How to Run a Company Well

Ten commandments for successful leaders.

7. A knack for developing talent is needed to build a stock of future leaders. People learn far more about the art of leading from a good mentor than from a great book. So effective leaders need not only to spot where the talents of a particular individual might be best deployed; they must also be teachers, conveying their skills to those around them (and encouraging others to teach their colleagues too). That is the way to create leaders at many levels in an organisation.

8. Emotional self-confidence. Accumulating a pool of talent requires an ability to work with people who may be better at their job than you are at yours, and to guide and motivate them. Leaders who are jealous of their followers do not inspire loyalty. Self-confidence also allows people to admit to weakness and ask for help without feeling defensive or inadequate. Successful leaders need to be able to say, “I don’t know what to do next,” without losing the respect of their colleagues.

9. Adaptability will prove invaluable when things go wrong. Surviving a reverse calls for resilience and flexibility. It is one thing to spot a change in the market, or in public attitudes, or in the political climate. It is quite another quickly to devise a completely different approach, even if that means abandoning an idea to which a leader has been passionately committed. Jeffrey Sonnenfeld of Yale University is cataloguing ways to turn misfortune into fortune. The key seems to be an ability to “reframe”: to reshape a problem so that from some angles it can look like a success.

10. Charm is not a quality taught on MBA courses, but few get to the top without it. A bit of luck helps too, though that may prove hard to arrange.

Many of these qualities are useful for leading any enterprise, but especially a publicly traded corporation. In turn, the way companies are led determines the prosperity of nations and the happiness of their workforce and their customers.

In response to the scandals and collapses of the past two years, governments have rushed in to tighten the rules of corporate governance. That is no bad thing: good governance may not guarantee good performance, but at least it provides tools to tackle bad management. And it is right to give boards a sense of responsibility and the means to exercise it. All this helps to rebuild trust.

There is, though, a danger that regulators, under pressure to be seen to act, will eventually go too far in some countries. Regulation is only one of several growing and conflicting constraints on corporate leaders. The glare of the media, the incessant demands of analysts and the increasing politicisation all make the job harder to do well. But corporate leaders now have an alternative. The demand for capable people to run businesses held by private-equity ventures is booming.

And If All Else Fails…

Talk to the chief executive of a public corporation about a job in private equity and “the first question is, ‘When can I start?’ They bite your hand off,” says Ashley Summerfield, a headhunter with the London office of Egon Zehnder. Running a business for a private-equity firm means not only shelter from the limelight: no small shareholders turn up at your annual meeting to moan about your pay, and the media and non-governmental groups are much less intrusive. In addition, there is a refreshing lack of ambiguity about what you are expected to achieve. The timeframe is manageable. The investor is rational and interested. The rewards for success are huge. And nobody asks awkward public questions about your pay package.

Running a large public company is still a thrilling and rewarding job, but nobody should take it for granted that there will always be a supply of leaders with talent and integrity willing to take it on. Too much mistrust and invective, and some of the best may simply decide the task is not worth the effort.

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