Corporate governance along the digital divide.

• Author: NADHERNY, CHRISTOPHER C.

A just-completed study with top dot-com executives surfaces a starkly different portrait of stewardship.

THE LEGENDARY newspaper columnist Walter Winchell once observed, "Nothing recedes like success." Executives at a lot of dot-coms that were on top of the world just a year or two ago now know only too well what he meant. The ups and downs of many new companies built around the Internet over the last four years are prominently chronicled in the media daily. A good deal of this attention has centered on areas ranging from the growing number of once pioneering Web firms teetering on the brink of financial collapse, the high percentage of remaining businesses in this space that have yet to deliver profits and the sharp decrease in new capital available, to their rapidly shifting fortunes in recruiting and retaining the best talent.

Many dot-coms are being portrayed as renegade mavericks at best and outlaws at worst. The perception in some quarters is that they have been allowed to operate largely unchecked, flouting many of the rules and practices that traditional, already established businesses have had to live (and die) by for decades. If more of these fledgling enterprises had been held to the same or even comparable standards, one popular refrain now goes, more than a few might never have attracted funding in the first place, let alone find themselves in such dire financial straits today.

The finger pointing goes both ways, of course, with just as many Internet executives critical of their S&P 500 colleagues as the other way around. This was one of the findings of the landmark Talent.com study, in which Spencer Stuart surveyed several years ago a cross-industry and functional sample of senior executives at over 55 companies at different stages of leveraging the Web, from Fortune 500 to some of the best-known dot-coms. We found that traditional vs. Web-centric firms spawned not only different cultures but also competencies and capabilities. They also attracted talent with fundamentally different views about the Internet, expectations of leaders, and approaches to personnel recruitment and development.

Our interviews further revealed that these and other differences, real or imagined, were driven at least in part by a desire of many executives in both camps to distance themselves from each other and paint a less than flattering portrait of how the other side conducted business. As a rule, a majority of executives we surveyed at dot-corns back then viewed their traditional company peers as being consumed by hierarchy and bureaucracy, too slow to change and adapt, and risk-averse. In fact, we discovered that Internet company respondents...