It's Time for Our Brightest CEOs to Step Up

What is it with CEOs putting their feet in their mouths lately? Sure, there are savvy ones like Steve Jobs and Richard Branson, or saintly ones like Bill Gates, who can do no wrong. But then there's BP CEO Tony Hayward calling the oil spill ‘relatively tiny' and Lloyd Blankfein, saying Goldman does ‘God's work'.

And let's not forget Toyota's Mr. Toyoda, who said nothing at all about Toyota's safety scandals until it was too late. It's inevitable to catch PR blunders with a 24 hour news cycle, but you can't help but wonder how CEOs can do what they do, yet say the things they say.

Along those lines, William F. Buckley used to quote an Austrian economist's adage that "the problem with capitalism is capitalists". Still, an ill-suited personality is no excuse for public blunders: when you're CEO, the buck stops with you -- that's why you're paid all those millions. Standing up in front of the world as the face of your company when the chips are down is part of the deal: you're accountable.

Take the oil spill as a terrible, extreme example. This kind of large-scale disaster is never directly caused by the CEO. From what we know of Deepwater Horizon so far, the catastrophe came from a combination of failures: a failure of the cement and casing system that was meant to plug the well, a failure of the crew to notice the pressure build-up when the gas started coming up, a failure of the company to spend more time on the whole drilling and plugging process, which could have left heavy mud in the pipes longer and helped resist the pressure, and a failure of a last-ditch "blowout preventer" that could have sealed the well.

You can point the finger at the casing guys (that would be Halliburton); you can point the finger at the crew; you can point the finger at the overall market pressures that lead companies to squeeze the time they spend on their work, and you could point the finger at the manufacturer or maintenance guy in charge of the preventer.

But in an enormous company like BP, each of these individual failures happens within a broader system that makes a company greater than the sum of its parts. That complexity also means most employees can't see the full implications of their activities.

Of course they're not expected to: the guy turning a valve is only paid to turn a valve. He takes the blame for the valve not turning, but not for all the consequences down the line. It's his manager who's accountable for the bigger picture, and he's paid extra to take on the additional burdens of his or her team's work, not just to make sure employees show up on time. Someone was in charge of managing the BP/Halliburton relationship - there should have been no ambiguities between them.

But there's one manager at the very top who has an overview of the whole - one person who can see the effects of company's own ‘invisible hand'. It's the CEO: he or she is accountable for the broader picture, even if the CEO can't see all the individual pieces that shape it. And it's the CEO who's accountable when things go very, very wrong. Lest you think this is a diatribe against the role of a CEO, it's not: Ayn Rand had Dagny Taggart personally promise to take on full accountability if buying Rearden Steel ended up a failure - the point is to hold CEOs to their task.

You'll hear some free-marketers agree that CEOs do have total accountability, only it's limited to the board and the shareholders. But when disaster strikes a company, and affects regular people - those people are right to turn to the CEO.

Trouble is, the Haywards, Blankfein's and Toyoda's are shirking or scorning this expanded accountability when they allow themselves these "PR blunders". Technically, the spill is "relatively tiny" - if the spill is compared to, say, space. And Toyoda may have a point that it's a cultural divide that prevented him from having the right PR strategy towards Americans, even though they're about a third of his customers. And Blankfein may very well be doing God's work, lubricating the economy, but then he'd also have to apologise for the entire crisis, in his godly omnipotence.

The danger is that the more CEOs appear unaccountable, the more regular people will feel they can't turn to the CEOs and the private sector when disaster strikes: they'll end up turning to the government. So step up guys - you're the best of the brightest: who knows what blunders will happen if you let politicians get into your shoes.