Nobility needed

Our annual survey of readers reveals that accounting scandals reflect poorly on CEO power, but improved customer service will recharge it.

2002 Power Ratings The biggest losers Trust bust Customers beat the Street How we did it Survey demographics More Power People articles The bracket game

What makes a good CEO? That’s the question of the era as former powerful network industry leaders continue to sink like so many storm-tossed dinghies. In the past three years, the companies featured in our annual Powerometer survey have replaced 11 CEOs – akin to 50% turnover.

Granted, at some companies, such as AT&T and IBM with C. Michael Armstrong and Lou Gerstner, CEO retirements were planned well in advance and successors – David Dorman and Sam Palmisano, in these cases – long groomed for top corporate command. But most CEO exits stand as another measure of the industry’s seemingly endless unrest.

This storm is different from the typical economic dip, too. It has been worsened (if not caused) by many of these dismissed CEOs. Corporate captains should hike out, right the keel and get their organizations – and consequently the whole industry – back on course. Instead many entered the galley, extracted cooked books then burned workers, investors, customers and themselves.

So the anticipated 2002 midyear recovery never surfaced. Not surprisingly then, trust in the leaders of the network industry, while not erased, certainly has dwindled. So say the 250 readers who participated in this annual Powerometer survey. Almost three-quarters of participants agreed that recent accounting scandals have hurt the power of network industry CEOs.

Using a scale of 1 to 100, readers rated a CEO’s power, with a higher number meaning more power. Comparing this year’s means – the Power Ratings – with last year’s, readers did not grant a single CEO more power and dropped the Power Rating of half by 10% or more. Moreover, the mean for all CEOs sank to its 1998 level from a five-year high in 2001, a drop of 6.2 points.

Those penalized come primarily from the stagnant telecom sector: Duane Ackerman of BellSouth, Bill Esrey of Sprint, Ed Whitacre of SBC Communications. Interestingly, readers also docked Carly Fiorina’s rating by a hefty 12.3%, presumably because she has much to prove at a post-merger Hewlett-Packard.

Novell’s Jack Messman is the good news/bad news story of the survey. Although readers deducted 10.6% from his Power Rating, landing him among the biggest losers, they chastised so many others more severely that Messman yielded his last-place spot to WorldCom’s leader at the time of the survey, John Sidgmore – and outranked two other telecom executives to boot. (When we conducted our survey in the fall, Sidgmore had made clear his intent to leave WorldCom, but Michael Capellas – formerly HP president – had not yet joined the company as his replacement.)

Respondents offer this basic advice for improved power: Service the customer. Half said the ability to please a customer was more important than the skill of pleasing Wall Street in determining a CEO’s power. Those who would make the customer king know this – happy customers mean better revenue, and that’s good for the Street, too.