B. Exposición, Análisis e Interpretación de TSM
3. Interpretación de TSM
Much of the literature on leadership succession in the previous chapter is from the USA and the UK perspectives as most of the work on leadership and leadership theories are derived from studies in these two countries. There are arguments that what works in the USA would also apply in the UK and vice versa (Olie, 1995; Stewart, Barsoux, Kieser, Ganter & Walgenbach, 1994; Lawrence & Edwards, 2000). Indeed, looking at Table 3.1, one might be tempted to think that the two countries are similar as Hofstede’s scores for both countries are very close. While the raw scores for the two countries are close, they do not suggest that there are no cultural differences between the two countries – indeed there are many. Nevertheless, in the area of corporate governance, leadership succession practice and culture, there are a number of similarities between the two countries to allow for their joint consideration; after all, the review undertaken here is not about social culture per se. Indeed, executive search consultants Heidrick & Struggles (2001) assert that the USA and the UK have made the largest strides in the development of corporate governance and leadership succession. Both countries have similarities in their wide distribution of corporate equity which reduces the concentration of power in the hands of a few as well as in matters on
corporate governance. Another important aspect of leadership succession practice in these two countries is the willingness to bring issues, for example on the paucity of ethnic minorities in top management position, to the fore. Before, delving further into the practice of leadership succession in these two countries, it would be beneficial to consider the cultures of the UK and the USA using Hofstede’s cultural dimensions.
Ferraro (2005, p. 103) lists both the USA and the UK as being high on individualism and egalitarianism and describes the following parallels in the business cultures of the two countries; he states that both cultures are low on status differences, high on the diffusion of power, and that both cultures minimise deference to superiors and allow for the questioning of decisions made by superiors. Hofstede (1980) places both countries in the same categories (along with New Zealand, Australia and Canada). The two countries are described as being alike in that they are both high on individualism, that managers in such societies are expected to be competent and able to assess the effects of their own actions on the companies that they lead and, therefore, to be individually responsible for the outcomes. Indeed, in both countries CEOs are often expected to make organisational changes and significant succession consequences are expected to be observed early in the tenure of the new CEO. This is unlike the slow, evolutionary changes that often accompany Japanese leadership transitions (Sakano & Lewin, 1999). Managers in both the UK and USA are expected to attribute success to their own abilities as individuals, and conversely to take responsibility for their own failures, to place personal goals over group goals, to value autonomy and independence and are
encouraged to be fully self-actualised. This may explain why unsuccessful candidates for top management positions like that of the CEO tend to leave rather than remain in the employ of the company. The example of the exit of GE’s unsuccessful contenders for Welch’s CEO position has been mentioned earlier. In the case of UK-based GlaxoSmithKline, there were also two unsuccessful contenders for the CEO’s position. In an effort to retain them, GlaxoSmithKline offered them substantial amounts of company shares and seats on the board but both left within a year of their failure to become the CEO (Carey, Phelan & Useem, 2009). This is not unexpected as in a highly individualistic culture candidates who fail to achieve the positions they were aspiring towards would view themselves as being the vanquished and thus prefer to work elsewhere rather than under the victor. These values and beliefs are very different from those espoused by Confucianism, the budi complex and by the tenets of Japanese culture where individual interests are to be made subordinate to group goals. In the first place, in East and South East Asian cultures, there is the question of whether there would be even more than one identified candidate especially in the case of dynastic succession. Members of the family are expected to respect and comply with the decisions of the father leader, and in the context of preserving the honour, reputation and dignity of the family, debates over succession matters are often suppressed. In the unlikely event that there are two or more candidates, unsuccessful employees would be counselled, much like a father would advise his children in times of failure, to subsume their personal needs to the overall goals of the company and to be patient and wait for other opportunities within the company.
