Smoke Signals Ignored

August 26, 2008

Smoke Signals Ignored

Although I wrote this post a few weeks back, I somehow deleted it so I am starting once again. The reason I can’t just let this one go is that it has to do with overlooked early warning signs that often bring companies to their knees. An article in The New York Times on Freddie Mac’s CEO Richard Syron not heeding billowing smoke signals bothered me. After spending many weekends writing my book on reputation recovery, I could not believe how often warning signs were dismissed by those at the top. Back to Freddie Mac. Apparently the CEO received a memo from Freddie Mac’s chief risk officer warning him about dubious loans. The CRO, David Andrukonis, told Syron that the company was purchasing bad loans “that would likely pose an enormous financial and reputational risk to the company and the country.” And this was 2004! They even sat in a conference room discussing this impending disaster. According to Andrukonis and many others, Syron refused to consider the options for reducing the institution’s risks. He felt that his options were extremely limited. Maybe that was the case but the CRO left in 2005 to become a teacher (smart man).  Syron is quoted in the article as saying “If I had better foresight, maybe I could have improved things a little bit. But frankly if I had perfect foresight, I would never have taken this job in the first place.” This statement deflects the question without answering it. It is not an answer to say that no one has perfect foresight. A reasonably cautious executive would have taken steps given these many early warning signs. This is what CEOs get paid to do….make the big decisions. Ultimately they are the guardian of the company’s reputation and shareholders’ investments. The article ends with Syron’s quote: “I’ve had four other jobs as C.E.O and I came out of them all pretty well. What I’m working for right now is to save my reputation.” That’s a fact.

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Leslie Gaines-Ross
Leslie Gaines-Ross
lesliegainesross@gmail.com

As Weber Shandwick’s Chief Reputation Strategist, I focus on the ever changing world of reputation. For the past 25 years, I have relentlessly observed, researched and commented on the rise and fall of reputations.

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