The corporate governance of iconic executives.

• Author: Lin, Tom C.W.

This Essay explores the special corporate governance challenges posed by iconic executives. Iconic executives are complex, bittersweet figures in corporate governance narratives. They are alluring, larger-than-life corporate figures who often govern freely. Iconic executives frequently rule like monarchs over their firms, offering lofty promises to shareholders, directors, and managers under their reign. But like many stories of powerful and influential figures, the narratives of iconic executives also contain adversity and danger. Part of the acquiescence and enchantment with such figures is rooted in the virtuous promises embodied by their presence, promises of unity, accountability, and effectiveness in corporate governance. Unfortunately, for many shareholders, these promises turn out to be illusory, empty, and full of peril The threatening hollowness of such promises exists because the virtues of unity, accountability, and effectiveness pledged by iconic executives also contain the vices of excessive deference, overconfidence, and licentiousness. Given such dangerous duplicity, this Essay calls for greater governance of iconic executives.

INTRODUCTION I. ICONIC EXECUTIVES II. THE PROMISE OF UNITARY CORPORATE EXECUTIVES A. Unity B. Accountability C. Effectiveness III. THE PERILS OF IMPERIAL CORPORATE GOVERNANCE A. Excessive Deference 1. Organizational Deference 2. Legal Deference B. Overconfidence C. Licentiousness CONCLUSION INTRODUCTION

The modern corporation is one of the greatest fictions and inventions of humankind. (1) It has made unparalleled wealth, unmatched progress, and unimaginable innovations a reality through the ingenuity and hard work of enterprising individuals. Nonetheless, the modem corporation is not without its flaws and challenges, imperfections and difficulties coded in its essential form. The modern corporation is owned by its shareholders, but governed by its directors and officers. (2) This inherent dissonance between ownership and management creates many advantages, (3) but also presents many corporate governance challenges. (4) Such challenges are exponentially magnified and further complicated when the manager of a corporation is of elevated stature and prominence, when the corporate manager is an "iconic executive." (5) This special set of challenges resides in corporate governance territory partially distinct from plots claimed by directorism, (6) managerialism, (7) and shareholderism. (8) The aim of this Essay is to venture into this distinct territory and explore this special set of corporate governance issues: the corporate governance challenges posed by powerful and influential iconic executives.

This Essay does not intend to serve as a normative, wholesale indictment of the corporate governance of iconic executives, nor does it intend to serve as a descriptive, resigned apology of the status quo. Instead, this Essay inquires into the unique considerations presented by the corporate governance of iconic executives and cautions against blind assent to their governance.

This Essay proceeds with this inquiry in three parts. Part I begins with a character sketch of iconic executives. (9) It describes their distinct attributes and functions in the modern corporation, and proffers an explanation for their seductive allure. Part II then explores the promise of iconic executives. Borrowing from constitutional law's discourse on the unitary presidency, (10) it illuminates the interrelated virtues of unity, accountability, and effectiveness in having a strong corporate unitary executive. Pivoting into the shadows, Part III examines the vices of such imperial governance and warns of the perils of iconic executives. Utilizing an instructive, albeit inelegant, penumbra cast by political despots, dictators, and strongmen, it warns against excessive deference, overconfidence, and licentiousness in boardrooms and executive suites. Finally, this Essay concludes with a cautionary coda on the bittersweet duplicity of iconic executives.

1. ICONIC EXECUTIVES

   Iconic executives are precious and rare creatures in the corporate ecosystem. The contemporary iconic executive is an epiphenomenon of modern media and modern business, often appearing as an alluring chimera of businessman, statesman, and celebrity. (11) Iconic executives frequently serve as the chairman and chief executive of prominent publicly-traded corporations. (12) Many perceived the modern iconic executive as both a personification and a reincarnation of the mythical captain of industry from the Industrial Age, as described by Thorstein Veblen:

