Company Boards Discover It Troublesome To Restrict Executives’ Threat-Taking Hobbies : NPR

The danger calculus for firms whose leaders take part in perilous actions is extra difficult as we speak, as company titans Richard Branson and Jeff Bezos have accomplished their travels to area.



A MARTINEZ, HOST:

After a fast journey to the sting of area, Amazon’s founder Jeff Bezos is again on Earth.

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JEFF BEZOS: Management, Bezos – greatest day ever.

UNIDENTIFIED PERSON: Yeah.

MARTINEZ: There have been cheers but in addition sighs of reduction from Amazon’s board of administrators. An sudden damage or demise of a prime govt like Bezos might throw an organization like Amazon into turmoil. However as NPR’s David Gura studies, there is not a lot they’ll do to rein within the risk-taking.

DAVID GURA, BYLINE: Just a few years earlier than Mark Bertolini turned the pinnacle of the medical health insurance firm Aetna, he went snowboarding in Vermont.

MARK BERTOLINI: I used to be trying over my shoulder, checking on one thing, and I caught an edge and hit a tree and slipped headfirst 60 ft down right into a river.

GURA: Bertolini was in a coma. He’d damaged his backbone in 5 locations. And there is been an extended, tough restoration. However the insurance coverage govt didn’t quit snowboarding. He is additionally somebody who loves bikes. Bertolini owns three Harley Davidsons and a Ducati.

BERTOLINI: Once I first was named CEO and chairman and was requested to take a look at a contract, they’d snowboarding and motorcycling in there as exclusions. And I informed them that that would not work for me.

GURA: Throughout these negotiations, Bertolini pushed again. They usually relented.

BERTOLINI: I mentioned that, you understand, I’d proceed to watch out and take the suitable precautions, however my life was my life, and I wasn’t keen to provide these up.

GURA: Many executives play golf and tennis, however some prefer to push the envelope. Going to area is one thing Jeff Bezos has wished to do for years. Bloomberg TV interviewed him after the journey.

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BEZOS: Actually, I am not proficient sufficient to explain this in phrases. I am unable to determine it out. It was rather more than I anticipated. It is awe-inspiring.

GURA: Richard Branson, the founding father of the Virgin Group, has tried to circle the Earth in a scorching air balloon, and a few week and a half in the past, he went to area. This is Branson on CNN.

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RICHARD BRANSON: It was simply, like, probably the most unbelievable dream. And simply we’re all simply so fortunate, so fortunate, to have the ability to take part in it.

GURA: Firm founders appear to really feel particularly empowered to do what they wish to do. On the Fourth of July, Fb’s Mark Zuckerberg posted a video. It is him using a hydrofoil surfboard, holding an American flag. Hillary Sale is a professor of legislation and administration at Georgetown College, and she or he says risk-taking can result in pressure between a board and executives.

HILLARY SALE: At what level does their obligation to, specifically, a publicly traded firm eclipse their sense of private freedom? And at what level does the board want to talk to them about that?

GURA: A board is meant to place an organization’s greatest pursuits first, and when a CEO does one thing harmful, the board is aware of that additionally places in danger traders and staff who depend upon that enterprise for his or her livelihood. In 2012, the CEO of Micron Expertise died piloting a aircraft, and though the corporate named a brand new CEO days later, the inventory did not recuperate for a few yr. Boards could make suggestions. They’ll take out additional insurance coverage and add restrictions to contracts. However enforcement is uneven. Robert Lutz was a prime govt at GM, Ford and Chrysler.

ROBERT LUTZ: I’ll let you know, I encountered these restrictions my entire profession, by no means took them very severely and bought away with it for 47 years.

GURA: He additionally preferred snowboarding and bikes. And Lutz owned and flew two fighter planes. When GM wished Lutz again for an additional massive job in 2001, this got here up, and Lutz remembers what he informed the board.

LUTZ: I am blissful to rejoin the corporate. I am blissful to imagine the put up as vice chairman. However I want absolute freedom so far as my hobbies are involved.

GURA: Lutz says he bought that absolute freedom. And he flew these jets till he was 87, by the way in which. He needed to cease two years in the past when he failed an eye fixed examination. Lutz thinks extra executives must be daredevils.

LUTZ: Versus, you understand, calm, peaceable guys who by no means wish to put themselves in danger, all the time drive on the pace restrict, drive a minivan as their solely car and so forth – who the heck desires an individual like that to guide a company or be in a management place at a company?

GURA: Today, Mark Bertolini is retired from Aetna, and he is nonetheless snowboarding and using bikes. And he additionally believes leaders ought to take extra dangers. However now Bertolini sits on a handful of company boards. He is on the opposite aspect of the desk. And that has given him a greater appreciation for the challenges a board would face with a risk-taking CEO.

BERTOLINI: You by no means wish to be in a spot the place that particular person is indispensable to the success of the corporate, nor would you like it, if it is publicly traded, to have a huge effect on market cap.

GURA: That is why CEO succession planning is so necessary. Bertolini says when he was operating Aetna, he had a dialog about it at each board assembly.

David Gura, NPR Information, New York.

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