Banking and corporate management used to be a boring, backroom affair, but since the 1980s, it has increasingly become careers taken by people desiring fame and wealth.
Arguably, this unrestricted greed, with few checks and balances, was the driving force behind the 2008 financial crash.
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Most recently, Musk exemplifies this archetype. In under two months, from 28 October to 20 December, he went from fresh-faced Twitter CEO to the promise of resignation.
In this period, Twitter faced countless lawsuits, had lost half of their biggest advertisers, and at one point faced potential bankruptcy. Musk’s other ventures felt the impact too, with Tesla shareholders complaining that Musk had “abandoned” them after a $700 billion drop in stock market value. His personal wealth followed, and Musk suffered the greatest loss ever recorded: $182 billion (enough to end world hunger many times over, by the way). Ouch.
Governance mistakes were made from the offset. Firstly, he immediately fired the entire board and made himself the sole member.
Then, around half of the payroll are let go, including many whose job it is to fight misinformation and hateful content. Add to this some poorly thought through policies, such as the ‘pay for play’, blue tick, 'official' status, contravened labour regulations, and ending remote working entirely, and you have a perfect storm of poor governance.
At the centre of all of this is poor governance, which was caused by Musk’s autocratic, impatient, inconsistent and unqualified management.
Throughout this period, he rushed through poor decisions, centralised control totally, removed anyone who was critical and chased the spotlight – the cult of the 'celebrity CEO’.
It isn’t just Twitter, but it also isn’t just Musk
Elizabeth Holmes, the enchanting 19-year-old who founded Theranos, a biotech startup that would soon raise $700 million, had a boardroom of big name executives, including Henry Kissinger and other White House secretaries.
Despite this, Holmes and Theranos were soon caught up in a high-profile fraud investigation: her wealth plummeted to zero and she now faces criminal charges.
The Enron collapse is probably one of the most well known cases of corporate fraud in US history, and many of the same themes apply. Executives, using flashy figures and misleading accounting techniques, lied to board members, shareholders and regulators to inflate profits and hide debt.
In each case, the same factors apply: ego, greed and the desire for wealth and fame allowed CEOs, CFOs, etc, to pacify boards, remove checks and balances, and shape company policy in line with their lofty ambitions. Musk is the best example of a failing CEO longing for the spotlight, but he is not an isolated case.
The remedy? Strong, critical, and engaged boards, and humble, effective executives, all tied together by an education on the topics that matter.
David W Duffy is co-founder and CEO of The Corporate Governance Institute