   In the typical case he was business manager of the venture as well as foreman of the works, and not infrequently he was the designer and master-builder of the equipment of which he was the responsible owner.... [A] man of workmanlike force and creative insight into the community's needs, who stood out on a footing of self-help, took large chances for large ideals, and came in for his gains as due reward for work well done in the service of the common good, in designing and working out more effective organization and industrial forces and in creating and testing out new and better processes of production. (13) The iconic executive is distinct from his or her ordinary boardroom brethren. Whereas ordinary executives are seen as mere temporary stewards of their firms, iconic executives are viewed as oracles, visionaries, and gurus. (14) Whereas ordinary executives are perceived as important to the success of their firms, iconic executives are viewed as indispensable to the success of their firms. Whereas ordinary executives are considered as one of many factors for investors, iconic executives are considered the determinative factor for investors. (15) Whereas ordinary executives are seen as faceless managers of their corporations, iconic executives are seen as doppelgangers of their firms.

   Throughout her exceptional history, America has been fortunate to have had more than its fair share of iconic executives in the past and in the present. (16) Iconic executives of time past like Andrew Carnegie, Henry Ford, John Pierpont Morgan, John D. Rockefeller, Cornelius Vanderbilt, and Sam Walton helped a nation rebuild after the Civil War, rise out of the Great Depression, and move towards the Great Society. Present day, iconic executives like Warren Buffett, Bill Gates, Steve Jobs, Jeff Bezos, Jamie Dimon, Sergey Brin, and Larry Page are helping to create wealth and economic progress to safeguard the present and shape the future. (17) For many investors and individuals, these iconic executives become mythical figures with seductive allure.

   Part of the profound enchantment with iconic executives can be explained by the immeasurable, amorphous, and complex nature of leadership and power. Effective leadership can manifest itself in a wide range of personalities from all backgrounds. (18) More than one type of person can make for an effective executive. Often, an executive is effective because of soft values and soft skills that are difficult to measure and replicate. (19) Thus, individuals, like iconic executives, who appear to possess such illusive traits and produce sustainable, successful results are exalted, and given great liberties to manage their firms.

   Functionally, because of the exalted stature of iconic executives, they exert a great deal of influence internally within their organizations and externally with the wider public. (20) Internally, iconic executives often unilaterally set forth the strategic visions of their firms, and carefully manage the execution of those visions. (21) Iconic executives do this more so than ordinary executives. Iconic executives often have an overwhelming influence in the composition of the firm's board of directors, the selection of high-level operational managers, and the operation of the corporation's key departments. (22)

   Externally, business peers, policymakers, regulators, journalists, and the public view iconic executives as social celebrities, thought leaders, economic mavens, and business gurus. (23) Among their business brethren, iconic executives, their behaviors, and their policies are often viewed as models and templates to adopt, mimic, and replicate. Therefore, the practices of iconic executives--good and bad--can significantly influence trends and norms in the business world. Outside of the business realm, iconic executives serve as counselors to presidents, legislators, and ministers--foreign and domestic--on a whole host of matters. (24) In short, they populate a superclass of merchant statesmen that influence policies and decisions beyond those of their own firms, industries, and nation-states. (25)

   Ultimately, because of their select prominence, influence, and power, iconic executives offer special promises and pose distinct dangers for their firms, their shareholders, and the larger public.

2. THE PROMISE OF UNITARY CORPORATE EXECUTIVES

   Iconic executive power holds special promises for the modern corporation. Executive power in the governance structure of our federal body politic offers an instructive lens for examining the promises of executive power in the governance structure of our corporations. The President of the United States has frequently been compared to the chief executive of a large, complex corporation. (26) As President Calvin Coolidge famously observed, "The business of America is business." (27)

   Fundamental governance principles, in the political and corporate realms, often find bases in the allocation of power among separate groups of stakeholders. (28) The governance powers of the American federal government are divided among three co-equal branches--the executive branch, the legislative branch, and the judicial branch. (29) This division in political power is in large part a reaction to the unchecked rule of the British crown over the colonies prior to American independence. (30) Similarly, the governance...