BP's walking-dead CEO Tony Hayward is getting tons of grief for going to a yacht race while the Gulf oil spill continued. It was a bad PR triple crown. First, the race was in the English Channel—a body of water not fouled (yet) by BP's rogue well. Second, at a time when many people who make their living on modest boats in the Gulf of Mexico are facing long-term unemployment, he was watching a yacht race. Third, given that he was on hand to watch other people do the work of piloting his 52-foot vessel, it highlighted the image of Hayward as a sort of aristocrat who can't be bothered much with the problems of what BP Chairman Carl-Henric Svanberg called "the small people." (In Britain, CEOs of major companies are frequently elevated to sirs and lords. Hayward may be in line to become Lord Tony of Mass Torts.)
In theory, the leisure pursuits and consumption habits of a CEO—even the CEO of a company in crisis—should be his own business. But again and again and again, we see executives at embattled companies engage in conspicuous—and conspicuously stupid—displays of consumption.
In November 2008, the CEOs of the Big Three U.S. automakers flew to Washington, D.C., on their corporate jets to ask for a bailout. That prompted Rep. Gary Ackerman's immortal line: "Couldn't you all have downgraded to first class or jet-pooled or something to get here?" In 2008, John Thain, the executive brought in to clean up the mess at Merrill Lynch, spent $1.2 million renovating his already nice office. Roger Lowenstein's The End of Wall Streethas a fantastic anecdote about Vikram Pandit, the CEO of bailed-out, government-owned Citi, having lunch at Le Bernardin:
Pandit looked discerningly at the wine list, saw nothing by the glass that appealed and ordered a $350 bottle so that, as he explained, he could savor "a glass of wine worth drinking." Pandit drank just one glass; his friend had none.
I thought it might be useful to offer a few rules for CEOs about how to sate their appetite for luxury while avoiding the scrutiny.
- Avoid any activity generally linked with European aristocracy. This includes, but is not limited to: yacht-racing, polo, lavish weddings to first cousins, and spending the weekend collecting rent from tenant farmers.
- If you must engage in conspicuous consumption, do so in private—and in your home, not at the office. In the age of Twitter, cell phones that double as video cameras, and Web sites that track the movements of private planes, it's very difficult to maintain privacy. The public assumes that CEOs lead posh lives, that they spend more money on food, drink, and entertainment in a week than most people make in the year. But most of us don't really care about this. We just don't want to have it rubbed in our faces at a time when a company is imposing huge costs on us. So, go ahead, bathe in champagne, dart out of a Congressional hearing to bid on a Monet, shoot birds on the grounds of your castle in Scotland. Nobody will find out or care. Hiring a tailor to come to your house to measure you for a $5,000 suit is fine. Dropping $4,000 at Bergdorf Goodman in front of a sales assistant who is a Gawker devotee is a no-no.
- Conspicuously consume down-market goods in public. Politicians are really good at doing this. They take vacations in national parks, as President Clinton did, and dine at greasy spoons. Use the news cycle and the paparazzi culture to your advantage. Vikram Pandit should have stopped at a convenience store around the corner from Citi's headquarters, bought a 40-ouncer, and chugged it on the sidewalk. John Thain could have shown up at a Home Depot in suburban New York, introduced himself to a sales associate, and inquired loudly about what sorts of nuts were needed to install a ceiling fan. If Tony Hayward felt an overpowering need to get on the water, he should have commandeered a 15-foot Boston Whaler Montauk 150and gone fishing.
Yes, these suggestions would limit CEOs' freedom to indulge their god-given right to squander their wealth. But reining in impulses should be a job requirement for CEOs. Of those to whom much shareholder wealth is given, much is expected. And if you're focused on the long-term, as any CEO should be, there will be plenty of time to enjoy the finer things in life after retirement. Of course, if you think your public image is irredeemably shot, and if your time horizon as CEO doesn't extend beyond December 2010, and you don't really care what the American public thinks, then you may as well join the other toffs and spend the weekend watching a bunch of guys sail your yacht.