Another similarity in the UK and the USA systems is in the fact that in both countries publicly listed companies have highly diversified ownership (La Porta, Lopez-de-Silanes & Schleifer, 1999). The boards of directors in both countries include outside directors and as a board are responsible to shareholders. In USA and UK companies, employment, even for the CEO, is on a needs basis (rather than for a lifetime in Japanese organisations) and top management team managers can be removed and dismissed as and when appropriate. The capital markets of both countries also bear many similarities in that they are sophisticated, large-scale and generally have much more liquid markets than East and South East Asian capital markets (Sakano & Lewin, 1999). Furthermore, USA and UK CEOs are better compensated than their East and South East Asian counterparts and so, in turn, face higher levels of expectations from their shareholders. As mentioned earlier, the level of involuntarily CEO exits in both the USA and the UK are highest in the world at 35 percent and 42 percent respectively (Amble, 2006) compared with 12 percent for Japan. Amble cites a report from Booz Allen Hamilton, a global consultant firm, which says that Western CEOs are becoming increasingly cognisant of the fact that they will remain in office for only as long as their performance is accepted by shareholders. This has been supported by evidence from Challenger Gray & Christmas, the Chicago-based executive recruitment company, who estimate that in 2008 there were six CEO resignations for every working day in the USA alone (Paton, 2009).
In the UK and the USA, board-initiated CEO dismissals are common, in contrast to the practice in Japan, Taiwan and Malaysia, and examples of
both USA dismissals (Carly Fiorina of HP-Compaq and Jill Barad of Mattel) and UK dismissals (Robert Ayling of British Airways) have been presented in the previous chapter. Given the cultures of the two countries, it is unlikely that the concept of father leadership as espoused by Low (2006) will be adopted to any degree in the USA or the UK. Along with the fact that nepotism is generally frowned upon in individualistic societies, and the wider distribution of corporate equity, it is more likely that people outside of the founding family would be considered for top management team positions rather than reserving such positions for the family in publicly listed companies.
Another feature of CEO succession in the UK and in the USA is that in both these countries, there is a greater level of diversity in top management positions in recent years than in East and South East Asian countries. Although it can be argued that the representation of ethnic minorities in top management positions is still small and that the rate of change is at best slow, a growing number of companies in both the USA and the UK have opened their doors to the top executive suite to women and to ethnic minorities. For instance, the CEO of American Express, Ken Chennault is an African-American, the CEO of Citigroup, Vikram Pandit is Indian and PepsiCo’s CEO, Indra Nooyi, is an Indian woman. Xerox is currently led by a white American woman, Anne Mulcahy who is preparing Ursula Burns as her successor; Burns is an African-American lady (Morris, 2007). This transition will be the first time that will see a female CEO of a Fortune 500 company being succeeded by another woman. In the USA, Asian-Americans of Chinese descent have also made
some, albeit limited, headway in top management positions. These include Avon CEO Andrea Jung, former president of Old Navy North America Jenny Ming, and former vice-chairman of Johnson & Johnson Christine Poon, who was also the first female vice-chairman of the company. In the UK, on March 19, 2009, Tidjane Thiam was announced as successor to Mark Tucker, the incumbent CEO of Prudential (UK). Thiam will become the first black African CEO of a Financial Times Stock Index (FTSE) 100 company on October 1, 2009 (Skinner, 2009). This is more likely to happen when company ownership is not in the hands of a few shareholders but are widely distributed. Furthermore, according to Heidrick & Struggles (2001), board members in publicly listed companies in the UK, and to a greater extent in the USA, are expected to be involved in leadership succession planning and implementation processes not only for the CEO but also for the top management team.
In the area of managerial succession – that is, leadership succession at the top management team – companies in the UK and USA have also made progress. For example, in Xerox, Human Resource Manager Douglas Pelino claims that the company has identified about 100 next-generation leaders who are currently in middle-management positions and that they have been individually informed that they have been earmarked for future grooming and development (Armour, 2003). Armour reports that organisations like Deloitte & Touche have also instituted mechanisms to ensure that women and minorities are given a greater representation in top management positions; they do this by having a group of top national
leaders select the final candidate rather than leaving the decision to the departing manager.
While there is debate about the level of effectiveness in leadership succession planning in the UK and in the USA, it is clear that these two countries have gone some ways in increasing knowledge of its value to organisations and to enhancing process transparency. There appears to be a larger emphasis on leadership succession planning and implementation in publicly listed companies in both countries and efforts can be seen to have been taken to make the process one that is based on the candidate’s abilities rather than on personal connections and family lineage. This is in contrast to the situation in East and South East Asian companies where the preservation of top management positions for family members is still deemed to be of utmost importance.