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Syd Weighs In

The myth of executive accountability

About the author

Sydney is a professor of strategy and leadership, and Dean for Executive Education,  at the Tuck School of Business at Dartmouth and the author of 16 books, including Why Smart Executives Fail. Follow him on twitter: @sydfinkelstein

Accountability in the executive suite is clouded by rich incentives. (iStockphoto)

Accountability in the executive suite is clouded by rich incentives. (iStockphoto)

I was window-shopping in Georgetown, an upscale area of Washington DC, last summer on a hot Sunday afternoon, when I noticed a group of people gathered around a parked car. They seemed quite agitated. As I got closer, I realized that there was a dog in the car, that the windows of the car were closed and that those concerned passers-by were becoming frantic. But nobody did anything about it until someone smashed the side window of the car with a trash can. Fresh air rushed in; the dog was going to be all right.

Why is this story remarkable? Because when I tell this story to groups of people, as I often do, they get it. The one person who embraced personal accountability is interesting because he did what so few ever do. If his behaviour were commonplace, the story would barely elicit a reaction. Instead, it stays with listeners long after they hear it.

Do people want to be held accountable for the consequences of their actions, or inactions? While the nature of human motivation is endlessly diverse, I’ve come to the conclusion that the default condition for accountability is its absence. Various corporate policies, including those relating to reward and consequence further exacerbate this and promote the absence of accountability further.

Consider chief executive officers. There is no question they want to stay on the job without interruption, and research has documented some of the techniques employed to do so: appoint board members so they are more likely to be beholden to you (Bank of America’s board under Ken Lewis); remove especially talented executives who might be a threat to you (Michael Eisner at Disney, who pushed out uber-talent Jeffrey Katzenberg, the present-day CEO of DreamWorks); ingratiate yourself with powerful board members (standard practice at many companies). Of course, running a high-performing firm would do the trick as well, but that can be very challenging.

Despite all of this, when disaster strikes CEOs often do tend to pay with their jobs. For example, Bob Diamond, the CEO who took the fall for Barclay’s Libor scandal, and Dick Fuld, the long-time CEO of Lehman who not only lost his job, but the company, at the peak of the financial crisis in 2008.

While a CEO cannot ensure permanent employment (only college professors with tenure can get away with that trick), the one thing they have been able to maintain is remarkably high compensation packages. CEOs are offered a smorgasbord of goodies for a job well done. Their tables are laden with salary, bonuses, stock grants, stock options and long-term incentive plans, the sum total of which often reaches $10 million a year, or more. And when they lose their jobs, they usually walk away with huge severance payouts. For example, after Carly Fiorina’s ineffectual tenure at the top of computer company Hewlett Packard came to an end, the news broke of her $23 million “separation package”. If that’s accountability, I suspect lots of people would sign up in a heartbeat.

How about professional athletes? For every Derek Jeter from Major League Baseball’s New York Yankees who will do anything to win, there are countless others who are happy to collect the big paycheck without the requisite performance. With all the talk of “performance incentives” the vast majority of the money that athletes earn is guaranteed and not contingent. That’s the formula for lack of accountability.

Sometimes even well-meaning organizational practices detract, rather than promote, personal accountability. Take job rotation, a staple of modern human resources and often the entry point for newly-minted MBAs. In principle, the idea of moving people across different jobs in the same company makes sense. Give managers exposure to how the business works, learn from different people, expand your experience base, become a well-rounded manager. In practice, the short stay in any particular job pushes you to focus on a short-term win with minimal concern for long-term consequences. After all, if you’re off to your next assignment in a matter of months, or even one to two years, as is common with these schemes, you won’t be around to deal with it.

All of these examples are classic illustrations of how accountability in modern organizational life has evaporated. But lest we believe that this is just a “business problem”, ask yourself when was the last time you walked past a homeless person and stopped to help? Accountability is less a business problem than it is a human problem.

The moral of the story: accountability among the people we work with cannot be assumed, but instead, must be motivated. The best way to instill accountability in others is to demonstrate it ourselves. One could even say that’s what leaders do. If we care enough to do what needs to be done, perhaps others will as well. I certainly know what I’ll do the next time I see a dog locked in a car on a hot day.

Do you think accountability has gone by the wayside for executives? Do rich incentives help or hinder accountability? Weigh in with your comments on BBC Capital's Facebook page or tweet us@BBC_Capital.

Accountability is less a business problem than it is a human problem.

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