deny”) his raise for the coming year. This came to a head in an exchange with one shareholder, who said that the issue really came down to where Moynihan’s “heart” is. “Do you love your neighbor as yourself? Are you going to turn down your raise?” Like a boy at his catechism, Moynihan parsed the question and said that he had been raised to love his neighbor as he loves himself (how could he say otherwise?), but when it comes to turning down his raise the answer is simply “no”; and then he repeated a few prepared phrases about how his own compensation is “aligned” with the Bank’s strategic goals. That was his gospel.

Still, shareholders urged the bank to consider the “injustice” in the world, and Bank of America’s part in it. Activist shareholder Dawn Dannenbring (whose appearance at a JP Morgan shareholder meeting I blogged about here) asked the Board to think about why they need to have heightened security at their shareholder meetings: “If you were a better corporate neighbor,” she remarked, “you wouldn’t have to be so scared.” To charges that it had “decimated” the communities where it did business, the Bank responded with a bland assertion: “the success of communities is equal to our success”; at one point Moynihan even muttered the phrase “good for America,” but it sounded as if he had never really warmed to that talking point, and his voice trailed off.

Some tried to appeal to the bank’s business sense: if Bank of America is seen “not as part of the solution but as causing the problem,” it runs a “reputational risk.” That’s putting it mildly. Others were not so restrained: “You’ve got to stop foreclosing on families,” exclaimed one shareholder; and a number of people rose during the Q & A and told their own stories about how the bank – their bank – had ruined them. Moynihan was patient and even compassionate with these share-owning customers, and told them they could talk to a B of A “teammate” on the spot, that very day, about their problems. But the crowd was repeatedly reminded that these individual cases – their own cases or the cases of family and friends – did not bear on the proposals they had assembled to vote on. This was a myopic response at best, as if behind each of these proposals there were not thousands, hundreds of thousands, millions of individual stories that need to be told, and that make up the big picture of the bank’s role in America.

While the bank is reluctant to open a dialogue on its role in society, it is aggressive in its bid for political power and social influence. And in the wake of Citizens United, the battle lines around political spending are being drawn. A proposal to prohibit all political spending from the corporate treasury – which I wrote about in a previous post — received just 4 percent of the vote, but the resolution still counts as an important first step. Another political spending proposal, requiring Bank of America to disclose all grassroots lobbying, fared much better, garnering about 30 percent of the vote (right around the 32.73 percent it gained last year).

Calls for disclosure of political spending are getting harder to ignore. And though prohibitions and other checks on spending still face an uphill battle, the resolution to stop political spending at least gave shareholders a chance to say a few words about the risks and uncertain outcomes of profligate political spending. Shareholders cited research (by Hadani and others) to support their position; but it is hard to say whether this made any impression whatsoever on the Board. If so, they weren’t going to let it show. They just seemed to want to get the whole thing over with. They had not come to deliberate, or listen or learn. They had come to defend. And that is why the 2012 Bank of America shareholders’ annual meeting should be reckoned a failure.