Executives passing the buck for failures that sank their companies or pushed them to the brink win no sympathy from business leaders and management experts.
"They need to man up and take responsibility," says Warren Bennis, founder of the Leadership Institute at the University of Southern California and author of books including Leaders and On Becoming a Leader.
"They kept winning, believing in their own omniscience and thinking they can get away with anything."
Chief executive officers summoned to Capitol Hill last week by the US House Committee on Oversight and Government Reform didn't point fingers at themselves, drawing criticism from fellow chiefs.
"There are three reasons why companies go out of business and individuals go out of business: No. 1 is arrogance, No. 2 is arrogance and No. 3 is arrogance," says Harvey Mackay, chairman and CEO of Minneapolis-based MackayMitchell Envelope Co. and author of Swim With the Sharks Without Being Eaten Alive and Beware the Naked Man Who Offers You His Shirt. "They all have chapped lips from kissing the mirror too much."
Testifying before the panel, Richard Fuld, who worked for Lehman Brothers for 39 years and was CEO when it fell apart, said he felt "horrible about what happened" and that management did "everything we could to protect the firm".
Fuld, whose compensation for his last eight years totalled US$484.8 million ($781.7 million), said Lehman had to seek bankruptcy protection last month because of a "financial tsunami" that was "bigger than any one firm or industry".
That's the wrong attitude, says Jeffrey Gault, CEO of Los Angeles-based LandCap Partners, which bought US$40 million of land and construction loans from Wachovia in August. "You're either the boss or you're not the boss. The CEO is the owner of the deal."
Maurice "Hank" Greenberg, who ran American International Group for 38 years until 2005, blamed successors for getting rid of controls he put in place that would have saved AIG, according to a statement he gave the committee. The insurer agreed to an emergency rescue last month giving the Federal Government a 79.9 per cent stake.
For their part, the two men who followed Greenberg at AIG faulted an accounting rule that they said forced the company to book unrealised losses. Martin Sullivan was CEO for three years until June. He earned US$4.6 million in salary and bonus in 2007, and was given US$47 million in severance and long-term compensation. Robert B. Willumstad was in charge until last month and received about US$4 million this year.
"Looking back on my time as CEO, I don't believe AIG could have done anything differently," Willumstad said in written testimony.
AIG, which had profits of more than US$10 billion in 2005 and 2006, lost billions in the mortgage-backed securities market. It was running short of cash when it agreed to the bailout and got a US$85 billion loan from the Federal Reserve. The Fed loaned it US$37.8 billion more last week.
At no point did the witnesses acknowledge errors in judgment, a management "travesty", says Rick Wartzman, director of the Drucker Institute at Claremont Graduate University in Claremont, California, which encourages effective management and ethical leadership.
"Being a leader is about being responsible and not passing the blame. True leaders step up," Wartzman says. "To say you're acting on the best information available is a failure of leadership that reflects a failure of the system."
Representative Henry Waxman, a Democrat who is chairman of the committee, has scheduled three more hearings as part of an investigation into the events leading up to Congress's approval of a US$700 billion rescue package. Waxman says hearings will start "holding those responsible to public account".
In their testimony, the CEOs put up "a weak defence" by saying that outside events were responsible for their companies' unravelling, says William Hopper, chairman of London-based investment bank WJ Hopper & Co. The resistance to accepting blame is linked to a "decline of the culture" in business, a shift away from "old-fashioned executives" who rose by working in every division of a company and understood "the craft of management", Hopper says.
Many executives now "come out of Harvard and Yale and start halfway up", he says. "All they're interested in is maximising their bonuses."